What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-02-09 compared with 2020-11-09 · 275 added, 208 removed, 716 unchanged (40% of the section changed)

3 unchanged sentences

(in thousands of Canadian dollars, except number of shares and per share data, unaudited)

September 30,

Current assets:

39 unchanged sentences

(in thousands of Canadian dollars, except number of shares and per share data, unaudited)

Three months ended September 30,

Six months ended September 30,

Three months ended December 31,

Nine months ended December 31,

Cost of goods sold

9 unchanged sentences

Other income (expense), net

(Loss) income before income taxes

Income tax (expense) recovery

Net (loss) income

Net loss attributable to noncontrolling interests and

redeemable noncontrolling interest

Net (loss) income attributable to Canopy Growth Corporation

Basic (loss) earnings per share

Basic weighted average common shares outstanding

Diluted (loss) earnings per share

Diluted weighted average common shares outstanding

Loss before income taxes

Income tax recovery

Net income (loss) attributable to noncontrolling

interests and redeemable noncontrolling interest

Net loss attributable to Canopy Growth Corporation

Basic and diluted loss per share

Basic and diluted weighted average common

shares outstanding

Comprehensive (loss) income:

Net (loss) income

Other comprehensive (loss) income, net of income tax effect

4 unchanged sentences

income tax effect

Comprehensive (loss) income

Comprehensive loss attributable to noncontrolling interests

and redeemable noncontrolling interest

Comprehensive loss

Comprehensive income (loss) attributable to

noncontrolling interests and redeemable

noncontrolling interest

Comprehensive (loss) income attributable to Canopy

22 unchanged sentences

Comprehensive loss

Balance at September 30, 2020

Balance at December 31, 2020

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

14 unchanged sentences

Share-based compensation

Issuance of replacement equity

Issuance and vesting of restricted

5 unchanged sentences

Comprehensive (loss) income

Balance at September 30, 2019

Balance at December 31, 2019

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

2 unchanged sentences

(in thousands of Canadian dollars, unaudited)

Six months ended September 30,

Nine months ended December 31,

Cash flows from operating activities:

6 unchanged sentences

Expected credit losses on financial assets and related charges

Income tax (recovery) expense

Income tax recovery

Non-cash foreign currency

10 unchanged sentences

Purchases of intangible assets

Proceeds on sale of property, plant and equipment

Proceeds on sale of intangible assets

(Purchases) redemption of short-term investments

Investments in equity method investments

Sale of (investments in) equity method investments

Investments in other financial assets

22 unchanged sentences

(in thousands of Canadian dollars, unaudited)

Six months ended September 30,

Nine months ended December 31,

Supplemental disclosure of cash flow information

4 unchanged sentences

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

CANOPY GROW TH CORPORATION

CANOPY GROWTH CORPORATION

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

5 unchanged sentences

On October 17, 2018, the ACMPR was superseded by the Cannabis Act which regulates the production, distribution, and possession of cannabis for both medical and adult recreational access in Canada.

The Company has also expanded to jurisdictions outside of Canada where federally lawful and regulated for cannabis and/or hemp including subsidiaries which operate in the United States, Europe, Latin America and the Caribbean, and Asia / Pacific.

The Company has also expanded to jurisdictions outside of Canada where cannabis and/or hemp is federally lawful and regulated.

The Company and its subsidiaries currently operate in the United States, Europe, Latin America, the Caribbean, and Asia/Pacific.

Through its partially owned subsidiary Canopy Rivers Inc.

(“Canopy Rivers”), the Company also provides growth capital and a strategic support platform that pursues investment opportunities in the global cannabis sector, where federally lawful.

Refer to Note 19 for a description of the plan of arrangement with Canopy Rivers.

BASIS OF PRESENTATION

18 unchanged sentences

Equity method investments

Investments accounted for using the equity method include those investments where the Company (i) can exercise significant influence over the other entity and (ii) holds common stock and/or in-substance common stock of the other entity.

Investments accounted for using the equity method include those investments where the Company (i) can exercise significant influence over the other entity;

and (ii) holds common stock and/or in-substance common stock of the other entity.

Under the equity method, investments are carried at cost, and subsequently adjusted for the Company’s share of net income (loss), comprehensive income (loss) and distributions received from the investee.

13 unchanged sentences

Adoption of ASU 2016-13 will require financial institutions and other organizations to use forward-looking information to better formulate their credit loss estimates.

Canopy Growth adopted the new standard as of April 1, 2020.

Canopy Growth adopted ASU 2016-13 as of April 1, 2020.

There was no impact of adopting ASU 2016-13 on the condensed interim consolidated financial statements.

2 unchanged sentences

ASU 2018-13 adds, modifies, and removes certain fair value measurement disclosure requirements.

Canopy Growth adopted the new standard as of April 1, 2020.

Canopy Growth adopted ASU 2018-13 as of April 1, 2020.

There was no impact of adopting ASU 2018-13 on the condensed interim consolidated financial statements.

13 unchanged sentences

In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies the accounting for convertible instruments by reducing the number of accounting models for convertible debt instruments and convertible preferred stock.

In addition, ASU 2020-06 enhances information transparency by making targeted improvements to the disclosures for convertible instruments and earnings-per-share (EPS) guidance, and amends the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-

based accounting conclusions.

In addition, ASU 2020-06 enhances information transparency by making targeted improvements to the disclosures for convertible instruments and earnings-per-share (EPS) guidance,

and amends the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions.

ASU 2020-06 is effective for interim and annual periods beginning after December 15, 2021, with early adoption permitted after December 15, 2020.

1 unchanged sentence

ASSET IMPAIRMENT AND RESTRUCTURING COSTS

In the year ended March 31, 2020, the Company commenced an organizational and strategic review of its business which resulted in several restructuring actions designed to improve organizational focus, streamline operations and align the Company’s production capability with projected demand.

In the three months ended June 30, 2020, the Company completed certain of the restructuring actions that had commenced in the previous fiscal year, and recorded final adjustments related to changes in certain estimates recorded at March 31, 2020.

In addition, the Company incurred additional costs in the three months ended June 30, 2020, related primarily to the rationalization of our marketing organization in the current period.

In the three months ended September 30, 2020, the Company recorded adjustments related to changes in the estimated fair value of certain of the Company’s Canadian production facilities from March 31, 2020 and charges related to rationalizing certain research and development activities.

As a result, in the three and six months ended September 30, 2020, the Company recognized asset impairment and restructuring costs of $ 46,363 and $ 59,157 , respectively, in relation to (i) changes in the estimated fair value of certain of the Company’s Canadian production facilities, and costs associated with their closure;

(ii) completing the exit of the Company’s operations in South Africa and Lesotho;

(iii) employee-related costs associated with rationalizing certain marketing activities;

and (iv) charges related to rationalizing certain research and development activities.

In the three months ended June 30, 2020, the Company completed certain of the restructuring actions that had commenced in the year ended March 31, 2020, including completing the exit of the Company’s operations in South Africa and Lesotho, and recorded final adjustments related to changes in certain estimates recorded at March 31, 2020.

In addition, the Company incurred additional costs in the three months ended June 30, 2020 related primarily to the rationalization of its marketing organization in April 2020.

In the three months ended September 30, 2020, the Company recorded (i) adjustments related to changes in the estimated fair value of certain of its Canadian production facilities from March 31, 2020, and (ii) charges related to rationalizing certain research and development activities.

In December 2020, as the partial outcome of an ongoing end-to-end strategic review of its operations, the Company announced a series of Canadian operational changes designed to streamline its operations and further improve its gross margins.

The Company has ceased operations at its sites in St.

John’s, Newfoundland and Labrador;

Fredericton, New Brunswick;

Edmonton, Alberta;

Bowmanville, Ontario;

as well as its outdoor cannabis grow operations in Saskatchewan.

As a result of these restructuring actions, the Company eliminated approximately 220 full-time positions, and abandoned or impaired certain of its production facilities and intangible assets in the three months ended December 31, 2020.

A loss totaling $ 352,634 was recognized in the three months ended December 31, 2020 representing the difference between the net book value of the long-lived assets and their estimated salvage value or fair value.

Of this loss, $ 298,209 related to property, plant and equipment and $ 54,425 related to facility licenses and other intangible assets.

The losses related to property, plant and equipment were primarily attributable to buildings and greenhouses, production and warehouse equipment, and right-of-use assets.

Additionally, the Company recognized contractual and other settlement obligations of $ 13,058 and employee-related and other restructuring costs of $ 1,862 .

Additionally, the Company (i) completed the sale of its production facilities in Aldergrove and Delta, British Columbia in December 2020 and January 2021, respectively, for combined proceeds of $ 40,650 ;

and (ii) recorded additional charges related to the shifting of the Company’s strategy in Latin America, which the Company commenced in the three months ended March 31, 2020.

As a result, a loss totaling $ 28,437 was recognized in the three months ended December 31, 2020, representing the difference between the net book value of the long-lived assets and their selling price.

Additionally, the Company recognized costs totaling $ 4,431 related to contractual and other settlement obligations, employee-related costs, and other restructuring costs associated with the remediation of damages caused by the fire at the Delta facility in November, the closure of the facilities, and their sale.

As a result of the above, in the three and nine months ended December 31, 2020, the Company recognized asset impairment and restructuring costs of $ 400,422 and $ 459,579 , respectively, in relation to (i) the restructuring actions resulting in the closure of certain of its facilities in Canada in the three months ended December 31, 2020;

(ii) adjustments to the net book value of its production facilities in Aldergrove and Delta, British Columbia in order to reflect their selling prices, and other costs associated with their remediation, closure and sale;

(iii) charges related to the shifting of the Company’s strategy in Latin America;

(iv) completing the exit of the Company’s operations in South Africa and Lesotho;

(v) employee-related costs associated with rationalizing certain marketing activities;

and (vi) charges related to rationalizing certain research and development activities.

Additionally, in the three and nine months ended December 31, 2020, the Company recognized charges of $ 15,637 in cost of goods sold, primarily relating to inventory write-downs associated with the closure of certain of the Company’s facilities in Canada.

CASH AND CASH EQUIVALENTS

The components of cash and cash equivalents are as follows:

September 30,

Cash equivalents

1 unchanged sentence

The components of short-term investments are as follows:

September 30,

Term deposits

1 unchanged sentence

Commercial paper and other

The amortized cost of short-term investments at September 30, 2020 is $ 1,048,316 (March 31, 2020 – $ 673,022 ).

The amortized cost of short-term investments at December 31, 2020 is $ 768,859 (March 31, 2020 – $ 673,022 ).

AMOUNTS RECEIVABLE, NET

The components of amounts receivable, net are as follows:

September 30,

Accounts receivable, net

2 unchanged sentences

Other receivables

Included in the accounts receivable, net balance at September 30, 2020 is an allowance for doubtful accounts of $ 571 (March 31, 2020 – $ 655 ) .

Included in the accounts receivable, net balance at December 31, 2020 is an allowance for doubtful accounts of $ 815 (March 31, 2020 – $ 655 ) .

The components of inventory are as follows:

September 30,

Raw materials, packaging supplies and consumables

1 unchanged sentence

Finished goods

In the three and six months ended September 30, 2020, the Company recorded write-downs related to inventory of $ 4,945 and $ 24,331 , respectively, (three and six months ended September 30, 2019 – $ 21,747 and $ 26,536 , respectively) in cost of goods sold.

In the three and nine months ended December 31, 2020, the Company recorded write-downs related to inventory in cost of goods sold of $ 23,836 and $ 48,167 , respectively, including charges of $ 15,637 associated with the restructuring actions described in Note 3 (three and nine months ended December 31, 2019 – $ 6,018 and $ 32,554 , respectively).

PREPAID EXPENSES AND OTHER ASSETS

The components of prepaid expenses and other assets are as follows:

September 30,

Prepaid expenses

1 unchanged sentence

PharmHouse Inc.

(“PharmHouse”), a joint venture formed on May 7, 2018 , between the Company and 2615975 Ontario Limited (the “PharmHouse JV Partner”), is a company licensed to cultivate cannabis under the Cannabis Act.

(“PharmHouse”), a joint venture formed on May 7, 2018 , between Canopy Rivers and 2615975 Ontario Limited (the “PharmHouse JV Partner”), is a company licensed to cultivate cannabis under the Cannabis Act.

CCAA Proceedings

During the three months ended September 30, 2020, it was determined that the previously anticipated timeline for PharmHouse to generate cash flows from its offtake agreements with the Company and TerrAscend Canada Inc.

would not be met, and the ultimate timing and receipt of cash inflows pursuant to these agreements became uncertain.

During the nine months ended December 31, 2020, PharmHouse determined that the previously anticipated timeline to generate cash flows from its offtake agreements with the Company and TerrAscend Canada Inc.

(“TerrAscend Canada”) would not be met, and the ultimate timing and receipt of cash inflows pursuant to these agreements became uncertain.

As a result of this, as well as broader sector-wide challenges impacting the Canadian cannabis industry, PharmHouse did not have sufficient liquidity and capital resources to meet its business objectives and became unable to meet its financial obligations as they became due.

1 unchanged sentence

The Court appointed an independent professional services firm to act as the Monitor of PharmHouse in the CCAA Proceedings while PharmHouse explores a restructuring of its business and operations (the “Restructuring”).

On October 29, 2020, PharmHouse received approval from the Court to commence its Sale and Investor Solicitation Process (“SISP”).

The SISP is intended to solicit interest in, and opportunities for, a sale of, or investment in, all or part of PharmHouse’s assets or business.

This may include a restructuring, recapitalization, or other form of reorganization of PharmHouse’s business and affairs.

Phase one of the SISP concluded on November 30, 2020, and a number of non-binding offers were received.

PharmHouse, with the assistance of the Monitor and the SISP advisor, selected a number of parties to bring forward to the next phase of the SISP, and binding offers for phase two of the SISP are due on or about February 16, 2021.

PharmHouse Recoverability Assessment

7 unchanged sentences

the recoverability percentage on the liquidation of PharmHouse’s property, plant and equipment;

the selling price per gram of PharmHouse’s existing cannabis

the selling price per gram of PharmHouse’s existing cannabis inventory;

and adjustments for the risk of fair value changes and liquidity.

2 unchanged sentences

PharmHouse Financial Guarantee

As at September 30, 2020, PharmHouse had entered a syndicated credit agreement with amended terms (the “PharmHouse Credit Agreement”) with a number of Canadian banks to provide PharmHouse with a committed, non-revolving credit facility (the “PharmHouse Credit Facility”) with a maximum principal amount of $ 90,000 , which was fully drawn.

Prior to December 31, 2020, PharmHouse had entered into a syndicated credit agreement (as amended, the “PharmHouse Credit Agreement”) with a number of Canadian banks (the “Lenders”) to provide PharmHouse with a committed, non-revolving credit facility (the “PharmHouse Credit Facility”) with a maximum principal amount of $ 90,000 , which was fully drawn.

The obligations of PharmHouse under the PharmHouse Credit Facility are secured by guarantees of Canopy Rivers and Canopy Rivers Corporation (“CRC”), a wholly-owned subsidiary of Canopy Rivers, and a pledge by CRC of all of the shares of PharmHouse held by it (the “PharmHouse Financial Guarantee”).

Accordingly, if PharmHouse is not able to generate sufficient cash flows to service its obligations pursuant to the PharmHouse Credit Facility, the Company may be required to recognize a financial liability relating to all or a portion of the PharmHouse Financial Guarantee.

The PharmHouse Credit Agreement also contains certain representations and warranties and affirmative covenants applicable to the Company.

Accordingly, if PharmHouse is not able to generate sufficient cash flows to service its obligations pursuant to the PharmHouse Credit Facility, the Company may be required to compensate the Lenders for their loss incurred on the PharmHouse Credit Facility.

The PharmHouse Credit Agreement also contains other covenants applicable to Canopy Rivers and CRC.

Based on the PharmHouse Recoverability Assessment described above, the Company determined that the fair value of PharmHouse’s assets under an orderly liquidation scenario where the facility is not used for cannabis operations may be less than the principal amount owed by PharmHouse pursuant to the PharmHouse Credit Facility.

Accordingly, the Company estimated that it has a financial liability related to the PharmHouse Financial Guarantee, reflecting the estimated shortfall between the recoverable amount of PharmHouse en bloc and the Company’s exposure to the PharmHouse Credit Facility.

As at September 30, 2020, the Company estimated the current expected credit loss related to its contingent obligation under the PharmHouse Financial Guarantee to be $ 25,000 , and recognized a financial liability for this amount in the consolidated balance sheet (March 31, 2020 – $nil) (see Note 17) and the associated expected credit loss in net income (loss) for the three and six months ended September 30, 2020 (three and six months ended September 30, 2019 – $nil).

As at December 31 , 2020, the Company estimated the current expected credit loss related to its contingent obligation under the PharmHouse Financial Guarantee to be $ 32,500 , and recognized a financial liability for this amount in the consolidated balance sheet (March 31, 2020 – $ nil ) (see Note 17) .

During the three and nine months ended December 31, 2020, the Company recognized associated current expected credit loss es of $ 7,500 and $ 32,500 in net income (loss) for the three and nine months ended December 31 , 2020 , respectively (three and nine months ended December 31 , 2019 – $ nil ).

Other financial assets, including loans receivable

As at September 30, 2020, the Company had advanced $ 40,000 of secured debt financing pursuant to a shareholder loan agreement with PharmHouse (March 31, 2020 – $ 40,000 ).

As at December 31, 2020, CRC had advanced $ 40,000 of secured debt financing pursuant to a shareholder loan agreement with PharmHouse (March 31, 2020 – $ 40,000 ).

The shareholder loan has a three-year term and an annual interest rate of 12 %, with interest calculated monthly (effective as at the date principal is advanced) and payable quarterly upon the achievement of certain sales-related milestones.

As at September 30, 2020, the Company had advanced $ 2,450 to PharmHouse pursuant to a secured demand promissory note (March 31, 2020 – $ 2,450 ).

As at December 31, 2020, CRC had advanced $ 2,450 to PharmHouse pursuant to a secured demand promissory note (March 31, 2020 – $ 2,450 ).

The secured demand promissory note is non-interest bearing both before and after demand or default.

Based on the terms of the secured demand promissory note, the Company had recognized the secured demand promissory note as a financial asset initially recorded at fair value and subsequently measured at amortized cost.

On August 4, 2020, the Company entered into an unsecured demand promissory note agreement with PharmHouse, pursuant to which it made total advances of $ 1,206 between August 4, 2020, and September 8, 2020.

On August 4, 2020, CRC entered into an unsecured demand promissory note agreement with PharmHouse, pursuant to which it made total advances of $ 1,206 between August 4, 2020, and September 8, 2020.

The unsecured promissory note bears interest at a rate of 12 % per annum, calculated and compounded monthly, and is payable on the demand date.

Based on the terms of the unsecured demand promissory note, the Company has recognized the instrument as a financial asset initially recorded at fair value and subsequently measured at amortized cost.

Pursuant to the Initial Order, Canopy Rivers entered into an agreement to provide a super-priority, debtor-in-possession (“DIP”) interim, non-revolving credit facility up to a maximum principal amount of $ 7,214 (the “DIP Financing”) to enable PharmHouse to continue its day-to-day operations throughout the anticipated Restructuring.

The DIP Financing bears interest at a rate of 8 % per annum, calculated and compounded monthly and payable on the maturity date, which is the earlier of December 29, 2020, and the date the CCAA Proceedings are terminated.

As at September 30, 2020, the Company had advanced $ 2,100 pursuant to the DIP Financing.

As a result of the PharmHouse Recoverability Assessment described above, the Company recognized current expected credit losses of $ 25,000 related to its contingent obligation under the PharmHouse Financial Guarantee and concluded that the following amounts may not be recoverable:

(i) $ 2,100 advanced pursuant to DIP Financing;

Pursuant to the Initial Order, CRC entered into an agreement to provide a super-priority, debtor-in-possession (“DIP”) interim, non-revolving credit facility up to a maximum principal amount of $ 7,214 to PharmHouse (the “DIP Financing”) to enable PharmHouse to continue its day-to-day operations throughout the anticipated Restructuring.

The DIP Financing, which is subordinate to PharmHouse’s obligations to the Lenders under the PharmHouse Credit Facility, bears interest at a rate of 8 % per annum, calculated and compounded monthly and payable on the maturity date, which is the earlier of December 29, 2020, and the date the CCAA Proceedings are terminated.

On December 15, 2020, the DIP Financing agreement entered into between CRC and PharmHouse was amended.

As a result of this amendment, the maximum principal amount available to be drawn by PharmHouse pursuant to the DIP Financing increased from $ 7,214 , to $ 9,700 , and the maturity date was extended from December 29, 2020 to February 28, 2021.

On December 18, 2020, the Court approved the DIP Financing amendment and extended the stay of proceedings in respect of PharmHouse until February 28, 2021, inclusively.

As at December 31, 2020, CRC had advanced $ 8,300 pursuant to the DIP Financing.

As a result of the PharmHouse Recoverability Assessment described above, the Company recognized current expected credit losses of $ 7,500 and $ 32,500 for the three and nine months ended December 31, 2020, respectively, related to its contingent obligation under the PharmHouse Financial Guarantee.

We also concluded that the following amounts may not be recoverable:

(i) $ 8,300 advanced pursuant to DIP Financing, of which $ 6,200 was advanced in the three months ended December 31, 2020;

(ii) $ 40,000 advanced under the shareholder loan agreement;

2 unchanged sentences

and (v) $ 8,989 in interest receivable in relation to the financial instruments.

Additionally, it was determined that certain advances in the amount of $ 15,000 provided to PharmHouse by the Company may not be recoverable.

Accordingly, the Company recorded expected credit losses on financial assets and related charges of $ 94,745 for the three and six months ended September 30, 2020 (three and six months ended September 30, 2019 - $nil).

Additionally, it was determined that certain advances in the amount of $ 15,000 provided to PharmHouse by the Company may not be recoverable, and costs of $ 35 were incurred associated with the Restructuring in the three months ended December 31, 2020.

Accordingly, the Company recorded expected credit losses on financial assets and related charges of $ 13,735 and $ 108,480 for the three and nine months ended December 31, 2020 (three and nine months ended December 31, 2019 - $nil).

PharmHouse equity method investment

As at September 30, 2020, the Company owned 10,998,660 common shares of PharmHouse (March 31, 2020 – 10,998,660 common shares), representing a 49 % equity interest on a non-diluted basis.

The Company had not yet received any distributions on account of its common share investment in PharmHouse.

As a result of the PharmHouse Recoverability Assessment described above, the Company determined that there was an other-than-temporary-impairment and recognized an impairment charge for the full amount of its equity method investment of $ 32,369 (see Note 10) for the three and six months ended September 30, 2020 (three and six months ended September 30, 2019 – $nil).

As at December 31, 2020, CRC owned 10,998,660 common shares of PharmHouse (March 31, 2020 – 10,998,660 common shares), representing a 49 % equity interest on a non-diluted basis.

CRC had not yet received any distributions on account of its common share investment in PharmHouse.

Refer to Note 19 for a description of the plan of arrangement with Canopy Rivers.

EQUITY METHOD INVESTMENTS

The following table presents changes in the Company’s investments in associates that are accounted for using the equity method in the six months ended September 30, 2020:

September 30,

The following table presents changes in the Company’s investments in associates that are accounted for using the equity method in the nine months ended December 31, 2020:

Derecognition

of investment

1 See Note 9 for information regarding PharmHouse.

Where the Company does not have the same reporting date as its investees, the Company will account for its investment one quarter in arrears.

Accordingly, certain of the figures in the above table, including the Company’s share of the investee’s net income (loss), are based on the investees’ results for the six months ended June 30, 2020 (with respect to September 30, 2020) with adjustments for any signficant transactions.

The following tables present current and non-current assets, current and non-current liabilities as well as revenues and net loss of the Company’s equity method investments as at and for the six months ended June 30, 2020:

Accordingly, certain figures in the above table, including the Company’s share of the investee’s net income (loss), are based on the investees’ results for the nine months ended September 30, 2020 (with respect to December 31, 2020) with adjustments for any signficant transactions.

On December 30, 2020, CRC sold its share s in CanapaR, in exchange for $ 7,000 cash and $ 1,000 in contingent consideration, which was recorded at its estimated fair value as an other financial asset.

OTHER FINANCIAL ASSETS

1 unchanged sentence

Additional details on how the fair value of significant investments are calculated are included in Note 23.

September 30,

credit losses

2 unchanged sentences

Exchangeable shares

TerrAscend - March 2020

TerrAscend - December 2020

Arise Bioscience

Acreage Hempco 1

7 unchanged sentences

2 See Note 9 for information regarding PharmHouse.

Arise Bioscience

On December 10, 2020, the Company entered into a loan financing agreement with Arise Bioscience, Inc.

(“Arise Bioscience”), a wholly owned subsidiary of TerrAscend Corp.

(“TerrAscend”).

The investment is in the amount of US$ 20,000 ($ 25,478 ) (the “Loan”) pursuant to a secured debenture (the “Debenture”).

The Debenture bears interest at a rate of 6.1 % and is payable beginning in the fourth year after its issuance.

The Debenture will mature on December 10, 2030 .

In connection with the Loan, TerrAscend issued 2,105,718 common share purchase warrants to the Company (the “Warrants”).

1,926,983 Warrants are exercisable at a price of $ 15.28 per share, and expire on December 10, 2030 .

178,735 Warrants are exercisable at a price of $ 17.19 per share, and expire on December 10, 2031 .

The Warrants will be exercisable by the Company following changes in U.S.

federal laws permitting the cultivation, distribution, and possession of marijuana or to remove the regulation of such activities from the federal laws of the United States.

The Loan is repayable by Arise Bioscience at any time.

At issuance, the Debenture had a fair value of $ 11,758 and the Warrants had a fair value of $ 13,720 .

As of December 31, 2020, the Debenture had a fair value of $ 12,204 and the Warrants had a fair value of $ 14,026 .

See Note 23 for additional details on how the fair value of the Company’s investment is calculated on a recurring basis.

PROPERTY, PLANT AND EQUIPMENT

The components of property, plant and equipment are as follows:

September 30,

Buildings and greenhouses

8 unchanged sentences

Accumulated depreciation

Depreciation expense included in cost of goods sold for the three and six months ended September 30, 2020 is $ 14,449 and $ 29,235 , respectively (three and six months ended September 30, 2019 – $ 12,138 and $ 21,455 , respectively).

Depreciation expense included in selling, general and administrative expenses for the three and six months ended September 30, 2020 is $ 4,509 and $ 7,138 , respectively (three and six months ended September 30, 2019 – $ 4,087 and $ 8,358 , respectively).

Depreciation expense included in cost of goods sold for the three and nine months ended December 31, 2020 is $ 10,955 and $ 40,190 , respectively (three and nine months ended December 31, 2019 – $ 13,568 and $ 35,023 , respectively).

Depreciation expense included in selling, general and administrative expenses for the three and nine months ended December 31, 2020 is $ 7,297 and $ 14,435 , respectively (three and nine months ended December 31, 2019 – $ 6,201 and $ 14,559 , respectively).

See Note 3 for information on the impairment and abandonment of property, plant and equipment that the Company recognized in the three months ended December 31, 2020 as part of the restructuring actions resulting in the closure of certain of its facilities in Canada, and adjustments to the net book value of its production facilities in Aldergrove and Delta, British Columbia in order to reflect their selling prices.

INTANGIBLE ASSETS

The components of intangible assets are as follows:

September 30, 2020

December 31, 2020

March 31, 2020

10 unchanged sentences

Total intangible assets

Amortization expense (recovery) included in cost of goods sold for the three and six months ended September 30, 2020 is $( 739 ) and $( 37 ) , respectively ( three and six months ended September 30, 2019 – $ 26 and $ 38 , respectively).

Amortization expense included in selling, general and administrative expenses for the three and six months ended September 30, 2020 is $ 13,539 and $ 29,469 , respectively (three and six months ended September 30, 2019 – $ 8,764 and $ 15,917 , respectively).

Amortization expense included in cost of goods sold for the three and nine months ended December 31, 2020 is $ 99 and $ 62 , respectively ( three and nine months ended December 31, 2019 – $ 71 and $ 109 , respectively).

Amortization expense included in selling, general and administrative expenses for the three and nine months ended December 31, 2020 is $ 14,034 and $ 43,503 , respectively (three and nine months ended December 31, 2019 – $ 10,624 and $ 26,541 , respectively).

See Note 3 for information on the impairment and abandonment of intangible assets that the Company recognized in the three months ended December 31, 2020 as part of the restructuring actions resulting in the closure of certain of its facilities in Canada.

The changes in the carrying amount of goodwill are as follows:

5 unchanged sentences

Foreign currency translation adjustments

Balance, September 30, 2020

Balance, December 31, 2020

OTHER ACCRUED EXPENSES AND LIABILITIES

The components of other accrued expenses and liabilities are as follows:

September 30,

Property, plant and equipment

3 unchanged sentences

Convertible senior notes

September 30,

Maturity Date

19 unchanged sentences

The notes will be convertible, at the holder’s option, at a conversion rate of 20.7577 common shares for every $ 1 principal amount of notes (equal to an initial conversion price of approximately $ 48.18 per common share), subject to adjustments in certain events.

the preceding calendar quarter is greater than or equal to 130 % of the conversion price on each applicable trading day, (ii) during the 5 business day period after any consecutive 5 trading day period (the “measurement period”) in which the trading price per $ 1 principal amount of the notes for each trading day in the measurement period was less than 98 % of the product of the last reported sales price of the Company’s common shares and the conversion rate on each such trading day, (iii) the notes are called for redemption or (iv) upon occurrence of certain corporate events (“Fundamental Change”).

In addition, the holder has the right to exercise the conversion option from September 30, 2018 to January 15, 2023, if (i) the market price of the Company common shares for at least 20 trading days during a period of 30 consecutive trading days ending on the last trading day of the preceding calendar quarter is greater than or equal to 130 % of the conversion price on each applicable trading day, (ii) during the 5 business day period after any consecutive 5 trading day period (the “measurement period”) in which the trading price per $ 1 principal amount of the notes for each trading day in the measurement period was less than 98 % of the product of the last reported sales price of the Company’s common shares and the conversion rate on each such trading day, (iii) the notes are called for redemption or (iv) upon occurrence of certain corporate events (“Fundamental Change”).

A Fundamental Change occurred upon completion of the investment by Constellation Brands, Inc.

(“CBI”) in November 2018, and no note holders surrendered any portion of their notes in connection therewith .

(“CBI”) in the Company in November 2018, and no note holders surrendered any portion of their notes in connection therewith .

The Company may, upon conversion by the holder, elect to settle in either cash, common shares, or a combination of cash and common shares, subject to certain circumstances.

6 unchanged sentences

The notes were initially recognized at fair value on the balance sheet.

All subsequent changes in fair value, excluding the impact of the change in fair value related to Company’s own credit risk are recorded in other income (expenses), net.

All subsequent changes in fair value, excluding the impact of the change in fair value related to the Company’s own

credit risk are recorded in other income (expenses), net.

The changes in fair value related to the Company’s own credit risk are recorded through other comprehensive income (loss).

The overall change in fair value of the notes during the three and six months ended September 30, 2020, was an increase of $ 36,306 and $ 72,000 , respectively (three and six months ended September 30, 2019, a decrease of $ 199,194 and $ 245,250 , respectively), which included contractual interest of $ 6,306 and $ 12,750 (three and six months ended September 30, 2019, interest of $ 6,306 and $ 12,750 , respectively).

The overall change in fair value of the notes during the three and nine months ended December 31, 2020, was an increase of $ 105,588 and $ 177,588 , respectively (three and nine months ended December 31, 2019, a decrease of $ 47,556 and $ 292,806 , respectively), which included contractual interest of $ 6,588 and $ 19,338 (three and nine months ended December 31, 2019, interest of $ 6,444 and $ 19,194 , respectively).

Refer to Note 23 for additional details on how the fair value of the notes is calculated.

Transferred receivables

The carrying amount of the transferred receivables include receivables which are subject to a factoring arrangement.

Under this agreement, C 3 Cannabinoid Compound Company (“C 3 ”) has transferred the relevant receivables to PB Factoring GmbH in exchange for cash.

The transferred receivables to PB Factoring GmbH are $ 1,542 and the associated secured borrowing is $ 1,553 .

The factoring arrangement with PB Factoring GmbH was repaid and subsequently terminated effective December 31, 2020.

Other revolving debt facility, loans, and financings

2 unchanged sentences

The extinguishment of $ 4,912 in previous FCC debt resulted in no gain or loss.

The current outstanding balance of the FCC debt facility is $ 5,268 with an interest rate of 3.45 %, or FCC prime rate plus 1.0 % , and matures on September 3, 2024 .

The current outstanding balance of the FCC debt facility is $nil with an interest rate of 3.45 %, or FCC prime rate plus 1.0 % , and matures on September 3, 2024 .

The revolving debt facility with FCC is secured by a first charge on the properties in Niagara-on-the-Lake, Ontario, a corporate guarantee from the Company, and a general corporate security agreement .

1 unchanged sentence

The components of other liabilities are as follows:

As at September 30, 2020

As at December 31, 2020

As at March 31, 2020

10 unchanged sentences

As at March 31, 2020

Loss attributable to noncontrolling interest

Net loss attributable to redeemable noncontrolling interest

Adjustments to redemption amount

As at September 30, 2020

As at December 31, 2020

As at March 31, 2019

Income attributable to noncontrolling interest

Initial recognition of noncontrolling interest

Net income (loss) attributable to redeemable noncontrolling interest

Adjustments to redemption amount

As at September 30, 2019

As at December 31, 2019

SHARE CAPITAL

2 unchanged sentences

(i) Equity financings

There were no equity financings during the six months ended September 30, 2020 (six months ended September 30, 2019 - no ne).

There were no equity financings during the nine months ended December 31, 2020 (nine months ended December 31, 2019 - no ne).

(ii) Other issuances of common shares

During the six months ended September 30, 2020, the Company issued the following shares, net of share issuance costs, as a result of business combinations, milestones being met, and other equity-settled transactions:

During the nine months ended December 31, 2020, the Company issued the following shares, net of share issuance costs, as a result of business combinations, milestones being met, and other equity-settled transactions:

Number of shares

1 unchanged sentence

Other issuances

During the six months ended September 30, 2019, the Company issued the following shares, net of share issuance costs, as a result of business combinations, milestones being met, and other equity-settled transactions:

During the nine months ended December 31, 2019, the Company issued the following shares, net of share issuance costs, as a result of business combinations, milestones being met, and other equity-settled transactions:

Number of shares

Acquisition of BC Tweed NCI release from escrow

Completion of acquisition milestones

4 unchanged sentences

Expiry of warrants

Balance outstanding at September 30, 2020 1

Balance outstanding at December 31, 2020 1

1 This balance excludes the Tranche C Warrants, which represent a derivative liability and have nominal value, see Note 27.

4 unchanged sentences

Exercise of warrants

Balance outstanding at September 30, 2019 1

Balance outstanding at December 31, 2019 1

1 This balance excludes the Tranche C Warrants, which represent a derivative liability and have nominal value, see Note 27.

1 unchanged sentence

Authorized capital

Canopy Rivers is authorized to issue an unlimited number of Class A common shares designated as subordinated voting shares (the “Subordinated Voting Shares”) and unlimited number of Class B common shares designated as multiple voting shares (the “Multiple Voting Shares”).

Canopy Rivers is authorized to issue an unlimited number of Class A common shares designated as subordinated voting shares (the “Subordinated Voting Shares”) and an unlimited number of Class B common shares designated as multiple voting shares (the “Multiple Voting Shares”).

Each Subordinated Voting Share carries the right to one vote per share and each Multiple Voting Share carries the right to 20 votes per share at all meetings of the shareholders of Canopy Rivers.

1 unchanged sentence

Issued and outstanding

As at September 30, 2020, Canopy Rivers had 36,468,318 Multiple Voting Shares (March 31, 2020 – 36,468,318 ) and 154,836,057 Subordinated Voting Shares (March 31, 2020 – 152,837,131 ) issued and outstanding.

As at September 30, 2020, the Company held 36,468,318 Multiple Voting Shares (March 31, 2020 – 36,468,318 ) and 15,223,938 Subordinated Voting shares (March 31, 2020 – 15,223,938 ) which represented a 26.9 % ownership interest in Canopy Rivers and 84.1 % of the voting rights (March 31, 2020 – 27.3 % and 84.4 % respectively).

As at December 31, 2020, Canopy Rivers had 36,468,318 Multiple Voting Shares (March 31, 2020 – 36,468,318 ) and 155,034,391 Subordinated Voting Shares (March 31, 2020 – 152,837,131 ) issued and outstanding.

As at December 31, 2020, the Company held 36,468,318 Multiple Voting Shares (March 31, 2020 – 36,468,318) and 15,223,938 Subordinated Voting shares (March 31, 2020 – 15,223,938 ) which represented a 26.9 % ownership interest in Canopy Rivers and 84.1 % of the voting rights (March 31, 2020 – 27.3 % and 84.4 % respectively).

The voting rights allow the Company to direct the relevant activities of Canopy Rivers such that the Company has control over Canopy Rivers and Canopy Rivers is consolidated in these financial statements.

There were no financings during the six months ended September 30, 2020, other than the release of shares related to share purchase financing as noted below.

See “Canopy Rivers Arrangement Agreement” below for further details.

There were no financings during the nine months ended December 31, 2020, other than the release of shares related to a share purchase financing as noted below.

Initial financing

1 unchanged sentence

These Subordinated Voting Shares were initially accounted for as seed capital options and are not considered issued for accounting purposes until the loans are repaid on an individual employee/consultant basis.

During the three and six months ended September 30, 2020, share purchase loans in the amount of $ 63 and $ 95 , respectively, (three and six months ended September 30, 2019 – $ 29 and $ 48 , respectively) relating to Canopy Rivers shares held in trust by the Company on behalf of certain Canopy Growth employees were repaid, resulting in the release from escrow of 1,266,668 and 1,905,559 Subordinated Voting Shares, respectively (three and six months ended September 30, 2019 – 583,333 and 961,108 , respectively).

As at September 30, 2020, there were 66,668 seed capital options outstanding (March 31, 2020 – 2,805,560 ).

During the three and nine months ended December 31, 2020, share purchase loans in the amount of $nil and $ 95 , respectively, (three and nine months ended December 31, 2019 – $ 2 and $ 50 , respectively) relating to Canopy Rivers shares held in trust by the Company on behalf of certain Canopy Growth employees were repaid, resulting in the release from escrow of nil and 1,905,559 Subordinated Voting Shares, respectively (three and nine months ended December 31, 2019 – 38,890 and 999,998 , respectively).

As at December 31, 2020, there were 33,334 seed capital options outstanding (March 31, 2020 – 2,805,560 ).

Please refer to Note 20 for additional details on the seed capital options.

5 unchanged sentences

All Subordinated Voting Share purchases made by Canopy Rivers under the NCIB will be funded out of Canopy Rivers’ working capital and will be cancelled immediately.

During the three months ended September 30, 2020, Canopy Rivers repurchased and cancelled a total of 164,200 Subordinated Voting Shares under the NCIB program for $ 181 , at a weighted average acquisition price of $ 1.09 per share (three months ended September 30, 2019 – not applicable).

During the six months ended September 30, 2020, Canopy Rivers repurchased and cancelled a total of 273,300 Subordinated Voting Shares under the NCIB program for $ 307 , at a weighted average acquisition price of $ 1.11 per share (six months ended September 30, 2019 – not applicable).

During the three months ended December 31, 2020, Canopy Rivers repurchased and cancelled a total of nil Subordinated Voting Shares under the NCIB program for $nil, at a weighted average acquisition price of $nil per share (three months ended December 31, 2019 – not applicable).

During the nine months ended December 31, 2020, Canopy Rivers repurchased and cancelled a total of 273,300 Subordinated Voting Shares under the NCIB program for $ 307 , at a weighted average acquisition price of $ 1.11 per share (nine months ended December 31, 2019 – not applicable).

Canopy Rivers Arrangement Agreement

In December 2020, Canopy Growth entered into an arrangement agreement (the “Canopy Rivers Arrangement Agreement”) with its wholly-owned subsidiary The Tweed Tree Lot Inc.

(“Tweed NB”), Canopy Rivers and its wholly-owned subsidiary, CRC, pursuant to which Canopy Growth will acquire certain assets from CRC, as set out below, in exchange for cash, common shares in the capital of Canopy Growth and the surrender of all shares in the capital of Canopy Rivers held by Canopy Growth by way of a plan of arrangement under the Business Corporations Act (Ontario) (the “Arrangement”).

Pursuant to the Arrangement, Canopy Growth will increase its conditional ownership interest in TerrAscend through the acquisition of (i) 19,445,285 exchangeable shares in the capital of TerrAscend;

(ii) 2,225,714 common share purchase warrants in the capital of TerrAscend with an exercise price of $ 5.95 per share;

(iii) 333,723 common share purchase warrants in the capital of TerrAscend with an exercise price of $ 6.49 per share;

and (iv) a $ 13.2 million loan receivable owing by TerrAscend Canada to CRC.

The securities in the capital of TerrAscend are not currently convertible or exercisable, and will not be convertible or exercisable until federal laws in the United States with respect to marijuana are amended.

Subject to certain rights of first refusal, pursuant to the Arrangement, Canopy Growth will also acquire all of the common shares and Class A preferred shares in the capital of Les Serres Vert Cannabis Inc.

(“Vert Mirabel”) held by CRC.

In addition, all of the obligations of Tweed NB owing to CRC pursuant to a royalty agreement between the parties will be terminated.

Canopy Growth currently owns 36,468,318 Multiple Voting Shares and 15,223,938 Subordinate Voting Shares in the capital of Canopy Rivers, which represent approximately a 27 % ownership interest and 84 % of the aggregate voting rights of Canopy Rivers.

Pursuant to the Arrangement, all of the Multiple Voting Shares and Subordinate Voting Shares held by Canopy Growth will be repurchased by Canopy Rivers for cancellation on a cashless basis.

Canopy Growth will not have any equity, debt or other interest in Canopy Rivers following completion of the Arrangement.

As additional consideration for the assets being transferred and the termination of the royalty agreement, Canopy Growth will make a cash payment to CRC of $ 115.0 million and issue an aggregate of up to 3,750,000 common shares.

The Arrangement remains subject to approval by the shareholders of Canopy Rivers at a special shareholder meeting expected to be held on February 16, 2021.

The Arrangement does not require the approval of the shareholders of Canopy Growth.

In addition to Canopy Rivers shareholder approval, the Arrangement is subject to applicable approvals by the Ontario Superior Court of Justice and certain other closing conditions.

SHARE-BASED COMPENSATION

3 unchanged sentences

The Omnibus Plan approved by the shareholders extended the maximum term of each Option (as defined below) to be granted by the Company to ten years from the date of grant rather than six years from the date of grant.

All directors, officers, employees and independent contractors of the Company are eligible to receive awards of common share purchase options (“Options”), restricted share units (“RSUs”), performance share units (“PSUs”), deferred share units, stock appreciation rights (“Stock Appreciation Rights”), performance awards (“Performance Awards”) or other stock based awards (collectively, the “Awards”) under the Omnibus Plan.

All directors, officers, employees and independent contractors of the Company are eligible to receive awards of common share purchase options (“Options”), restricted share units (“RSUs”), performance share units (“PSUs”), deferred share units, stock appreciation rights, performance awards, or other shares-based awards (collectively, the “Awards”) under the Omnibus Plan.

Under the Omnibus Plan, the maximum number of shares issuable from treasury pursuant to Awards shall not exceed 15 % of the total outstanding shares from time to time less the number of shares issuable pursuant to all other security-based compensation arrangements of the Company.

The maximum number of common shares reserved for Awards is 55,806,917 at September 30, 2020.

As of September 30, 2020, the only Awards issued have been Options, RSUs and PSUs under the Omnibus Plan.

The maximum number of common shares reserved for Awards is 56,070,568 at December 31, 2020.

As of December 31, 2020, the only Awards issued have been Options, RSUs and PSUs under the Omnibus Plan.

The Omnibus Plan is administered by the Board of Directors of the Company who establishes exercise prices, at not less than the market price at the date of grant, and expiry dates.

Options under the Omnibus Plan generally become exercisable in increments with 1/3 being exercisable on each of the first, second and third anniversaries from the date of grant, with expiry dates set at ten years from issuance.

Options under the Omnibus Plan generally become exercisable in increments

with 1/3 being exercisable on each of the first, second and third anniversaries from the date of grant, with expiry dates set at ten years from issuance.

The Board of Directors of the Company has the discretion to amend general vesting provisions and the term of any award, subject to limits contained in the Omnibus Plan.

The Employee Share Purchase Plan (the “Purchase Plan”) is the Company’s only other security-based compensation arrangement.

The Employee Share Purchase Plan (the “Purchase Plan”) is the Company’s only other share-based compensation arrangement.

Under the Purchase Plan, the aggregate number of common shares that may be issued is 600,000 , and the maximum number of common shares which may be issued in any one fiscal year shall not exceed 300,000 .

As of September 30, 2020, no common shares have been issued under the Purchase Plan.

The following is a summary of the changes in the Options outstanding under the Omnibus Plan during the six months ended September 30, 2020:

As of December 31, 2020, no common shares have been issued under the Purchase Plan.

The following is a summary of the changes in the Options outstanding under the Omnibus Plan during the nine months ended December 31, 2020:

exercise price

2 unchanged sentences

Options exercised

Options forfeited/cancelled

Balance outstanding at September 30, 2020

The following is a summary of the Options as at September 30, 2020:

Options forfeited

Balance outstanding at December 31, 2020

The following is a summary of the Options as at December 31, 2020:

Options Outstanding

Options Exercisable

Range of Exercise Prices

Outstanding at September 30, 2020

Weighted Average

Contractual Life

Exercisable at September 30, 2020

Weighted Average

Outstanding at

Contractual Life

Exercisable at

Contractual Life

Range of Exercise Prices

December 31, 2020

$0.06 - $24.62

3 unchanged sentences

$42.85 - $67.64

At September 30, 2020, the weighted average exercise price of Options outstanding and Options exercisable was $ 35.16 and $ 33.84 , respectively (March 31, 2020 – $ 34.89 and $ 31.84 , respectively).

The Company recorded $ 15,525 and $ 37,853 in share-based compensation expense related to Options issued to employees and contractors for the three and six months ended September 30, 2020, respectively (three and six months ended September 30, 2019 – $ 80,225 and $ 153,318 , respectively).

The share-based compensation expense for the six months ended September 30, 2020 includes an amount related to 2,060,068 Options being provided in exchange for services which are subject to performance conditions (for the six months ended September 30, 2019 – 445,000 ).

The Company uses the Black-Scholes option pricing model to establish the fair value of Options granted during the three months ended September 30, 2020 and 2019, on their measurement date by applying the following assumptions:

September 30,

At December 31, 2020, the weighted average exercise price of Options outstanding and Options exercisable was $ 36.12 and $ 35.91 , respectively (March 31, 2020 – $ 34.89 and $ 31.84 , respectively).

The Company recorded $ 16,663 and $ 54,516 in share-based compensation expense related to Options issued to employees and contractors for the three and nine months ended December 31, 2020, respectively (three and nine months ended December 31, 2019 – $ 57,735 and $ 211,053 , respectively).

The share-based compensation expense for the nine months ended December 31, 2020 includes an amount related to 2,112,745 Options being provided in exchange for services which are subject to performance conditions (for the nine months ended December 31, 2019 – 445,000 ).

The Company uses the Black-Scholes option pricing model to establish the fair value of Options granted during the three months ended December 31, 2020 and 2019, on their measurement date by applying the following assumptions:

Risk-free interest rate

7 unchanged sentences

The risk-free rate was based on zero coupon Canada government bonds with a remaining term equal to the expected life of the Options.

During the six months ended September 30, 2020, 1,431,880 Options were exercised ranging in price from $ 0.06 to $ 27.99 for gross proceeds of $ 10,756 (for the six months ended September 30, 2019 – 3,290,212 Options were exercised ranging in price from $ 0.22 to $ 40.68 for gross proceeds of $ 36,023 ).

For the three and six months ended September 30, 2020, the Company recorded $ 2,343 and $ 6,185 respectively, in share-based compensation expense related to these RSUs (for the three and six months ended September 30, 2019 – $ 1,287 and $ 2,681 , respectively).

The following is a summary of the changes in the Company’s RSUs during the six months ended September 30, 2020:

During the nine months ended December 31, 2020, 3,176,977 Options were exercised ranging in price from $ 0.06 to $ 36.34 for gross proceeds of $ 37,999 (for the nine months ended December 31, 2019 – 3,642,733 Options were exercised ranging in price from $ 0.22 to $ 40.68 for gross proceeds of $ 39,149 ).

For the three and nine months ended December 31, 2020, the Company recorded $ 2,685 and $ 8,870 , respectively, in share-based compensation expense (recovery) related to RSUs (for the three and nine months ended December 31, 2019 – $( 2,552 ) and $ 129 , respectively).

The following is a summary of the changes in the Company’s RSUs during the nine months ended December 31, 2020:

Number of RSUs

2 unchanged sentences

RSUs cancelled and forfeited

Balance outstanding at September 30, 2020

Balance outstanding at December 31, 2020

Share-based compensation expense related to acquisition milestones is comprised of:

Three months ended

Six months ended

September 30,

Nine months ended

Spectrum Colombia

During the three and six months ended September 30, 2020, 397,164 and 1,149,086 common shares, respectively, (during the three and six months ended September 30, 2019 – 84,530 and 566,851 respectively) were released on completion of acquisition milestones.

At September 30, 2020, there were up to 3,965,798 common shares to be issued on the completion of acquisition and asset purchase milestones.

During the three and nine months ended December 31, 2020, nil and 1,149,086 common shares, respectively, (during the three and nine months ended December 31, 2019 – 665,297 and 1,232,148 , respectively) were released on completion of acquisition milestones.

At December 31, 2020, there were up to 3,778,334 common shares to be issued on the completion of acquisition and asset purchase milestones.

In certain cases, the number of common shares to be issued is based on the volume weighted average share price at the time the milestones are met.

The number of common shares has been estimated assuming the milestones were met at September 30, 2020.

The number of common shares has been estimated assuming the milestones were met at December 31, 2020.

The number of common shares excludes common shares that are to be issued on July 4, 2023 to the previous shareholders of Spectrum Colombia S.A.S.

5 unchanged sentences

BioSteel has a stock option plan under which non-transferable options to purchase common shares of BioSteel may be granted to directors, officers, employees, or independent contractors of the BioSteel.

As at September 30, 2020, BioSteel had 1,352,000 (March 31, 2020 – 1,008,000 ) options outstanding which vest in equal tranches over a 5 -year period.

As at December 31, 2020, BioSteel had 1,507,000 (March 31, 2020 – 1,008,000 ) options outstanding which vest in equal tranches over a 5-year period.

In determining the amount of share-based compensation related to these options, BioSteel used the Black-Scholes option pricing model to establish the fair value of options on their measurement date.

The Company recorded $ 418 and $ 662 of share-based compensation expense related to the BioSteel options during the three and six months ended September 30, 2020, respectively (three and six months ended September 30, 2019 – $nil), with a corresponding increase in noncontrolling interest.

The Company recorded $ 256 and $ 918 of share-based compensation expense related to the BioSteel options during the three and nine months ended December 31, 2020, respectively (three and nine months ended December 31, 2019 – $ 247 ), with a corresponding increase in noncontrolling interest.

CANOPY RIVERS SHARE-BASED COMPENSATION PLAN

11 unchanged sentences

Options expired

Balance outstanding at September 30, 2020

Canopy Rivers has a stock option plan (the “Option Plan”) under which non-transferable options to purchase Subordinated Voting Shares of the Company may be granted to directors, officers, employees, or independent contractors of Canopy Rivers.

Pursuant to the Option Plan, the maximum number of Subordinated Voting Shares issuable from treasury pursuant to outstanding options shall not exceed 10 % of the issued and outstanding Subordinated Voting Shares and Multiple Voting Shares, on an aggregate basis.

The Option Plan is administered by the Board of Directors of Canopy Rivers who establishes exercise prices, at not less than the market price at the date of the grant, and expiry dates.

Options under the Option Plan generally become exercisable in increments, with one-third being exercisable on each of the first, second, and third anniversaries from the date of grant, and have expiry dates five years from the date of grant.

The Board of Directors of Canopy Rivers has the discretion to amend general vesting provisions and the term of any option grant, subject to limits contained in the Option Plan.

The seed capital options are not within the scope of the Option Plan.

The following is a summary of the changes in Canopy Rivers’ stock options, excluding the seed capital options presented separately, during the six months ended September 30, 2020:

Balance outstanding at December 31, 2020

Canopy Rivers has a long-term incentive plan (“LTIP”) under which non-transferable options, RSUs, PSU, stock appreciation rights, and restricted stock may be granted to directors, officers, employees, or other eligible service providers of Canopy Rivers.

Pursuant to the LTIP, the maximum number of Subordinated Voting Shares issuable from treasury pursuant to outstanding options, RSUs and PSUs shall not exceed 10 % of the issued and outstanding Subordinated Voting Shares and Multiple Voting Shares, on an aggregate basis.

The LTIP is administered by the Board of Directors of Canopy Rivers who establishes exercise prices, at not less than the market price at the date of the grant, and expiry dates.

Options under the LTIP generally become exercisable in increments, with one-third being exercisable on each of the first, second, and third anniversaries from the date of grant, and have expiry dates five years from the date of grant.

The Board of Directors of Canopy Rivers has the discretion to amend general vesting provisions and the term of any option grant, subject to limits contained in the LTIP.

The seed capital options are not within the scope of the LTIP.

The following is a summary of the changes in Canopy Rivers’ stock options, excluding the seed capital options presented separately, during the nine months ended December 31, 2020:

exercise price

3 unchanged sentences

Options expired

Options forfeited/cancelled

Balance outstanding at September 30, 2020

In determining the amount of share-based compensation related to options issued during the year, Canopy Rivers used the Black-Scholes option pricing model to establish the fair value of options granted during the three months ended September 30, 2020 and 2019, on their measurement date by applying the following assumptions:

September 30,

Options forfeited

Balance outstanding at December 31, 2020

In determining the amount of share-based compensation related to options issued during the year, Canopy Rivers used the Black-Scholes option pricing model to establish the fair value of options granted during the three months ended December 31, 2020 and 2019, on their measurement date by applying the following assumptions:

Risk-free interest rate

7 unchanged sentences

The risk-free rate was based on zero coupon Canada government bonds with a remaining term equal to the expected life of the options.

For the three and six months ended September 30, 2020, the Company recorded $ 391 and $ 1,575 , respectively, (three and six months ended September 30, 2019 – $ 2,255 and $ 4,849 , respectively) in share-based compensation expense related to these options and the seed capital options with a corresponding increase to noncontrolling interests.

In the three and six months ended September 30, 2020, Canopy Rivers granted 28,884 (three and six months ended September 30, 2019 – none ) restricted share units which vest immediately.

For the three and six months ended September 30, 2020, the Company recorded $( 5 ) and $ 112 , respectively, (three and six months ended September 30, 2019 – $nil) of share-based compensation expense (recapture) related to these restricted share units.

In the three and six months ended September 30, 2020, Canopy Rivers granted 1,210,000 (three and six months ended September 30, 2019 – none ) performance share units which vest over a three-year period.

For the three and six months ended September 30, 2020, the Company recorded $ 404 (three and six months ended September 30, 2019 – $nil) of share-based compensation expense related to these performance share units.

For the three and nine months ended December 31, 2020, the Company recorded $ 202 and $ 1,776 , respectively, (three and nine months ended December 31, 2019 – $ 1,333 and $ 6,182 , respectively) in share-based compensation expense related to these options and the seed capital options with a corresponding increase to noncontrolling interests.

In the three and nine months ended December 31, 2020, Canopy Rivers granted nil and 28,884 (three and nine months ended December 31, 2019 – none) restricted share units which vest immediately.

For the three and nine months ended December 31, 2020, the Company recorded $ 45 and $ 157 , respectively, (three and nine months ended December 31, 2019 – $nil) of share-based compensation expense related to these restricted share units.

In the three and nine months ended December 31, 2020 , Canopy Rivers granted nil and 1,210,000 , respectively ( three and nine months ended December 31, 2019 – none ) performance share units which vest over a three-year period.

During the three and nine months ended December 31, 2020, 285,000 performance share units were forfeited (three and nine months ended December 31, 2019 – nil ).

For the three and nine months ended December 31, 2020 , the Company recorded $ 134 and $ 538 , respectively ( three and nine months ended December 31, 2019 – $nil ) of share-based compensation expense related to these performance share units .

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

5 unchanged sentences

Other comprehensive loss

As at September 30, 2020

As at December 31, 2020

Foreign currency translation adjustments

3 unchanged sentences

Other comprehensive (loss) income

As at September 30, 2019

Income tax expense

As at December 31, 2019

NONCONTROLLING INTERESTS

1 unchanged sentence

As at March 31, 2020

Comprehensive loss

Comprehensive income (loss)

Net loss attributable to redeemable

2 unchanged sentences

Ownership changes

As at September 30, 2020

As at December 31, 2020

As at March 31, 2019

4 unchanged sentences

Ownership changes

As at September 30, 2019

As at December 31, 2019

FAIR VALUE OF FINANCIAL INSTRUMENTS

12 unchanged sentences

Quoted prices

September 30, 2020

December 31, 2020

Short-term investments

44 unchanged sentences

Increase or decrease in discount rate will result in a decrease or increase in fair value

TerrAscend warrants

TerrAscend warrants - March 2020

Monte Carlo simulation model

7 unchanged sentences

Increase or decrease in discount rate will result in a decrease or increase in fair value

Arise Bioscience term loan

Discounted cash flow

Probability and timing of US legalization

Increase or decrease in probability of US legalization will result in an increase or decrease in fair value

Discount rate

Increase or decrease in discount rate will result in a decrease or increase in fair value

TerrAscend warrants - December 2020

Monte Carlo simulation model

Probability and timing of US legalization

Increase or decrease in probability of US legalization will result in an increase or decrease in fair value

ZeaKal shares

15 unchanged sentences

Increase or decrease in expected life will result in an increase or decrease in fair value

Financial asset / financial liability

Valuation techniques

Significant unobservable inputs

Relationship of unobservable inputs to fair value

BioSteel redeemable noncontrolling interest

10 unchanged sentences

Increase or decrease in future wholesale price and production levels will result in an increase or decrease in fair value

During the six months ended September 30, 2020 and September 30, 2019, there were no transfers of amounts between levels .

During the nine months ended December 31, 2020 and December 31, 2019, there were no transfers of amounts between levels .

Revenue is dissaggregated as follows:

Three months ended

Six months ended

September 30,

Nine months ended

Recreational cannabis revenue

6 unchanged sentences

The Company recognizes variable consideration related to estimated future product returns and price adjustments as a reduction of the transaction price at the time revenue for the corresponding product sale is recognized.

Net revenue reflects actual returns and variable consideration related to estimated returns and price adjustments in the amount of $ 3,750 and $ 7,150 for the three and six months ended September 30, 2020, respectively (three and six months ended September 30, 2019 – $ 32,727 and $ 40,727 , respectively).

As of September 30, 2020, the liability for estimated returns and price adjustments was $ 7,392 (March 31, 2020 – $ 17,586 ).

Net revenue reflects actual returns and variable consideration related to estimated returns and price adjustments in the amount of $ 3,750 and $ 10,900 for the three and nine months ended December 31, 2020, respectively (three and nine months ended December 31, 2019 – $ 5,343 and $ 46,070 , respectively).

As of December 31, 2020, the liability for estimated returns and price adjustments was $ 7,140 (March 31, 2020 – $ 17,586 ).

OTHER INCOME (EXPENSE), NET

1 unchanged sentence

Three months ended

Six months ended

September 30,

Nine months ended

Fair value changes on other financial assets

8 unchanged sentences

Foreign currency loss

Gain on acquisition/disposal of consolidated entity

Other (expense) income, net

There have been no material changes to income tax matters in connection with normal course operations during the six months ended September 30, 2020.

There have been no material changes to income tax matters in connection with normal course operations during the nine months ended December 31, 2020.

The Company is subject to income tax in numerous jurisdictions with varying income tax rates.

1 unchanged sentence

Although statutory income tax rates remain stable, the Company’s effective income tax rate may fluctuate, arising as a result of the Company’s evolving footprint, discrete transactions and other factors that, to the extent material, are disclosed in these financial statements.

The Company continues to believe the amount of unrealized tax benefits appropriately reflects the uncertainty of items that are or may in the future be under discussion, audit, dispute or appeal with a tax authority or which otherwise result in uncertainty in the determination of income for tax purposes.

The Company continues to believe that the amount of unrealized tax benefits appropriately reflects the uncertainty of items that are or may in the future be under discussion, audit, dispute or appeal with a tax authority or which otherwise result in uncertainty in the determination of income for tax purposes.

If appropriate, an unrealized tax benefit will be realized in the reporting period in which the Company determines that realization is not in doubt.

3 unchanged sentences

On June 24, 2020, the Company and Acreage Holdings, Inc.

(“Acreage”) entered into a proposal agreement to amend the terms of the existing plan of arrangement (the “Prior Arrangement”) made pursuant to an arrangement agreement (the “Arrangement Agreement”) between the Company and Acreage dated April 18, 2019, as amended on May 15, 2019.

(“Acreage”) entered into a proposal agreement to amend the terms of the existing plan of arrangement (the “Prior Arrangement”) made pursuant to an arrangement agreement (the “Acreage Arrangement Agreement”) between the Company and Acreage dated April 18, 2019, as amended on May 15, 2019.

Pursuant to the terms of the Prior Arrangement, shareholders of Acreage and holders of certain securities convertible into Existing SVS (as defined below) as of June 26, 2019, received an immediate aggregate total payment of US$ 300,000 ($ 395,190 ) in exchange for granting Canopy Growth both the right and the obligation (the “Acreage financial instrument”) to acquire all of the issued and outstanding shares of Acreage following the occurrence or waiver of changes in U.S.

federal law to permit the general cultivation, distribution, and possession of marijuana or to remove the regulation of such activities from the federal laws of the United States (the “Triggering Event”) and subject to the satisfaction or waiver of the conditions set out in the Arrangement Agreement.

In September 2020, Acreage obtained the requisite approvals of the shareholders of Acreage and the Supreme Court of British Columbia and on September 23, 2020, the Company and Acreage entered into a second amendment to the Arrangement Agreement and implemented an amended and restated plan of arrangement (the “Amended Arrangement”).

In September 2020, Acreage obtained the requisite approvals of the shareholders of Acreage and the Supreme Court of British Columbia and on September 23, 2020, the Company and Acreage entered into a second amendment to the Acreage Arrangement Agreement and implemented an amended and restated plan of arrangement (the “Amended Arrangement”).

The Amended Arrangement provides for, among other things, the following:

2 unchanged sentences

(ii) each outstanding Existing PVS was exchanged for 28 Fixed Shares and 12 Floating Shares;

and (iii) each outstanding Existing MVS was exchanged for 0.7 of a Fixed Multiple Share and 0.3 of a Floating Share;

and (iii) each outstanding Existing MVS was exchanged for 0.7 of a Fixed Multiple Share and 0.3 of a Floating

The new Class E subordinated voting shares (the “Fixed Shares”) have the same attributes as the Existing SVS and are listed on the Canadian Securities Exchange (the “CSE”) under the ticker symbol ACRG.A.U.

Following the occurrence or waiver (at the discretion of Canopy Growth) of the Triggering Event and subject to the satisfaction or waiver of the conditions set out in the Arrangement Agreement (as modified in connection with the Amended Arrangement), Canopy Growth will acquire all of the issued and outstanding Fixed Shares based on an amended exchange ratio equal to 0.3048 of a common share to be received for each Fixed Share held (reduced from 0.5818 per Existing SVS pursuant to the Prior Arrangement).

Following the occurrence or waiver (at the discretion of Canopy Growth) of the Triggering Event and subject to the satisfaction or waiver of the conditions set out in the Acreage Arrangement Agreement (as modified in connection with the Amended Arrangement), Canopy Growth will acquire all of the issued and outstanding Fixed Shares based on an amended exchange ratio equal to 0.3048 of a common share to be received for each Fixed Share held (reduced from 0.5818 per Existing SVS pursuant to the Prior Arrangement).

The foregoing exchange ratio for the Fixed Shares is subject to adjustment in accordance with the Amended Arrangement if, among other things, Acreage issues greater than the permitted number of Fixed Shares;

6 unchanged sentences

If the occurrence or waiver of the Triggering Event does not occur within 10 years from the date the Amended Arrangement was implemented (being September 23, 2030), Canopy Growth’s rights to acquire both the Fixed Shares and the Floating Shares will terminate;

Upon implementation of the Amended Arrangement, Canopy Growth ma de a cash payment to the shareholders of Acreage and holders of certain securities convertible into Existing SVS in the aggregate amount of US$ 37,500 ($ 49,849 ) ;

Upon implementation of the Amended Arrangement, Canopy Growth made a cash payment to the shareholders of Acreage and holders of certain securities convertible into Existing SVS in the aggregate amount of US$ 37,500 ($ 49,849 );

Acreage is only permitted to issue an aggregate of up to 32,700,000 Fixed Shares and Floating Shares.

At September 30, 2020, the Acreage financial instrument represents a financial liability of $ 147,000 (March 31, 2020 – $ 250,000 ), as the estimated fair value of the Acreage business is less than the estimated fair value of the consideration to be provided upon the exercise of the Acreage financial instrument.

Fair value changes of $ 88,151 and $ 53,151 were recognized in other income (expense), net in the three and six months ended September 30, 2020, respectively (three and six months ended September 30, 2019 – $( 235,190 ) and $( 235,190 ), respectively) (see Note 25).

At December 31, 2020, the Acreage financial instrument represents a financial liability of $ 450,000 (March 31, 2020 – $ 250,000 ), as the estimated fair value of the Acreage business is less than the estimated fair value of the consideration to be provided upon the exercise of the Acreage financial instrument.

Fair value changes of $( 303,000 ) and $( 249,849 ) were recognized in other income (expense), net in the three and nine months ended December 31, 2020, respectively (three and nine months ended December 31, 2019 – $( 30,000 ) and $( 265,190 ), respectively) (see Note 25).

The fair value determination includes a high degree of subjectivity and judgment, which results in significant estimation uncertainty.

1 unchanged sentence

From a measurement perspective, the Company has elected the fair value option under ASC 825.

In connection with the Amended Arrangement, an affiliate of the Company advanced US$ 50,000 ($ 66,995 ) to Universal Hemp, LLC, a wholly-owned subsidiary of Acreage (“Acreage Hempco”) pursuant to a secured debenture (“debenture”).

In connection with the Amended Arrangement, on September 23, 2020, an affiliate of the Company advanced US$ 50,000 ($ 66,995 ) to Universal Hemp, LLC, a wholly-owned subsidiary of Acreage (“Acreage Hempco”) pursuant to a secured debenture (“debenture”).

In accordance with the terms of the debenture, the funds cannot be used, directly or indirectly, in connection with or for any cannabis or cannabis-related operations in the United States, unless and until such operations comply with all applicable laws of the United States.

1 unchanged sentence

The debenture is not convertible and is not guaranteed by Acreage.

The amount advanced on September 23, 2020 pursuant to the debenture has been recorded in other financial assets (see Note 11), and the Company has elected the fair value option under ASC 825.

At September 30, 2020, the estimated fair value of the debenture issued to an affiliate of the Company by Acreage Hempco was $ 43,681 , measured using a discounted cash flow model, and fair value changes of $ 23,314 were recognized in other income (expense), net in the three months ended September 30, 2020 (see Note 25).

The amount advanced on September 23, 2020 pursuant to the debenture has been recorded in other financial assets (see Note 11), and the Company has elected the fair value option under ASC 825 (see Note 23).

At December 31, 2020, the estimated fair value of the debenture issued to an affiliate of the Company by Acreage Hempco was $ 26,561 , measured using a discounted cash flow model, and fair value changes and foreign currency translation adjustments totaling $( 17,120 ) and $( 40,434 ) were recognized in other income (expense), net in the three and nine months ended December 31, 2020, respectively (see Note 25).

An additional US$ 50,000 may be advanced pursuant to the debenture subject to the satisfaction of certain conditions by Acreage Hempco.

5 unchanged sentences

the Tranche C Warrants are exercisable to acquire 12.8 million common shares at a price equal to the 5-day volume-weighted average price of the common shares immediately prior to exercise.

In connection with the Tranche B Warrants and the Tranche C Warrants, Canopy Growth will provide CBI with a share repurchase credit of up to $ 1.583 billion on the aggregate exercise price of the Tranche B Warrants and Tranche C Warrants in the event that Canopy Growth does not purchase for cancellation the lesser of (i) 27,378,866 common shares, and (ii) common shares with a value of $ 1.583 billion, during the period commencing on April 18, 2019 and ending on the date that is 24 months after the date that CBI exercises all of the Tranche A Warrants.

The share repurchase credit feature is accounted for as a derivative liability, with the fair value continuing to be $nil at September 30, 2020.

and (ii) common shares with a value of $ 1.583 billion, during the period commencing on April 18, 2019 and ending on the date that is 24 months after the date that CBI exercises all of the Tranche A Warrants.

The share repurchase credit feature is accounted for as a derivative liability, with the fair value continuing to be $nil at December 31, 2020.

The modifications to the Tranche A Warrants resulted in them meeting the definition of a derivative instrument under ASC 815 - Derivatives and Hedging (“ASC 815”).

1 unchanged sentence

The Tranche B Warrants are accounted for as derivative instruments measured at fair value in accordance with ASC 815.

At September 30, 2020, the fair value of the warrant derivative liability was $ 221,948 (March 31, 2020 – $ 322,491 ), and fair value changes of $ 65,174 and $ 100,543 have been recognized in other income (expense), net in the three and six months ended September 30, 2020, respectively (three and six months ended September 30, 2019 – gains of $ 641,854 and $ 666,746 , respectively) (see Note 25).

At December 31, 2020, the fair value of the warrant derivative liability was $ 415,946 (March 31, 2020 – $ 322,491 ), and fair value changes of $( 193,998 ) and $( 93,455 ) have been recognized in other income (expense), net in the three and nine months ended December 31, 2020, respectively (three and nine months ended December 31, 2019 – gains of $ 82,512 and $ 749,258 , respectively) (see Note 25).

The fair value determination includes a high degree of subjectivity and judgment, which results in significant estimation uncertainty.

See Note 23 for additional details on how the fair value of the warrant derivative liability is calculated on a recurring basis.

The Tranche C Warrants are accounted for as derivative instruments, with the fair value continuing to be $nil at September 30, 2020.

The Tranche C Warrants are accounted for as derivative instruments, with the fair value continuing to be $nil at December 31, 2020.

SEGMENT INFORMATION

1 unchanged sentence

The Company operates in two segments:

1) Cannabis, Hemp and Other Consumer Products, which encompasses the production, distribution and sale of a diverse range of cannabis, hemp-based, and other consumer products in Canada and internationally pursuant to applicable international and domestic legislation, regulations and permits;

and 2) Canopy Rivers, a publicly-traded company in Canada, through which the Company provides growth capital and strategic support in the global cannabis sector, where federally lawful.

i) Cannabis, Hemp and Other Consumer Products, which encompasses the production, distribution and sale of a diverse range of cannabis, hemp-based, and other consumer products in Canada and internationally pursuant to applicable international and domestic legislation, regulations and permits;

and ii) Canopy Rivers, a publicly-traded company in Canada, through which the Company provides growth capital and strategic support in the global cannabis sector, where federally lawful.

Financial information for Canopy Rivers is included in the table below, and in Note 22.

September 30,

Refer to Note 19 for a description of the plan of arrangement with Canopy Rivers.

Ownership interest

8 unchanged sentences

Entity-wide disclosures

All property, plant and equipment are located in Canada, except for $ 517,572 which is located outside of Canada as at September 30, 2020 (March 31, 2020 – $ 499,059 ).

All revenues were principally generated in Canada during the three and six months ended September 30, 2020, except for $ 48,959 and $ 93,658 , respectively related to exported medical cannabis and cannabis related merchandise generated outside of Canada (three and six months ended September 30, 2019 – $ 34,866 and $ 57,407 , respectively).

For the three months ended September 30, 2020, no customer represented more than 10% of the Company’s net revenue (three months ended September 30, 2019 – none ).

For the six months ended September 30, 2020, no customer represented more than 10% of the Company’s net revenue (six months ended September 30, 2019 – one ).

All property, plant and equipment are located in Canada, except for $ 462,083 which is located outside of Canada as at December 31, 2020 (March 31, 2020 – $ 499,059 ).

All revenues were principally generated in Canada during the three and nine months ended December 31, 2020, except for $ 61,468 and $ 155,126 , respectively related to exported medical cannabis and cannabis related merchandise generated outside of Canada (three and nine months ended December 31, 2019 – $ 43,029 and $ 100,436 , respectively).

For the three months ended December 31, 2020, one customer represented more than 10% of the Company’s net revenue (three months ended December 31, 2019 – one ).

For the nine months ended December 31, 2020, one customer represented more than 10% of the Company’s net revenue (nine months ended December 31, 2019 – one ).

SUBSEQUENT EVENTS

On November 1, 2020, a production facility owned by the Company in Delta, British Columbia was damaged by a fire.

The facility has been non-operational since March 2020.

The Company is in the process of assessing the impact of the fire, including the extent of damages and potential insurance recoveries.

As a result, an estimate of the financial effect on the Company's consolidated financial statements is uncertain at this time.

TerrAscend Option Agreement

On January 13, 2021, the Company entered into an option agreement to acquire 1,072,450 common shares of TerrAscend for US$ 10,500 , conditional upon the occurrence or waiver of amendments to federal laws of the United States to permit the general cultivation, distribution and possession of marijuana or to remove the regulation of such activities from the federal laws of the United States.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements