Mr. Bruce Linton reports

CANOPY GROWTH CORPORATION REPORTS THIRD QUARTER FISCAL YEAR 2016 FINANCIAL RESULTS

Canopy Growth Corp. has released its financial results for the third quarter of fiscal year 2016 ended Dec. 31, 2015.

Third quarter fiscal 2016 highlights:

• Revenues of $3.5-million, representing a 41-per-cent increase over second quarter 2016 and a greater-than-400-per-cent increase over the three-month period ended Dec. 31, 2014;
• 462,000 grams sold, representing an increase of 45 per cent over Q2 2016 and a greater-than-430-per-cent increase over the three-month period ended Dec. 31, 2014;
• Adjusted product contribution of $2.4-million or 70 per cent of sales;
• Over 8,200 registered patients at Dec. 31, 2015, compared with 6,200 at the end of Q2 2016 and 1,800 at the end of Dec. 31, 2014;
• Cash position of $19.7-million;
• Completed acquisition of MedCannAccess, providing the company three physical community engagement centres in the highly populous Southern Ontario region.

Subsequent to third quarter fiscal 2016:

• Tweed Inc. granted licence by Health Canada to produce and sell cannabis oil extracts;
• Tweed launched sale of 10-to-1 cannabis oils.

"Our diversified client acquisition and best-in-class customer service helped drive significant growth in active registered customers and revenue," said Bruce Linton, chairman and chief executive officer, Canopy Growth. "Our revenues reached an important milestone, exceeded $1-million per month in the third quarter.

"The intent from day one has been to build a scale of production and brands that would be of value in medical and possibly non-medical markets, for when the time came. We are increasing our focus on brand clarity and market segmentation for Bedrocan and Tweed."

Revenue review

Revenue for the third quarter ended Dec. 31, 2015, was $3.5-million, representing a sequential increase of 41 per cent over the second quarter ended Sept. 30, 2015. Third quarter 2016 revenues were over 400 per cent higher than the revenues reported in the three months ended Dec. 31, 2014.

Revenues for the nine months ended Dec. 31, 2015, were $7.7-million.

Product sales review

Total product sold in third quarter fiscal 2016 was approximately 462,000 grams at an average price of $7.34 per gram. In comparison, approximately 319,000 grams at an average price of $7.54 per gram were sold in the second quarter of fiscal 2016 and approximately 216,000 grams at an average price of $7.74 per gram were sold in the first quarter of 2016. In the three months ended Dec. 31, 2014, the company sold approximately 87,000 grams at an average price of $7.04 per gram.

Over the nine months of fiscal 2016 ended Dec. 31, 2015, Canopy Growth has sold almost one million grams of cannabis product.

Gross margin review

The gross margin, including the unrealized gain on changes in fair value of biological assets, in accordance with international financial reporting standards, was $2.8-million, or 79 per cent of sales, for the three-month period ended Dec. 31, 2015. In the three months ended Dec. 31, 2014, the reported gross margin on the same basis was 36 per cent of sales. Year to date, the gross margin, inclusive of the unrealized gain on changes in fair value of biological assets, was $16.3-million, or 213 per cent of sales, as compared with $1.1-million, or 45 per cent of sales, last year for the same period.

Adjusted product contribution review

The company's adjusted product contribution is a non-generally accepted accounting principles metric used by management which adjusts the reported gross margin by excluding the fair value measurements as required by IFRS and measures the cost of sales for the grams actually sold in the period. Management believes this measure provides useful information as it reflects the gross margin based on the company's weighted average cost per gram from seed to sale against the grams sold. The resulting adjusted product contribution is $2.4-million, or 70 per cent of sales, in the third quarter ended Dec. 31, 2015, and $5.0-million, or 65 per cent of sales, on a year-to-date basis to Dec. 31, 2015.

Third quarter fiscal 2016 operating expense review

For the three-month period ended Dec. 31, 2015, sales, branding, and medical outreach and education costs were $1.4-million (three months ended Dec. 31, 2014 -- $729,000).

General and administrative (G&A) expenses were $2.0-million in the three-month period ended Dec. 31, 2015, compared with $1.0-million in the comparison period ended Dec. 31, 2014. The increase in G&A reflects the company's growth from the early start-up of last year, building commercial capacity and capability as a public company, and meeting all compliance requirements with Health Canada.

Third quarter fiscal 2016 earnings review

The company reported a net loss of $3.3-million or four cents per basic share for the three months ended Dec. 31, 2015, compared with a net loss of $2.6-million or seven cents per basic share in the comparison quarter last year.

For the nine months ended Dec. 31, 2015, net income was $1.6-million or two cents per basic share, compared with a net loss of $6.2-million or 15 cents per basic share in the nine months ended Dec. 31, 2014. The net income or loss was inclusive of the non-cash unrealized gain on changes in fair value of biological assets described above.

Third quarter fiscal 2016 balance sheet and cash flow review

At Dec. 31, 2015, the company's cash, comprising cash and cash equivalents, totalled $19.7-million, representing a decrease of $1.7-million from March 31, 2015. The decrease is attributable to net proceeds from financings, including the bought-deal common share offering in Q3, and the exercise of warrants and options, together totalling $20.6-million, primarily offset by $2.1-million used to repay a loan, $11.1-million used to finance operations and investments in facility enhancements totalling $10-million. Investments in facility enhancements include the buildout of the Tweed Farms facility and the installation of equipment in the Tweed facility, in part required for the production of cannabis oil extracts.

The unaudited condensed interim consolidated financial statements and management's discussion and analysis documents have been filed with SEDAR and are available on SEDAR.

Subsequent events

Bedrocan true compassionate pricing

Bedrocan Canada took an important step to making medical cannabis more affordable for all Canadian patients with a new price structure called true compassionate pricing. Under true compassionate pricing, all six cannabis varieties produced by Bedrocan Canada are priced at $5 per gram, making it the most affordable product line in Canada. Many Canadians who medicate with cannabis are doing so because traditional pharmaceutical drugs have not been as effective at treating their symptoms or have undesirable side effects. The decision to consume medical cannabis is made more complex due to the cost of the medicine.

Bedrocan's production methods have been refined over two decades to maximize yield and eliminate genetic variance from harvest to harvest. As a result, Bedrocan is able to produce standardized varieties efficiently. With Bedrocan's facility operating at full capacity, Bedrocan is in a position to offer standardized varieties at a much lower price.

Tweed cannabis oil extracts supplemental licence

On Feb. 23, 2016, Tweed was granted a supplemental licence by Health Canada to sell up to 350 kilograms of cannabis oil extracts during the licence period, which ends Jan. 19, 2017.

Sales of 10-to-1 cannabis oils launched

On Feb. 24, 2016, Tweed announced that the company had launched the sale of high-quality 10-to-1 cannabis oils made with GMO-free, organic sunflower oil. Starting with oils made from single strains and slowly introducing high-quality oil products, Tweed's product line will meet the needs of Canadians managing a variety of symptoms. Starting with popular offerings of Argyle, Princeton and Birds Eye, Tweed will introduce new strain-specific 10-to-1 cannabis oils on a continuing basis. The new product line, 10-to-1 cannabis oils, will be sold in 100-millilitre bottles equivalent to 10 dried grams of the same dried flower. Each 10 ml will contain the equivalent of one gram of the corresponding Tweed dried-flower variety. Creating a universal equivalency factor between flower and oil is a logical and simple way to ensure that Tweed customers can manage their dosing confidently. Tweed chose to balance 10-to-1 cannabis oils with organic, non-genetically modified sunflower oil because it is versatile enough to cook or bake with, hypoallergenic, and even good to ingest on its own.

Federal court ruling

On Feb. 24, 2016, the federal court released its decision in the case of Allard et al. versus Canada. This case began as a result of the government's decision to repeal the Marihuana Medical Access Regulations (MMAR) and enact the Marihuana for Medical Purposes Regulations (MMPR). This change overhauled the way that the government provides access to medical cannabis for patients across the country. The plaintiffs in the Allard case argued that the MMPR violates their charter rights, and the court, in a lengthy and detailed judgment, agreed with the plaintiffs and gave the government six months to amend the MMPR. Canopy Growth's preliminary interpretation of the decision is as follows: the decision reaffirms the right of Canadians to access marijuana for medical purposes; the decision stipulates that the MMPR, under which Canopy Growth subsidiaries Tweed, Tweed Farms and Bedrocan Canada are licensed producers, does not provide sufficient access to cannabis; the decision gives the Canadian federal government a period of six months to determine how existing regulations should be amended to ensure that patients have the access to medical marijuana that they need; and the current MMPR regulations remain in force. Based on this preliminary interpretation, management does not believe the Allard decision will materially impact Canopy Growth.

                                                                                                              
               CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
                               (In thousands, except per share)
                                                        
                                      Three months ended Dec. 31,   Nine months ended Dec. 31,
                                               2015         2014           2015          2014

Revenue                                      $3,481         $641         $7,657        $1,146
Unrealized gain on changes in fair
value of biological assets                   (9,013)        (939)       (26,768)       (3,196)
Inventory expensed to cost of sales           3,784          239          7,954           629
Production costs                              5,954        1,111         10,173         3,197
Cost of sales, net of the unrealized
gain on changes in fair value of
biological assets                               725          411        (8,641)           630
Gross margin, including the
unrealized gain on changes in fair
value of biological assets                    2,756          230         16,298           516
Sales and marketing                           1,372          729          3,253         1,880
Research and development                        192           41            441           160
General and administration                    1,962        1,035          5,619         2,286
Acquisition costs                                16            -          1,155             -
Share-based compensation expense              1,162          908          2,107         2,080
Amortization                                    755          173          1,475           356
                                              5,459        2,886         14,050         6,762
(Loss) income from operations                (2,703)      (2,656)         2,248        (6,246)

Interest income/(expense)                      (102)          18           (111)           71
Change in fair value of acquisition
consideration-related liabilities              (741)           -           (741)            -
                                               (843)          18           (852)           71
(Loss) income and comprehensive
(loss) income before taxes                   (3,546)      (2,638)         1,396        (6,175)
Income tax recovery                             230            -            230             -
Net (loss) income and comprehensive
(loss) income after taxes                    (3,316)      (2,638)         1,626        (6,175)
Net (loss) income per share, basic            (0.04)       (0.07)          0.02         (0.15)
Net (loss) income per share, diluted          (0.04)       (0.07)          0.02         (0.15)

We seek Safe Harbor.