Canopy Growth (CGC) Q1 FY2027 10-Q: Canopy USA, the Acreage Default, and the US Option
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The Hook
Canopy Growth $CGC cut its quarterly net loss from C$44.9 million to C$14.6 million in the three months ended June 30, 2026. That is a C$30.3 million improvement, and it is the best-looking number in the filing.
C$26.3 million of it came from a fair value mark on US cannabis assets that the same filing says Canopy Growth has "no economic or voting interest" in. The operating loss barely moved: C$22.1 million this quarter against C$22.6 million a year ago, an improvement of C$514 thousand. Eighty-seven percent of the good news is a mark on an option Canopy cannot exercise, on a business it does not control, held through a structure whose trigger condition got materially harder to satisfy during this same fiscal year.
Company Snapshot
Canopy Growth is a Canadian licensed producer headquartered in Smiths Falls, Ontario, listed on the NASDAQ Global Select Market and the TSX, and it reports in Canadian dollars under US GAAP. Every figure in this note is CAD unless marked US$. Its fiscal year ends March 31, so the quarter ended June 30, 2026 is the company's fiscal first quarter of 2027, and the comparison quarter is fiscal Q1 2026. The filing is the 10-Q for that period, accession 0001193125-26-339076, filed August 7, 2026.
The operating business is Canada, Germany, Australia and Poland: adult-use and medical cannabis under Tweed, 7ACRES, Claybourne, MTL and others, plus Storz & Bickel vaporizer hardware. Canopy Growth touches no US cannabis plant. Its US revenue this quarter was C$6.2 million of vaporizer devices, 7.7 percent of net revenue. Separately, it holds non-voting, non-participating shares representing roughly 84.4 percent of a US holding company called Canopy USA on an as-converted basis. Canopy USA owns Wana, Jetty, Acreage and a large stake in TerrAscend. That structure is the whole story.
One point of precision, since this is a cannabis note. Section 280E denies ordinary business deductions to US taxpayers trafficking a Schedule I or II substance. Canopy Growth is not one. It is a Canadian filer with no US plant-touching operations, and its tax line this quarter was a C$0.1 million recovery on a C$14.7 million pretax loss. There is no 280E signature anywhere on its income statement. 280E lives one level down, inside the businesses Canopy USA owns, where it is one of the reasons those assets have been marked down. It is a reason the option is cheap, not a line item on the optionholder.
The Financial Story
The home business is genuinely better, and it is small. Net revenue was C$81.2 million, up 12.5 percent from C$72.1 million. Every line grew: Canadian medical C$21.2 million to C$25.8 million, Canadian adult-use C$27.0 million to C$29.7 million, international C$8.8 million to C$9.6 million, Storz & Bickel C$15.2 million to C$16.1 million. Gross margin improved to 27.4 percent from 25.0 percent, and the company's adjusted EBITDA loss narrowed to C$3.2 million from C$7.9 million. Management attributes the Canadian growth substantially to MTL Cannabis, acquired March 16, 2026 for 41.2 million shares and C$18.5 million of cash, so a meaningful share of the growth was bought rather than grown. The medical line also absorbed a Veterans Affairs Canada reimbursement rate cut effective April 1, 2026, which the filing names as the reason Cannabis segment gross margin fell 200 basis points to 22 percent even as revenue rose.
| Three months ended June 30 (C$ thousands) | FY2027 Q1 | FY2026 Q1 | Change |
|---|---|---|---|
| Net revenue | 81,165 | 72,134 | +12.5% |
| Gross margin | 22,238 | 18,038 | +23.3% |
| Operating loss | (22,110) | (22,624) | +514 |
| Other income (expense), net | 7,402 | (21,946) | +29,348 |
| Net loss | (14,579) | (44,861) | +30,282 |
| Weighted average shares | 422,264,025 | 188,321,555 | +124% |
The improvement in the bottom line is not operational. Read the last three rows together. Operating loss improved by half a million dollars. Net loss improved by thirty million. The bridge is other income, and inside other income the single largest item is C$16.2 million of fair value gains on Canopy USA related assets against a C$10.0 million loss a year ago, a C$26.3 million swing. The rest is a C$4.0 million swing on the warrant derivative and C$2.2 million more interest income, partly offset by C$3.0 million more interest expense.
Interest is now a real weight. Interest expense was C$12.7 million against gross margin of C$22.2 million. The company paid C$8.6 million of interest in cash during the quarter, up from C$6.0 million. That is the cost of the January 2026 refinancing: a US$150 million senior secured term loan (principal US$162.1 million after a US$12.1 million original issue discount) at SOFR plus 6.25 percent with a 3.25 percent floor, secured on substantially all assets, maturing January 31, 2031, alongside a C$55.0 million 7.50 percent convertible debenture maturing July 8, 2031. There is no near-term maturity wall. There is a permanent cash cost.
The scoreboard behind all of this. Accumulated deficit at June 30, 2026 was C$11.15 billion against total assets of C$1.10 billion. Constellation Brands alone put C$5.1 billion into this company in fiscal 2019, a fact the filing still cites in its own liquidity discussion. Goodwill is C$55.7 million and it is essentially all MTL: fiscal 2026 added C$55.7 million of purchase accounting goodwill and impaired C$47.5 million of what was already there. Net revenue has gone C$475.7 million in fiscal 2022, C$333.3 million, C$297.1 million, C$269.0 million, and C$284.6 million in fiscal 2026. This is not a company recovering toward its old size. It is a company that has finished shrinking and started again from a much smaller base.
Catalyst Scenarios: How the Math Changes
The trigger is not rescheduling. It is a listing policy. This is the finding that reframes the whole name. The Non-Voting Shares Canopy holds in Canopy USA convert into economic Class B shares only after the "Stock Exchange Permissibility Date," and the 10-Q defines that date as the date on which both the NASDAQ Stock Market and The New York Stock Exchange permit the listing of companies that consolidate the financial statements of entities that cultivate, distribute or possess marijuana in the United States for non-medicinal purposes. Until then, in the filing's own words, "Canopy Growth will have no economic or voting interest in Canopy USA or the Canopy USA LPs." A full DEA rescheduling could land and that sentence would still be true, because the condition written into the LLC agreement is a private listing decision by two exchanges, not an act of the federal government.
And the definition got harder this year. Canopy's 10-Q for the quarter ended December 31, 2025, filed February 6, 2026, defined the same term as "the date that the NASDAQ Stock Market or The New York Stock Exchange permit the listing of companies that consolidate the financial statements of companies that cultivate, distribute or possess marijuana in the United States." Either exchange. Marijuana, full stop. By the fiscal 2026 Form 10-K filed June 15, 2026, and again in this 10-Q, it reads both exchanges and specifically "for non-medicinal purposes." The tightening lands in exactly the window when the April 28, 2026 medical-only Schedule III order took effect and when Trulieve and Glass House cleared the NYSE on medical-only structures. The medical route that opened the door for them is now expressly outside Canopy's trigger.
A second lock was added in June. On June 15, 2026 Canopy amended its senior loan agreement, and the filing states that the lenders "restricted the Company's and certain of its subsidiaries' ability to exchange any Non-Voting Shares into Canopy USA Class B Shares at any time prior to the Stock Exchange Permissibility Date." Canopy's own secured lender has written the exchange restriction into the credit agreement.
Meanwhile the asset under the option is deteriorating. Acreage, the multi-state operator Canopy USA owns outright, is currently in default under its credit agreement. An initial forbearance was signed May 12, 2026 and required Acreage to appoint a chief restructuring officer; a second forbearance was signed July 31, 2026 with an outside date of January 31, 2027, extendable at the lenders' sole discretion. Canopy is a lender here, and it is the junior one: the C$112.3 million owed to the third-party ARCA Lender "ranks in priority" to the C$185.9 million owed to Canopy's subsidiary, and the ARCA Lender's security includes pledged equity in the Wana entities. The Annual Report risk factor the 10-Q points to says it plainly: the Company "may lose the entirety of its investment in the Acreage and Wana Debt."
| The Canopy USA ledger at June 30, 2026 (C$ thousands) | Amount |
|---|---|
| Elevate loan principal owed to Canopy Growth | 245,422 |
| Elevate loan interest owed to Canopy Growth | 81,338 |
| Acreage and Wana Debt owed to Canopy's subsidiary | 185,929 |
| Total principal and disclosed interest owed | 512,689 |
| Carried on the balance sheet as loans receivable | 64,636 |
| Canopy USA LP equity method interest, at fair value | 58,885 |
Canopy is owed roughly C$512.7 million by the US side and carries the loan at C$64.6 million, about 13 cents on the dollar. That mark did not appear overnight: the loan receivable was C$144.7 million at March 31, 2025 and C$63.9 million a year later, a C$76.1 million fair value write-down in fiscal 2026 alone. The two Canopy USA lines together, C$123.5 million, are the entire Level 3 recurring balance the filing discloses, and the valuation technique table names the significant unobservable inputs outright: "probability and timing of US legalization," a discount rate, expected future cash flows, and the volatility of Wana and Jetty equity. Canopy Growth carries a legalization probability estimate on its balance sheet, at 11 percent of total assets.
Valuation: What It Is Worth If It Is a Normal Business
The usual cannabis pro forma does not apply here, and pretending otherwise would be the wrong analysis. There is no 280E adjustment to make on a Canadian filer that reported a tax recovery, and there is no EBITDA to put a multiple on while adjusted EBITDA is still negative. What can be done is arithmetic on the filing's own carrying values.
At roughly US$0.98 a share (public market data, August 8, 2026) across the 423.0 million common and 26.3 million exchangeable shares on the 10-Q cover page, Canopy's market value is about US$440 million, or about C$626 million at the 1.4210 rate implied by the filing's own paired disclosures. Against that: C$336.6 million of cash and C$123.5 million of Canopy USA carrying value are C$460 million, roughly 74 percent of the market value. Back out cash and add the C$285.4 million of debt principal and the operating business is implied at roughly C$451 million, about 1.5 times trailing twelve month net revenue of C$293.6 million. Book equity is C$688.6 million, so the shares trade at roughly nine tenths of book.
| Scenario (assumptions stated, not a target) | Effect on the Canopy USA lines | Versus a C$626M market value |
|---|---|---|
| Bear: ARCA Lender enforces, Acreage restructures, Canopy's junior claim and LP interest impair toward zero | -C$123.5M | about -20% |
| Base: door stays shut, mark holds, value is cash plus the Canadian and European business | C$0 | unchanged |
| Partial: half the C$448.1M gap between nominal and carried is eventually recovered | +C$224.0M | about +36% |
| Full: the loans become money good at nominal, before any value for the equity | +C$448.1M | about +72% |
That band is the honest read: the US position is somewhere between a total loss and roughly three quarters of today's market capitalization, and the filing tells you the swing factor is a listing policy at two exchanges plus a restructuring outcome at Acreage. What today's price implies is that the market is paying very little for either.
Risks and Open Questions
The trigger risk is not the one most coverage names. Broad rescheduling could arrive on schedule, late in 2026 or in 2027, and Canopy's Non-Voting Shares still would not convert until NASDAQ and NYSE both change listing policy for adult-use consolidators, and until the senior lenders release the exchange restriction. The Acreage default is live and the outside date on the current forbearance is January 31, 2027, extendable only at the lenders' discretion. Cash is being consumed: free cash outflow was C$25.7 million in the quarter against C$11.6 million a year ago, and the term loan carries a minimum unrestricted cash covenant of the lesser of US$90 million or the outstanding principal, roughly C$128 million, which leaves about C$209 million of usable cushion. At the quarter's burn that is roughly two years; at fiscal 2026's full-year operating outflow of C$63.8 million it is longer, and the filing attributes the quarter's step-up to working capital timing.
Dilution is the other standing risk. Weighted average shares went 74.8 million in fiscal 2024, to 107.6 million, to 298.0 million in fiscal 2026, to 422.3 million this quarter. The August 2025 ATM has sold 56.2 million shares at an average of C$2.42 and has US$102.0 million of capacity left, which at a share price near a US dollar takes far more shares to raise the same money. Add 30.8 million liability-classified warrants at a C$4.58 weighted average strike, 18.7 million loan warrants at US$1.30, and a C$1.83 conversion price on the convertible. And the legal overhang is real: an Ontario securities class action was certified December 22, 2025, and the SEC investigation opened after Canopy self-reported the BioSteel revenue recognition review is still ongoing.
The Bottom Line
The correction to our own thesis. We came to this filing expecting to find a company positioned at the door, holding a clean option on US rescheduling, with the risk that the balance sheet shrank underneath it. The structure is real and documented in more detail than most companies give any single subsidiary. But the option is not on rescheduling. It is on a listing policy decision by NASDAQ and NYSE for adult-use consolidators, that definition was tightened this fiscal year from either exchange to both and from marijuana to marijuana for non-medicinal purposes, and Canopy's own secured lender added a contractual restriction in June. Meanwhile the balance sheet is not the thing shrinking. Cash is up year over year and revenue is growing. The thing that shrank is the option itself, from C$144.7 million of loan carrying value to C$64.6 million against C$512.7 million owed, with the borrower in default.
So the framework is this. Canopy Growth is two assets sitting in one ticker: a real, improving, sub-scale Canadian and European cannabis business that still loses money at the operating line, and a deeply written-down claim on the United States whose exercise date is set by two stock exchanges rather than by Washington. Watch three things: whether the fair value marks on the Canopy USA lines keep rising or reverse, what happens to Acreage before January 31, 2027, and whether the words in that footnote move again. The footnote has already moved once this year, and almost nobody read it.
Analysis built on the RoboSystems SEC Shared Repository: structured XBRL filing data for every public company that files. Every figure above traces to Canopy Growth's Form 10-Q for the quarter ended June 30, 2026 (accession 0001193125-26-339076), its Form 10-K for fiscal 2026, or the prior 10-Q filed February 6, 2026. Not investment advice. No price targets. No paid promotions. Run your own deep dives at robosystems.ai/pricing. New customers get 50% off your first month with code CANNABIS50.