Exhibit 99.10

NOTICE TO READER

As of September 30, 2019, Canopy Growth Corporation (the “Company”) determined that it no longer qualified as a “foreign private issuer” as such term is defined in Rule 405 under the Securities Act of 1933. This means that as of April 1, 2020, the Company has been required to comply with all of the periodic disclosure requirements of the Securities Exchange Act of 1934 applicable to U.S. domestic issues, such as Forms 10-K, 10-Q and 8-K, rather than the forms the Company has filed with the Securities and Exchange Commission (“SEC”) in the past as a foreign private issuer, such as Forms 40-F and 6-K.

Accordingly, the Company is now required to prepare its financial statements filed with the SEC in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). As required pursuant to section 4.3(4) of National Instrument 51-102 – Continuous Disclosure Obligations, the Company must restate its interim financial reports for the fiscal year ended March 31, 2020 in accordance with U.S. GAAP, such interim financial reports having previously been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.

The attached amended and restated management’s discussion and analysis (the “MD&A”) for the three and nine months ended December 31, 2019 and 2018, is current as of February 14, 2020 and provides financial information for the three and nine months ended December 31, 2019, as amended and restated on July 10, 2020, solely to reflect the filing of the amended and restated unaudited condensed interim consolidated financial statements for the three and nine months ended December 31, 2019 and 2018 in accordance with U.S. GAAP. Other than as expressly set forth above, the revised MD&A does not, and does not purport to, update or restate the information in the original MD&A or reflect any events that occurred after the date of the filing of the original MD&A.

The Company’s Annual Report on Form 10-K (the “Annual Report”) dated June 1, 2020 is available under the Company’s profile on SEDAR at www.sedar.com and on EDGAR at www.sec.gov. Readers are cautioned that this MD&A should be read in conjunction with the Annual Report, including the consolidated financial statements and the related notes thereto included in Item 8 thereof.

CANOPY GROWTH CORPORATION

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2019

FEBRUARY 14, 2020

MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2019

This amended and restated management’s discussion and analysis (“MD&A”) for the three and nine months ended December 31, 2019 is provided as of February 14, 2020 and provides financial information for the three and nine months ended December 31, 2019, as amended and restated on July 10, 2020, solely to reflect the filing of the amended and restated unaudited condensed interim consolidated financial statements for the three and nine months ended December 31, 2019 and 2018 prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). Other than as expressly set forth above, the amended and restated MD&A does not, and does not purport to, update or restate the information in the original MD&A or reflect any events that occurred after the date of the filing of the original MD&A.

Unless the context indicates or requires otherwise, the terms “Canopy Growth”, “the Company”, “we”, “us” and “our” refers to Canopy Growth Corporation and its controlled entities. Canopy Growth is a publicly traded corporation, incorporated in Canada, with its head office located at 1 Hershey Drive, Smiths Falls, Ontario K7A 0A8. The common shares of Canopy Growth trade on the Toronto Stock Exchange (“TSX”) under the ticker symbol “WEED” and on the New York Stock Exchange (“NYSE”) under the ticker symbol “CGC”.

This MD&A was prepared with reference to National Instrument 51-102 – Continuous Disclosure Obligations of the Canadian Securities Administrators. Under the United States/Canada Multijurisdictional Disclosure System, we are permitted to prepare this MD&A in accordance with Canadian disclosure requirements which may differ from United States disclosure requirements. This MD&A provides information as at, and for the three and nine months ended December 31, 2019 and up to and including February 14, 2020.

This amended and restated MD&A should be read in conjunction with Canopy Growth’s amended and restated unaudited condensed interim consolidated financial statements and the notes thereto for the three and nine months ended December 31, 2019 (the “Interim Financial Statements”), which have been prepared in accordance with U.S. GAAP. The Interim Financial Statements include the accounts of Canopy Growth and its subsidiaries and its interests in affiliated companies, and all intercompany balances and transactions have been eliminated on consolidation. The Interim Financial Statements and this MD&A have been reviewed by Canopy Growth’s Audit Committee and were approved by Canopy Growth’s Board of Directors on July 10, 2020.

Financial information contained herein is expressed in thousands of Canadian dollars, except share and per share amounts, or as otherwise stated.

This MD&A contains forward-looking information within the meaning of Canadian securities laws, and the use of non-GAAP measures. Refer to “Cautionary Note Regarding Forward-Looking Statements” for cautionary statements regarding forward-looking statements.

Additional information filed by us with the Canadian Securities Administrators, including this MD&A, the Interim Financial Statements, audited annual consolidated financial statements, interim reports and annual information forms have been filed electronically through the System for Electronic Document Analysis and Retrieval (“SEDAR”) and are available under the Company’s profile at www.sedar.com, on the Securities and Exchange Commission (“SEC”) website (www.sec.gov/edgar) and also on our website at www.canopygrowth.com.

This MD&A provides additional information on our performance in the last three and nine month periods, and our financial condition and future prospects. It is organized as follows:

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Canopy Growth is not considered a U.S. Marijuana Issuer (as defined in the Canadian Securities Administrators Staff Notice 51-352 – Issuers with U.S. Marijuana-Related Activities (the “Staff Notice”)) nor does the Company have material ancillary involvement in the United States cannabis industry in accordance with the Staff Notice. While the Company has several arrangements with United States-based companies that may themselves participate in the United States cannabis market, these relationships do not violate the federal laws of the United States respecting cannabis and in no manner involve Canopy Growth in any activities in the United States respecting cannabis. Where a non-controlled affiliate has expressed an intent to enter the United States cannabis market, we have taken steps to insulate the Company from all economic and voting interests until such time that United States federal permissibility changes in favour of cannabis related activities.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This MD&A contains certain “forward-looking statements” within the meaning of section 27A of the United States Securities Act of 1933, section 21E of the United States Securities Exchange Act of 1934, the United States Private Securities Litigation Reform Act of 1995 or in releases made by the United States Securities and Exchange Commission (“SEC”) all as may be amended from time to time, and “forward looking information” within the meaning of Canadian securities legislation, including but not limited to statements relating to:

The words “plans”, “expects”, “is expected”, “budget”, “strategy”, “scheduled”, “estimates” “forecasts”, “future”, “intends”, “anticipates”, or “believes” or variations (including negative variations) of such words and phrases, or statements that certain actions, events, or results “may”, “could”, “would”, “might”, “likely” or “will” be taken, occur or to achieve are all forward-looking statements. Forward-looking statements are based on the reasonable assumptions, estimates, internal and external analysis and opinions of management made considering its experience and perception of trends, current conditions and expected developments, as well as other factors that management believes to be relevant and reasonable at the date that such statements are made. Forward-looking statements involve known and unknown risks, uncertainties, assumptions and other factors that may cause actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Some of the risks and other factors which could cause actual results to differ materially from those expressed in the forward-looking statements contained in this MD&A include, but are not limited to, the factors included under “Part 7 – Risks and Uncertainties” in this MD&A, the factors included under “Part 7 – Risks and Uncertainties” in the Company’s MD&A for the three months and year ended March 31, 2019 and in the Company’s annual information form dated June 24, 2019 (the “AIF”). Although the Company has attempted to identify important factors that could cause actions, events or results to differ materially from those described in the forward-looking statements, there may be other

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factors that cause actions, events, or results to differ from those anticipated, estimated or intended. Forward-looking statements contained herein are made as at the date of this MD&A. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on the forward-looking statements. The Company does not undertake to update any forward-looking statements except as required by applicable securities laws.

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PART 1 – BUSINESS OVERVIEW

Canopy Growth is a world-leading cannabis company. We produce, distribute and sell a diverse range of cannabis and hemp-based products for both recreational and medical purposes under a portfolio of distinct brands in Canada pursuant to the Cannabis Act, and globally pursuant to applicable international and domestic legislation, regulations and permits.

On October 17, 2018 the Cannabis Act came into effect, regulating both the medical and recreational cannabis markets in Canada and providing provincial, territorial and municipal governments the authority to prescribe regulations regarding the distribution and sale of recreational cannabis. On October 17, 2019, the second phase of recreational cannabis products, specifically, ingestible cannabis, cannabis extracts, and cannabis topical products (referred to as “Cannabis 2.0”), was legalized pursuant to certain amendments to the regulations under the Cannabis Act. We began selling our cannabis-infused chocolates in early January 2020 across Canada, complementing our existing flower, oil and softgel product offerings. We expect the first of our cannabis-infused beverage offerings to be available to customers over the next few months. We introduced our vape pen power sources to customers in January 2020, with product availability varying based on provincial and territorial regulations. We expect additional vape products to be available in participating provinces and territories over the next few months. Our recreational cannabis products are predominantly sold to provincial and territorial agencies under a “business-to-business” wholesale model, with those provincial and territorial agencies then being responsible for the distribution of our products to bricks-and-mortar stores and for online retail sales. We have also opened a network of Tweed and Tokyo Smoke retail stores across Canada, where permissible, to further brand awareness and drive consumer demand.

Our Spectrum Therapeutics medical division is a global leader in medical cannabis with approximately 76,750 medical customers in Canada and an established footprint in 15 other countries across 5 continents. In addition to producing and distributing a diverse portfolio of cannabis products to healthcare practitioners and customers in Canada and other countries where it is federally permissible to do so, Spectrum Therapeutics offers education, resource, and support programs. Through its research and development initiatives, Spectrum Therapeutics is building a portfolio of intellectual property and pre-clinical and clinical evidence to support cannabinoid-based medicines that deliver therapeutic value in areas of unmet medical needs, including clinically-proven drug formulations and dosage formats.

Subsequent to the passage of the Farm Bill (as defined below), we began building our hemp supply chain in the United States chain through our investment in hemp growing capability and in processing, extraction and finished goods manufacturing facilities. In December 2019, we began selling a line of hemp-derived cannabidiol (“CBD”) products, including oils and softgels in certain states in the United States, where permissible under state law.

In June 2019 we executed an arrangement agreement with Acreage Holdings, Inc. (“Acreage”), a leading United States multi-state cannabis operator, that provides us the right, in accordance with the Acreage Plan of Arrangement (as defined below), to acquire all of the issued and outstanding securities of Acreage upon the occurrence (or waiver) of changes in United States 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 acquisition of Acreage, if completed, will provide a pathway into cannabis markets in the United States; however, Canopy Growth and Acreage will continue to operate as independent companies until completion of the Acreage Plan of Arrangement.

Our other product offerings, which are sold in jurisdictions where it is permissible to do so, include vapes and other delivery devices, beauty, wellness and sleep products, and sports nutrition beverages.

Our products contain tetrahydrocannabinol (“THC”), CBD, or a combination of these two cannabinoids which are found in the Cannabis sativa plant species. THC is the primary psychoactive or intoxicating cannabinoid found in cannabis. We also refer throughout this MD&A to “hemp”, which is a term used to classify varieties of the cannabis plant that contain CBD and 0.3% or less THC content (by dry weight). Conversely, the term “marijuana” refers to varieties of the cannabis plant with more than 0.3% THC content and moderate levels of CBD.

Our licensed capacity in operation in Canada includes indoor, greenhouse and outdoor growing space, post-harvest processing and cannabinoid extraction capability, advanced manufacturing capability for vape products, softgel encapsulation, and pre-rolled joints, a beverage production facility, and a chocolate manufacturing facility. These infrastructure investments allow us to supply the recreational and medical markets with a complimentary balance of flower products and raw material input for our oil, softgel, CBD and Cannabis 2.0 products. Internationally, we hold licences for cultivation and production space in Denmark, Colombia and Lesotho, providing domestic supply chains in support of our global expansion plans.

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Overview of Financial Results for the Third Quarter of Fiscal 2020

Revenue

Gross revenue from the Canadian recreational business-to-business channel was $53,454 in the third quarter of fiscal 2020, an increase of $36,777 from the previous quarter. Excluding other revenue adjustments recorded in the second quarter of fiscal 2020 in relation to our determination of returns and pricing adjustments in the amount of $32,727, gross revenue from the business-to-business channel increased sequentially from $49,404 to $53,454. The increase of 8% was primarily attributable to the overall increase in demand resulting from the opening of approximately 140 new retail stores across Canada during the third quarter of fiscal 2020, and growth in the sales of pre-rolled joints and THC-dominant dry flower. Gross revenue from the Canadian recreational business-to-consumer channel was $15,242 in the third quarter of fiscal 2020, with the quarter-over-quarter increase of 16% primarily attributable to same-store sales growth for our corporate-owned Tweed and Tokyo Smoke retail stores of 11%.

Medical cannabis gross revenue was $33,466 in the third quarter of fiscal 2020, an increase of $1,227 from the previous quarter. Gross revenue for our Canadian medical cannabis business was $14,765 in the third quarter of fiscal 2020, with the quarter-over-quarter increase of 4% primarily attributable to the broadening of our brand and product offerings for our medical customers and an increase in the number of customers registered with Spectrum Therapeutics to 76,750. Revenue for our international medical cannabis business was $18,701 in the third quarter of fiscal 2020, with the quarter-over-quarter increase of 3% driven by the performance of C³ Cannabinoid Compound Company (“C³”).

Other revenue was $33,384 in the third quarter of fiscal 2020, an increase $9,779 from the previous quarter due primarily to strong seasonal performance by Storz & Bickel GmbH & Co., KG (“Storz & Bickel”) and TWP UK Holdings Limited (“This Works”), and the acquisition of BioSteel Sports Nutrition Inc. (“BioSteel”) in October 2019.

Gross margin

Our gross margin percentage 31% of net revenue in the third quarter of fiscal 2020. Comparatively, our gross margin percentage was 5% in the second quarter of fiscal 2020. As detailed in our MD&A for the second quarter of fiscal 2020, we recorded charges associated with excess recreational cannabis inventory, primarily related to oils and softgels, in the amount of $17,000, our gross margin was impacted by $9,157 related to returns and pricing adjustments, and we recorded other adjustments related to the net realizable value of inventory. These charges did not recur to the same extent in the third quarter of fiscal 2020. Our gross margin in the third quarter of fiscal 2020 also benefited from a quarter-over-quarter decrease in operating costs relating to non-operating or under-utilized production facilities, from $10,536 in the previous quarter to $8,137 in the third quarter of fiscal 2020, which was largely attributable to the commencement of commercial-scale cultivation and processing at our facility in Denmark, and improved utilization of our advanced

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manufacturing facilities in Smiths Falls. See “Cost of goods sold and gross margin” under “Part 3 – Results of Operations” in this MD&A.

Adjusted EBITDA

Our Adjusted EBITDA loss in the third quarter of fiscal 2020 was $96,982, as compared to an Adjusted EBITDA loss of $150,380 in the previous quarter.

The Adjusted EBITDA loss attributed to strategic investments and business development was $39,111 in the third quarter of fiscal 2020, compared to a loss of $36,208 in the previous quarter, as we continued to invest in (1) the build-out of our administrative infrastructure in support of our global expansion strategy, (2) marketing initiatives in advance of the launch of CBD products in certain states in the United States in December 2019, and (3) research and development initiatives related to new product innovation for the recreational markets, and conducting clinical trials to support new cannabis-based human and animal medicines.

The Adjusted EBITDA loss attributed to operations in Canada and Europe and corporate overhead was $49,734 in the third quarter of fiscal 2020, compared to a loss of $103,636 in the previous quarter. The quarter-over-quarter improvement is largely reflective of the increase in net revenue and the increase in our gross margin percentage, which was driven primarily by the adjustments of $32,727 recorded in the second quarter of fiscal 2020 for returns, return provisions and pricing allowances related primarily to our oils and softgels portfolio.

The results of our operations for the current quarter in comparison to the third quarter of fiscal 2019 are discussed below under “Part 3 - Results of Operations”.

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PART 2 – STRATEGY

Our strategy is to position Canopy Growth as the dominant, global leader in recreational and medical cannabis and hemp-based products, and to establish long-term competitive advantages while doing so in order to generate industry-leading growth and shareholder returns. To achieve this, we have been focusing on:

Canadian Recreational and Medical Cannabis Markets

Our investment phase in Canada is complete, with our cultivation, processing and extraction, and finished goods manufacturing infrastructure in place, licensed, and capable of meeting anticipated consumer demand for our existing recreational and medical products, our new Cannabis 2.0 products and the continued build-out of retail cannabis stores across the country. Our strategy in Canada includes:

European Medical Cannabis Market

Our primary strategy in the European medical cannabis market is to increase access to our medical cannabis products for medical customers in countries where it is federally permissible to do so, and to position ourselves as a trusted market leader in those countries. Through our global Spectrum Therapeutics brand, our strategy encompasses:

United States Market Development

The key elements of our United States market development strategy include:

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Global Expansion

We are expanding globally and increasing our total addressable market by pursuing cannabis-related business opportunities in countries where it is federally legal and/or permissible to do so, including:

Since the legalization of recreational cannabis in Canada on October 17, 2018, Canopy Growth has established itself as a leader in both the recreational and medical cannabis markets in Canada by successfully executing on our business model, which includes making investments in cannabis production and consumer product manufacturing capability and distribution, developing intellectual property and industry and local regulatory knowledge and expertise, and providing physician, pharmacist and patient education programs in order to build market share and customer loyalty. Accordingly, we believe that an opportunity exists today to deploy our Canadian “playbook” and our financial strength to establish ourselves as the first-mover and market leader in countries which have legalized or are exploring the legalization of medical cannabis.

Developing Intellectual Property and Innovative New Products

We believe a significant opportunity exists to improve our gross margins by vertically integrating up the value chain towards recreational and medical products that include cannabis and cannabinoids as ingredients. We believe this will increase our total addressable market and position our products as premium offerings. We have been continuously focused on conducting research and development of intellectual property related to:

Our intellectual property portfolio has increased to over 130 issued patents and over 350 patent applications as of February 14, 2020 (including 94 United States provisional patents) covering cannabis-infused beverage production and medical treatments, device and delivery technologies, large-scale cannabis processing, and plant genetics.

Our Products

Cannabis 2.0 Products

The legalization and regulation of Cannabis 2.0 products in Canada was announced by the federal government on October 17, 2019 pursuant to certain amendments to the regulations under the Cannabis Act. We began shipping our products in late December 2019, with the first wave of our cannabis-infused chocolates being available at retail locations

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in early January 2020. We expect the first of our cannabis-infused beverage offerings to be available to customers over the next few months. We introduced our vape pen power sources to customers in January 2020, with product availability varying based on provincial regulations. We expect that additional vape products will be available in participating provinces over the next few months. Our Cannabis 2.0 product offerings include:

Cannabis-infused beverages, which are being produced in our licensed 150,000 square foot beverage facility in Smiths Falls. Through our extensive research and development efforts we have developed a proprietary process that distills whole flower cannabis into a clear liquid that we refer to as “Distilled Cannabis”, which is used as an active ingredient in our THC and CBD infused beverages. Our beverage portfolio will include 10 ready-to-drink products, pre-mixed with Distilled Cannabis, and 3 Distilled Cannabis beverage mixer products that can be combined with non-alcoholic beverages or enjoyed neat or on the rocks. Our beverages will be offered in a variety of flavours and sizes under the Tweed, Quatreau, Houseplant and Deep Space brands. We believe that cannabis-infused beverages that offer sophisticated taste and dose control with a rapid onset and shorter duration can be tailored to meet specific outcomes across a variety of consumption occasions, while avoiding such things as weight gain, “hangover” effects, and interactions with traditional pharmaceutical medications. While our products will contain THC, CBD, or a combination of the two up to the limit of 10 milligrams of THC per package, in accordance with the regulations under the Cannabis Act, we believe a standard serving of 2 milligrams of THC is ideal for consumers and allows for more control for the user, and therefore most of our cannabis-infused beverages will be available at this potency.

Cannabis-infused craft chocolates, which are being produced in the same factory in Smiths Falls where Hershey Canada made chocolates for over 50 years. We have worked with award-winning chocolate maker, Hummingbird Chocolate, to build and refine our chocolate manufacturing process and are selling 3 distinct products under the Tweed, Tokyo Smoke and Bean & Bud brands. We have taken a “bean-to-bar” approach to our chocolates, sourcing our beans from Peru, the Dominican Republic and Colombia and then roasting them onsite in Smiths Falls to achieve optimal flavour. Similar to our beverages, our chocolates contain specific amounts of specifically-formulated cannabis up to a limit of 10 milligrams of THC per package.

Cannabis vapes, including a range of proprietary hardware designed to bring reliable technology to the vaping category. We are offering rechargeable and compact batteries under the JUJU Power brand, designed for compatibility with our 510-threaded cannabis concentrate vape cartridges. Our “510” vape concentrate cartridges will be available in a variety of Tweed, Van der Pop, and Twd. strains, and with a range of THC and CBD levels. Our JUJU Joints line includes ready-to-go vape pens containing Tweed cannabis concentrate and terpenes, and feature several convenient safety capabilities. Finally, we are offering Tokyo Smoke Luma rechargeable batteries and vape pods using our precise ceramic heating technology. Some of our devices will feature Bluetooth connectivity, allowing users to lock, locate, and set specific temperatures from their Android smartphones.

Vape Safety

Recent reports on vape safety underscore the importance of federal regulation for vape pen devices. We are committed to a high standard for cannabis extracts without the use of polyethylene glycol, vegetable glycerin or vitamin E acetate. Our vape cartridges use surgical-grade steel and specialized glass to ensure the reduction of heavy metal poisoning and contaminants leaching into the extract. Our vape products are produced using UL 8139 Certified Safe Manufacturing standards, meaning that each component of our hardware has been certified by UL (Underwriters Laboratories), or undergoing the review process with certification expected in advance of product on-sale dates. UL is a world leader in product safety testing and certification, and developed industry standard UL 8139 to help manufacturers address lithium battery hazards for vaping devices. UL 8139 evaluates the safety of the electrical, heating, battery and charging systems of these products. Further, our vapes are tamper-resistant, serialized, traceable, and adhere to Health Canada’s regulations. We are continually reviewing and testing all inputs to ensure the highest quality and reliability of cannabinoids, terpenes, tamper-resistance and product serialization features.

See “Risks and Uncertainties – Recent Announcements and Risks Regarding Vaping Products” under “Part 7 – Risks and Uncertainties” in this MD&A.

Hemp-Derived CBD Products

Our branded CBD products include our First & Free line of hemp-derived CBD products, including oils and softgels, which we launched in December 2019 in states where permissible in the United States. Developed as a result of our investments in technology and rigorous testing, First & Free’s products were created by extracting and isolating derivatives from the hemp plant to produce consistent CBD formulations that are packaged in easy-to-use formats. We

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are committed to selling high-quality, tested and reliable products, and ensuring we make no claims unless clinically validated. This means selling First & Free products only in states where permissible under state law in order to ensure compliance with state consumer protection mandates and following the most stringent state laws regarding the sale of CBD. The Company is also abiding by existing United States Food and Drug Administration (“FDA”) regulations for manufacturing, labeling and marketing dietary supplements. We expect the scope of our United States CBD business to increase beginning in the first half of fiscal 2021, as we expand our distribution network, product formats (including topical creams, beverages, and edibles) and brand portfolio, and begin building-out a bricks-and-mortar retail presence.

We have also entered into strategic arrangements in order to build our brand awareness around hemp-derived CBD products, including engaging Martha Stewart in an advisory role to assist with developing and positioning a new line of CBD-based product offerings across multiple categories such as animal health and wellness.

Devices and Delivery Technology

In addition to the vape pens and cartridge products that we are rolling-out as part of our Cannabis 2.0 offerings, through Storz & Bickel we have entered the market for the manufacture and sale of medical cannabis delivery devices. Storz & Bickel has developed a factory that is certified internationally for the production of medical devices, and exports medically-approved vaporizers and other similar devices to 50 markets around the world. We are building-out the capacity of Storz & Bickel’s manufacturing facilities to support its continued growth through new product development and market expansion, while continuing to integrate the product development expertise and capability of Storz & Bickel’s research and development and engineering teams with that of Canopy Growth.

Our Brands

Our diverse platform of brands “under the Canopy” allows us to effectively target specific customer demographics, use occasions and product form factors.

Core Brands

Tweed – Tweed’s highly-curated cannabis products, places and spaces are tailored to help people reconnect with one another. Our authentic local presence and desire for shared prosperity help us to be a good neighbor to those communities that invite us in.

Tokyo Smoke – Tokyo Smoke is an award-winning cannabis brand delivering immersive, innovative experiences to consumers through cannabis products, accessories, and retail stores. From our thoughtfully-crafted intent-based

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classification system to our iconic red lantern logo, Tokyo Smoke pushes creative boundaries, unlocking new ways to explore cannabis.

Van der Pop – With a focus on education, empowerment and community building, Van der Pop is Canopy Growth’s female-focused cannabis brand. Van der Pop provides products and platforms for women to explore using cannabinoids for self-care in a way that is nuanced and respects stigma-free living.

Spectrum Therapeutics – Our international medical brand that serves as our physician and patient-facing identity across all federally-permissible jurisdictions where Canopy Growth operates. “Spectrum” in the name refers to the trademarked colour-coded cannabis strain classification system. Spectrum Therapeutics is positioned as a rational voice in the medical cannabis space with a focus on high-quality research, healthcare professional education, and quality products for medical customers with pain, mood and sleep conditions.

First & Free – Our therapeutic CBD-based brand designed for consumers that are proactive about their health and advocates of self-care. We believe in taking care of you first, so you can be free to be you. Only First & Free combines years of cannabinoid research and development and clinical expertise with purified, hemp-derived CBD technologies that currently include oils and softgels.

DOJA – DOJA is based in British Columbia’s Okanagan Valley, where DOJA grows premium, hand-crafted flower. DOJA represents celebrating the freedom from convention and a respect for the West Coast community and land from which it came from.

TWD – TWD is our basic line of safe and affordable cannabis products from Tweed.

This Works – Founded in 2004, London, England-based This Works offers a range of high-quality natural skincare and sleep solution products that have rewarded the company with a loyal following of customers spanning 35 countries. Through their unique approach of formulating solutions that work in harmony with the 24-hour body clock, This Works has evolved its product lines beyond a traditional viewpoint to a more complete regiment.

BioSteel – BioSteel is an innovative sports nutrition brand that was built on the mandate of providing the safest, healthiest and most effective line of nutritional products. Originally formulated for the best athletes in the world, BioSteel’s line of nutritional products have become adopted by the masses through authentic partnerships with our #TEAMBIOSTEEL athletes.

Beverage and Edibles Brands

Quatreau – Quatreau is a line of deliciously refreshing cannabis-infused, naturally flavoured sparkling water beverages available in CBD-only and THC/CBD balanced varieties. Quatreau believes in making daily situations a little more simple, enabling consumers to reset and recharge before tackling what’s next.

Deep Space – Deep Space is a mysterious and full flavoured cannabis-infused spiced cola beverage with a higher dose of THC than other offerings across Canopy Growth’s portfolio. With 10 milligrams of THC per serving offered in an easy-travel 222 milliliter mini can, Deep Space aims to unlock a collective journey of possibility and discovery.

Bean & Bud Craft Cannabis Company – Bean & Bud is a line of premium, bean to bar cannabis-infused dark chocolate with 5 milligrams of THC per serving. Hand-crafted by the award-winning chocolate makers at Hummingbird Chocolates. Made in small batches - the attention to detail and meticulous process adds a special touch for consumers to savour life’s moment.

Technology Brands

Storz & Bickel – Based in Tuttlingen, Germany, Storz & Bickel are designers and manufacturers of medically approved vaporizers, most notably the Volcano Medic and the Mighty Medic. Exported to 50 markets around the world and with a 23-year track record of breakthrough innovations, Storz & Bickel is widely recognized as a global leader in vaporizer design and manufacturing.

JUJU Technologies – JUJU represents the cutting edge of cannabis technology. Available in a variety of products ranging from premium, ready-to-go vape pens (under our JUJU Joints line), to cutting-edge cannabis vape battery systems (under our JUJU Power line), to an advanced app that enables control over a user’s vape experience. JUJU believes in sharing positive energy and vibes with the world.

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Affiliated Brands

Houseplant – An elevated Canadian cannabis company founded by Seth Rogen and Evan Goldberg and launched in 2019, Houseplant is rooted in commitment, authenticity and education. Their love affair with cannabis has spanned a lifetime, and they believe it should be treated with the reverence it deserves. Each element of their suite of products, and every part of their identity have been thoughtfully designed and considered.

More Life Growth Company – A wellness-based cannabis company and joint venture between two Canadian trailblazers. Owner/Founder Aubrey “Drake” Graham – a cultural leader, entrepreneur and entertainment icon – joined forces with Canopy Growth to commercialize a premium, licensed product lineup in Canada and future global markets.

DNA Genetics – DNA Genetics has won awards in every category in the Cannabis Cup, the world’s preeminent cannabis competition. Working with DNA Genetics, Canopy Growth breeds new strains for customers that are simply not available anywhere else in the world, bringing the best of existing DNA Genetics to Canopy Growth customers, bred and grown to DNA standards.

LBS – LBS is a premier cannabis brand by entertainment icon Snoop Dogg available in the United States and licensed by Canopy Growth in Canada. LBS embodies the “California Vibe”.

Canadian Retail Store Strategy and Brands

The Cannabis Act provides provincial, territorial and municipal governments with the authority to prescribe regulations regarding retail and distribution of recreational cannabis. As such, the distribution model for recreational cannabis is prescribed by provincial and territorial regulations and differs in each jurisdiction. Some provinces have government-run retailers, while others have government-licensed retailers, and some have a combination of the two. All of our recreational sales are conducted according to the applicable provincial and territorial legislation and through applicable local agencies. We continue to monitor the developing legislation to identify opportunities for our brands.

As of February 14, 2020, we have 28 cannabis retail stores operating under the Tweed or Tokyo Smoke banner, of which 22 are corporate-owned stores and the balance are independently operated. Tweed has 16 corporate-owned locations selling cannabis across Newfoundland & Labrador, Manitoba and Saskatchewan and has a branded e-commerce presence in Newfoundland & Labrador, Manitoba, Saskatchewan and Nunavut. Tokyo Smoke operates 6 corporate-owned retail cannabis stores and an e-commerce platform in Manitoba.

Further, we have received licences, rights to licences or permits to apply for licences to operate cannabis retail stores in 4 provinces:

In Ontario, we have entered into multi-year licensing agreements to enable licence holders to open 9 new Tokyo Smoke-branded stores. We anticipate that all of these stores will be open by May. In addition, we have submitted an application for a farm-gate store at our Smiths Falls production facility. We are continuing to explore additional opportunities to expand the Tokyo Smoke and Tweed retail banners across the province. We are also pursuing cannabis retail licences in British Columbia through the provincial retail licensing processes.

After a restricted lottery-based retail rollout, the government of Ontario announced on December 12, 2019 changes to the cannabis licensing regulations under the Cannabis License Act, 2018. Premier Doug Ford announced several changes to the licensing rules governing private cannabis retail stores in Ontario, that will have an immediate positive impact on Ontario’s access to the regulated adult use market. The government of Ontario anticipates that, initially, approximately 20 retail store authorizations will be issued per month in Ontario, starting in April 2020. We believe the province of Ontario can support upwards of 1,000 retail stores within the province, and we anticipate the retail store authorizations to focus on the greater Toronto area and southern Ontario, which has a significantly higher population density. Additionally, on February 10, 2020 the government of Ontario initiated public consultations on providing consumers with more choice and convenience on cannabis, including consumption venues.

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Global Expansion

In recent years, the actions of governments around the world have signaled a significant change in attitudes towards cannabis, and federal governments in over 40 countries have either formally legalized medical cannabis access or established government efforts to explore the legalization of medical cannabis access. Therefore, future opportunities are likely to exist for Canopy Growth in jurisdictions where governments are actively moving towards a legal framework.

Europe

Our investment in our European infrastructure is complete. We have recently commenced commercial-scale cultivation and processing at our facility in Denmark and, having obtained the necessary regulatory approvals from the Danish government in October 2019, we expect to begin shipping the cannabis harvested and processed by the Danish facility to European markets in early fiscal 2021. Through C³, we also operate two manufacturing facilities specializing in natural extraction and synthetic cannabinoid production. Our infrastructure is expected to supply the growing demand for our medical cannabis products across the continent, where permissible, and support our objective of offering a greater range of medically-validated cannabinoid products and therapies to healthcare professionals and medical customers.

In October 2019, Spectrum Therapeutics received the necessary government licences to store and distribute medical cannabis products in the United Kingdom, reducing prescription delivery times and allowing the importation of medical cannabis from our European and global networks. In October 2019, we completed the acquisition of the outstanding, unowned interest in Beckley Canopy Therapeutics (“BCT”), including the joint commercial venture Spectrum Biomedical UK Limited (“Spectrum UK”). BCT will be integrated into the broader Spectrum Therapeutics organization to increase the breadth of the clinical research being pursued in the area of cannabis-based medicines.

We continue to explore and pursue opportunities to develop the medical cannabis markets in Poland, Czech Republic, and other European countries where permissible.

Latin America and the Caribbean

The cannabis landscape in Latin America and the Caribbean continues to evolve rapidly, with final regulations for medical cannabis being published in both Peru and Brazil in December 2019. We are monitoring regulatory developments across the region, including in Mexico where we anticipate medical access rules and regulations to advance towards final governmental approval in the coming months. We continue to develop our regional production and operating infrastructure, and pursue distribution agreements, to support the future commercialization of regionally-produced products. Operations are advancing at our fully licensed cultivation site in Colombia, and we continue to collaborate with Procaps with the objective of launching products in Latin America, where legal and permissible, in 2020.

Asia/Pacific

Early in fiscal 2019, we launched our Australian operations and Spectrum Therapeutics began selling medical cannabis to doctors prescribing its products. Construction of a Victoria-based greenhouse and processing facility is currently underway, with completion expected in March 2020. This will enable domestic cultivation and production of medical cannabis for customers while serving as a planned distribution hub for other jurisdictions in Asia/Pacific. Spectrum Therapeutics will continue supporting Australian medical customers through imports until the facility is operational. The Victoria-based facility will also operate as our Asia/Pacific research and development center, supporting the ongoing research collaboration between Canopy Growth and the Victoria state government on furthering innovations in medical cannabis.

Africa

We completed our first import and sale of medical cannabis in South Africa during September 2019 and plan to launch a range of CBD products under the First & Free brand beginning in February 2020. This product launch will be underpinned by a customer education program aimed at assisting the public to make the most informed decisions around quality, standards and usage of CBD products.

We hold a licence to cultivate, process, import and export cannabis and its resin in the Kingdom of Lesotho. We have also secured a medical hemp production licence for outdoor grow space in Lesotho, with our first commercial hemp harvest expected in the first quarter of fiscal 2021. We have also commenced cultivation at our 322,000 square foot facility which includes an indoor grow room, a greenhouse, and an outdoor growing area. High THC and CBD-THC balanced varieties can both be cultivated at this facility. This facility was Africa’s first Good Agricultural Practices (GAP) certified medical cannabis growing facility.

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Production, Extraction and Finished Goods Manufacturing Capacity

Canada

We have built, and now operate, a Canada-wide supply chain including a balanced portfolio of licensed indoor and greenhouse cultivation facilities and outdoor cannabis and hemp growing area. We believe that our production capability is sufficient to meet the diverse needs of our recreational and medical cannabis consumers in Canada, from cost-effective, high-yield input material for our oils, softgels, Cannabis 2.0 and CBD products to sophisticated finished product cannabis flowers.

We have also invested in large-scale cannabinoid extraction capability to process our outdoor hemp and cannabis output and other raw materials from our indoor and greenhouse cultivation facilities, in support of our innovation. This includes a licensed cannabis and hemp biomass processing and extraction facility in close proximity to our large-scale outdoor hemp and cannabis growing operations in Saskatchewan, and licensed extraction facilities in Smiths Falls and Aldergrove, British Columbia.

Our licensed infrastructure in Canada also includes advanced manufacturing for products such as vape pens and cartridges, softgel encapsulation, a 150,000 square foot beverage production facility, and a bean-to-bar chocolate manufacturing facility. In addition, we have secured additional cannabis production capacity through offtake agreements with other licensed producers.

United States

Immediately following passage of the Farm Bill, we began investing in our supply chain in the United States through a diverse group of contract hemp cultivators and growers across several states. In 2019, we secured a 308,000 square foot facility in Kirkwood, New York. The renovation of the facility in Kirkwood recently commenced, and once complete it is expected to support our large-scale cannabinoid extraction and related product manufacturing capability in the eastern part of the United States. Additionally, we own an industrial-scale facility in Batavia, Illinois that has been certified by the FDA and licensed by the state of Illinois for hemp processing. Our facilities in Kirkwood and Batavia, together with third-party contract manufacturers, are critical in processing the extract required to supply and sustain the broad portfolio of hemp-derived CBD products that we rolled-out in certain states in the United States in December 2019.

See “Risks and Uncertainties” under “Part 7 – Risks and Uncertainties” in this MD&A, the factors included under “Part 7 – Risks and Uncertainties” in the Company’s MD&A for the three months and year ended March 31, 2019 and in the AIF.

Conducting Business in the United States

Canopy Growth will only conduct business activities related to growing or processing cannabis in jurisdictions where it is federally permissible to do so. Canopy Growth is not considered a U.S. Marijuana Issuer nor does the Company have material ancillary involvement in the United States cannabis industry in accordance with the Staff Notice.

While we have several arrangements with United States-based companies that may themselves participate in the United States cannabis market, these relationships do not violate the federal laws of the United States respecting cannabis and in no manner involve Canopy Growth in any activities in the United States respecting cannabis. As discussed below, certain entities in which the Company holds securities may operate in the United States cannabis industry, however, our investment in such entities has been structured such that we hold non-participating, non-voting securities that are only exercisable or exchangeable upon cannabis becoming legal or permissible in the United States under federal law. Further, we have developed specific plans related to establishing business operations in the United States in the event cannabis becomes federally permissible which are discussed below.

Overview of the Farm Bill and Potential Future Permissibility of Cannabis in the United States

On December 20, 2018, the Agricultural Improvement Act of 2018 (the “Farm Bill”) was signed into law in the United States. The Farm Bill, among other things, defines industrial hemp, removes industrial hemp and its cannabidiols, including CBD derived from industrial hemp but excluding THC, from the United States Controlled Substances Act (the “CSA”) and allows for industrial hemp production and sale in the United States. The FDA has retained authority over the addition of CBD to products that fall within the Food, Drug and Cosmetic Act (the “FDCA”). In late November 2019, the FDA released a consumer update, the purpose of which was to warn consumers about CBD products. Specifically, the FDA stated that (a), to date, it has approved only one CBD product (a prescription drug to treat two forms of epilepsy), (b) it has seen only limited data about CBD safety and the data it has seen points to risks that need to be considered

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before taking CBD for any reason, (c) some CBD products are being marketed with unproven medical claims and are of unknown quality and (d) it is currently illegal to market CBD by adding it to a food or labeling it as a dietary supplement. On the same day, the FDA issued warning letters to 15 companies for illegally selling CBD products in violation of the FDCA and indicated that it cannot conclude that CBD is “generally recognized as safe” among qualified experts for its use in human or animal food.

There can be no assurance that the FDA will approve CBD as an additive to products under the FDCA. Additionally, the 2018 Farm Bill does not legalize CBD derived from “marihuana” (as such term is defined in the CSA), which is and will remain a Schedule I controlled substance under the CSA. The FDA has expressed a willingness to take a flexible regulatory approach to foster the development of hemp-derived products such as CBD; however, the FDA has indicated that those actions will have to fit under the confines of current law and further legislation will likely be required. Multiple legislative reforms related to cannabis are currently being considered by the federal government in the United States. Examples include the Strengthening the Tenth Amendment Through Entrusting States Act, the Marijuana Opportunity, Reinvestment and Expungement Act and the Secure and Fair Enforcement Banking Act. There can be no assurance that any of these pieces of legislation will become law in the United States.

Acreage Transaction

In late June 2019, Canopy Growth and Acreage implemented the previously-announced plan of arrangement (the “Acreage Plan of Arrangement”) which grants Canopy Growth the right (the “Call Option”) and the requirement to acquire all of the issued and outstanding securities of Acreage upon the occurrence (or waiver) of changes in United States 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”). Upon the implementation of the Acreage Plan of Arrangement, shareholders of Acreage and certain other holders of securities convertible into shares of Acreage received an upfront payment of US$300 million. Following the occurrence (or waiver) of the Triggering Event and the satisfaction (or waiver) of the conditions to completion of the acquisition of Acreage, upon closing, shareholders of Acreage will receive 0.5818 of a Canopy Growth common share for each Acreage share held at the effective time, subject to adjustment in certain circumstances in accordance with the terms of the arrangement agreement with Acreage (the “Exchange Ratio”). The value of the consideration payable to Acreage shareholders may change up to closing of the Acreage Plan of Arrangement, as the value is based on the Exchange Ratio. Further information regarding the Acreage Plan of Arrangement is described in Canopy Growth’s Management Information Circular dated May 17, 2019, which is available under Canopy Growth’s profile on SEDAR at www.sedar.com.

Acreage is headquartered in New York City and is a leading vertically-integrated, multi-state operator in United States cannabis. Acreage owns licences to operate (or has management services agreements with licence holders to assist with operating) approximately 90 dispensaries and over 20 cultivation and processing sites in 20 U.S. states. Canopy Growth and Acreage will operate as independent companies until completion of the Acreage Plan of Arrangement, at which time the combined operations of Canopy Growth and Acreage are expected to create a leader in the United States cannabis market.

Other United States Holdings

While Canopy Growth does not engage in activities in the United States relating to cultivating and distributing cannabis so long as cannabis remains illegal under United States federal law, certain companies that we have invested in may operate in the United States cannabis industry, provided that the securities held by Canopy Growth are non-participating and non-voting securities that are only convertible, exercisable, or exchangeable for common shares upon cannabis becoming legal or permissible in the United States under federal law. For instance, TerrAscend Corp. (“TerrAscend”) and Slang Worldwide Inc. (“Slang”) have interests in cannabis-related business in the United States, we have undertaken steps to structure our security holdings in these entities to insulate Canopy Growth from engaging in any unlawful United States cannabis-related activities.

Canopy Growth holds conditionally exchangeable shares in the capital of TerrAscend. These shares are not entitled to voting rights, dividends or other rights upon dissolution of TerrAscend but are convertible into common shares of TerrAscend upon receipt of the approval of the stock exchanges upon which Canopy Growth’s securities are listed and following either changes in United States federal laws regarding the cultivation, distribution or possession of cannabis or changes in the policies of the stock exchanges upon which Canopy Growth’s securities are listed with respect to such activities. The exchangeable shares do not provide (and there are no related contractual rights that would otherwise provide) us with any right to dividends, entitlements upon dissolution of TerrAscend, cash flow or other current economic entitlements, voting rights or any form of control over the business, affairs, operation or financial condition of TerrAscend.

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Additionally, Canopy Growth (through its ownership interest in Canopy Rivers Inc. (“Canopy Rivers”)), indirectly holds conditionally exercisable warrants in the capital of TerrAscend (the “TerrAscend Warrants”). The TerrAscend Warrants are only exercisable following changes in United States federal laws regarding the cultivation, distribution or possession of cannabis or approval of the various securities exchanges upon which the securities of the holder of the TerrAscend Warrants are listed.

Similarly, Canopy Growth holds conditionally exercisable warrants in the capital of Slang. Canopy Growth is not permitted to exercise the warrants without, among other things, receipt of the approval of the stock exchanges upon which Canopy Growth’s securities are listed and following the date that the growth, cultivation, production, sale, use and consumption of cannabis and cannabis-related products are permitted in the United States for any and all purposes (including medical, therapeutic and recreational) under all applicable federal laws of the United States, including the CSA.

The Company may also acquire rights, options or other securities in entities that are currently engaged in activities in the United States related to cultivating and distributing cannabis that are only exercisable, convertible, or exchangeable for common shares following the date that the federal laws in the United States in regards to cannabis are amended and/or, if applicable, the date that the stock exchange(s) upon which the common shares of Canopy Growth are listed permit the investment in an entity that is involved in the cultivation or distribution of marijuana in the United States, provided that the Company (i) does not provide funds to such entities, and (ii) is not entitled to voting rights, dividends, or other rights upon dissolution in connection with the holding of such rights, options, or other securities. The Company may also invest in or loan funds to subsidiaries of entities that are currently engaged in activities in the United States related to cultivating and distributing cannabis, provided that (i) such subsidiaries do not engage in activities in the United States related to cultivating and distributing cannabis, and (ii) the funds invested or loaned to such entity are only used for lawful purposes and not in connection with activities in the United States related to cultivating and distributing cannabis.

We monitor the activities of TerrAscend, Slang and other entities in which we are invested for compliance with United States cannabis laws and would make similar arrangements, if necessary, to ensure our ongoing compliance with United States federal laws.

Canopy Growth will only conduct business and will only invest in entities in jurisdictions outside of Canada where such operations are legally permissible and in compliance with the policies of the TSX and the NYSE. However, there is a risk that the Company’s interpretation of laws, regulations and guidelines, including, but not limited to, the Cannabis Act, the associated regulations, various United States state regulations and applicable stock exchange rules and regulations may differ from those of others, including those of government authorities, securities regulators and stock exchanges. In addition, the Company has and will endeavour to cause the entities that it invests in, to only conduct business and invest in entities in federally-legal jurisdictions by including appropriate representations, warranties and covenants in its agreements with such entities. Any violation of these terms would result in a breach of the applicable agreement between the Company and such entity and, accordingly, may have a material adverse effect on the business, operations and financial condition of the Company. In particular, the Company may be required to divest its interest in an entity or risk significant fines, penalties, administrative sanctions, convictions, settlements, or delisting from the TSX and/or NYSE and there is no assurance that any divestiture will be completed on terms favourable to the Company, or at all.

See “Risk and Uncertainties” under “Part 7 – Risks and Uncertainties” in this MD&A, the factors included under “Part 7 – Risks and Uncertainties” in the Company’s MD&A for the three months and year ended March 31, 2019 and in the AIF.

Canopy Rivers

Canopy Rivers (TSXV:RIV) identifies strategic counterparties seeking financial and/or operating support and affiliation to create an ecosystem of complementary companies operating throughout the cannabis value chain. As a result of a dual-class share structure, Canopy Growth owns approximately 27.3% of the issued and outstanding shares in the capital of Canopy Rivers and approximately 84.4% of the voting power attached to all of the outstanding shares.

To date, Canopy Rivers has established a diversified portfolio of cannabis industry investments that includes large-scale greenhouse cannabis cultivators, small-scale cannabis cultivators, international hemp processors, pharmaceutical formulators, brand developers and distributors, cannabis retail store operators, technology and media platforms, beverage companies, beauty brands, and agriculture-technology companies.

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Other Matters

Appointment of Chief Executive Officer (“CEO”)

On December 9, 2019, we announced the appointment of David Klein as Canopy Growth’s CEO effective January 14, 2020. Mark Zekulin stepped down from his role as CEO of the Company and resigned as a director of Canopy Growth’s Board of Directors effective December 20, 2019.

Transition to United States Generally Accepted Accounting Principles (“US GAAP”)

As part of our United States financial reporting requirements, Canopy Growth is required by the SEC to test whether it continues to qualify as a foreign private issuer at the end of every second fiscal quarter. Canopy Growth confirmed that, as of September 30, 2019, it no longer met the criteria for qualification as a foreign private issuer because (a) more than 50% of the outstanding voting securities are held by residents of the United States, and (b) the majority of Canopy Growth’s directors are United States citizens.

Therefore, as of April 1, 2020 Canopy Growth will be considered a United States domestic issuer and a large accelerated filer. As a result of this change, as of April 1, 2020 Canopy Growth will be required to prepare its consolidated financial statements, including the Company’s March 31, 2020 audited annual consolidated financial statements, in conformity with U.S. GAAP, with such change being applied retrospectively. The extent of the impact of this change in accounting framework has not yet been quantified by the Company. Canopy Growth will also be required to provide an auditor attestation report under Section 404(b) of the Sarbanes-Oxley Act.

Subsequent Events

Effective January 14, 2020, David Klein became the CEO of Canopy Growth. Mr. Klein remains a member of Canopy Growth’s Board of Directors.

On January 22, 2020, Judy Schmeling was appointed as Chair of Canopy Growth’s Board of Directors, and Jim Sabia was appointed to the Board of Directors subject to receiving clearance from Health Canada.

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PART 3 – RESULTS OF OPERATIONS

Operational and Financial Highlights – Third Quarter of Fiscal 2020

The following table presents selected operational and financial information for the three months ended December 31, 2019 and 2018:

The total quantity of cannabis sold during the third quarter of fiscal 2020 was 13,237 kilogram and kilogram equivalents, an increase from 10,102 kilograms and kilogram equivalents in the third quarter of fiscal 2019 due primarily to the Canadian recreational cannabis market being open for a full three months in the current quarter, as compared to approximately two and a half months in the third quarter of fiscal 2019, and the cannabis retail store build-out across Canada since legalization of recreational cannabis. Additionally, the acquisition of C³ in April 2019 resulted in a year-over-year increase in the quantity of cannabis sold.

Recreational cannabis accounted for 10,980 kilogram and kilogram equivalents sold in the third quarter of fiscal 2020 (83% of total cannabis sold), of which 78% was sold directly to the Canadian provinces through the business-to-business channel, and the remainder through our direct retail and on-line consumer channels. This compares to 84% sold through the business-to-business channel in the third quarter of fiscal 2019. Medical cannabis accounted for 2,257 kilogram and kilogram equivalents sold in the third quarter of fiscal 2020 (17% of total cannabis sold), representing an increase of 24% from the 1,815 kilogram and kilogram equivalents sold in the third quarter of fiscal 2019, due primarily to the acquisition of C³ in April 2019, growth in our German medical cannabis business, and a change in the current quarter in the equivalency factor for our oil products, as described below.

The average selling price per gram, net of excise tax, was $7.23 in the third quarter of fiscal 2020, a decrease from $7.33 in the third quarter of fiscal 2019. The average selling price per gram for our recreational products decreased year-over-year due largely to a shift in the product mix towards higher demand for our lower-margin dried flower products that we introduced to the market in fiscal 2020. In the current quarter we changed the equivalency factor for our Canadian medical

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oil products, from 1 gram being equivalent to 8 milliliters of oil, to 1 gram being equivalent to 4 milliliters of oil. Assuming the application of this change to the three months ended December 31, 2018, the impact would be an increase of 403 kilogram equivalents of oil sold, and a decrease in the average selling price per gram, net of excise tax for our Canadian medical products to $6.79. The year-over-year increase in the average selling price per gram from $6.79 to $7.16 is primarily attributable to the Canadian federal government exempting medical CBD product sales from excise taxes beginning in May 2019. The increase in the average selling price per gram for our international medical business is attributable to our acquisition of C³ in April 2019.

We harvested 29,920 kilograms of cannabis in the third quarter of fiscal 2020, as compared to 7,556 kilograms in the third quarter of fiscal 2019, reflecting the year-over-year growth of our production capacity.

Discussion of the Third Quarter of Fiscal 2020 Results of Operations

Revenue

The following tables present revenue for the three months ended December 31, 2019 and 2018:

Net revenue in the third quarter of fiscal 2020 was $123,764, as compared to $83,048 in the third quarter of fiscal 2019. The year-over-year increase of $40,716 is primarily attributable to an increase in medical revenue, largely resulting from

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the acquisition of C³ in April 2019, and an increase in other revenue attributable to our acquisitions of Storz & Bickel in December 2018, This Works in May 2019 and BioSteel in October 2019.

Recreational

Canadian recreational cannabis revenue in the third quarter of fiscal 2020 was $68,696, as compared to $71,618 in the third quarter of fiscal 2019. Revenue from the business-to-business channel was $53,454, a year-over-year decrease of $6,687. This decrease is primarily a result of the opening of the Canadian recreational cannabis market on October 17, 2018, as our provincial and territorial agency partners ordered significant quantities of cannabis products in the third quarter of fiscal 2019 in order to have a sufficient and diverse supply of products to meet the expected recreational cannabis consumer demand. Revenue from the business-to-consumer channel was $15,242, with the year-over-year growth of $3,765 primarily attributable to the continued build-out of our retail store platform in Canada. There were 22 corporate-owned Tweed and Tokyo Smoke stores open at December 31, 2019, an increase from the 14 corporate-owned stores that were open one year earlier.

In the third quarter of fiscal 2020, we generated revenue of $69,283 from the sale of our dry bud format products, of which $12,136 related to sales of 1.9 million higher-margin pre-rolled cannabis products.

Medical

Medical cannabis revenue for the third quarter of fiscal 2020 was $33,466, as compared to $18,633 in the third quarter of fiscal 2019.

Canadian medical revenue in the third quarter of fiscal 2020 was $14,765, a decrease of $1,166 from the third quarter of fiscal 2019 due primarily to the continuing impact of the opening of the Canadian recreational cannabis market and the transition of our medical customers to the Spectrum Therapeutics online store, which offered a more medical-focused range of cannabis products. We continue to broaden our brand and medical cannabis product offerings available on the Spectrum Therapeutics online store in response to patient demand, and in the third quarter of fiscal 2020 sales of our higher-margin oils and softgels represented approximately 66% of our Canadian medical sales, an increase from 59% in the second quarter of fiscal 2020.

International medical revenue in the third quarter of fiscal 2020 was $18,701, with the increase of $15,999 from the third quarter of fiscal 2019 attributable to the acquisition of C³, which generated revenue of $14,775 in the current quarter, and year-over-year growth of $1,224 in our German medical revenues which resulted from the resolution of the supply constraints we had previously experienced and which were associated with the opening of the recreational cannabis market in Canada.

Other

Other revenue for the third quarter of fiscal 2020 was $33,384, as compared to $7,452 in the third quarter of fiscal 2019. The year-over-year increase is primarily attributable to Storz & Bickel which, in addition to contributing a full quarter to our results in the third quarter of fiscal 2020, had a strong performance in the current quarter’s holiday season with revenue of $15,889. Also contributing to the year-over-year increase were the acquisitions of This Works in May 2019 and BioSteel in October 2019. The remainder of other revenue for the third quarter of fiscal 2020 is comprised of revenue from other strategic sources including extraction services and clinic partners.

Net revenue is determined by deducting excise taxes which are included in gross revenue and subsequently remitted to the tax authorities.

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Cost of goods sold and gross margin

The following table presents cost of goods sold and gross margin for the three months ended December 31, 2019 and 2018:

Cost of Goods Sold

Cost of goods sold for the third quarter of fiscal 2020 was $85,556, as compared to $63,976 in the third quarter of fiscal 2019. These costs were primarily comprised of the costs of the inventory sold in the period, distribution charges, and the operating costs relating to facilities that were not yet cultivating or processing cannabis, not yet producing cannabis-related products, or having under-utilized capacity.

Gross margin in the third quarter of fiscal 2020 was $38,208, or 31% of net revenue. Comparatively, in the third quarter of fiscal 2019 gross margin was $19,072 or 23% of net revenue. The year-over-year increase in the gross margin percentage was primarily attributable to a year-over-year decrease in the impact of operating costs relating to facilities not yet cultivating or processing cannabis, not yet producing cannabis-related products or having under-utilized capacity. In the third quarter of fiscal 2020, these operating costs amounted to $8,137 and primarily related to start-up costs associated with our advanced manufacturing and beverage facilities in Smiths Falls, our greenhouse in Denmark, and under-utilized capacity associated with our KeyLeaf extraction facility in Saskatchewan. Comparatively, these operating costs amounted to $13,092 in the third quarter of fiscal 2019 and related to the under-utilization of several of our larger greenhouse facilities, including those in Delta and Aldergrove, British Columbia, and Mirabel, Quebec. These operating costs impacted our gross margin percentage to a greater degree in the third quarter of fiscal 2019.

Operating expenses

The following table presents operating expenses for the three months ended December 31, 2019 and 2018:

Operating Expenses

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Sales and marketing

Sales and marketing expense in the third quarter of fiscal 2020 was $63,382, as compared to $48,324 in the third quarter of fiscal 2019. The increase of $15,058 is attributable to the following areas:

Included in sales and marketing expense for the third quarter of fiscal 2020 are strategic investments of $3,776 related to sales and marketing staff, product marketing campaigns, and brand awareness and consumer education initiatives related to our continued commercial expansion into new markets, most notably the launch of CBD products under the First & Free brand in certain states in the United States in December 2019 (for the third quarter of fiscal 2019 - $1,117).

Research and development

Research and development expense in the third quarter of fiscal 2020 was $20,808, as compared to $5,264 in the third quarter of fiscal 2019. The increase of $15,544 is attributable to:

General and administration

General and administration expense in the third quarter of fiscal 2020 was $67,812, as compared to $46,088 in the third quarter of fiscal 2019. The increase of $21,724 is attributable to:

Included in general and administration expense for the third quarter of fiscal 2020 are strategic investments and business development costs of $14,540 attributable to administrative staffing and facilities, insurance, information technology,

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regulatory, and other administrative and start-up costs incurred as we continue to expand globally (for the third quarter of fiscal 2019 - $2,488).

Acquisition-related costs

Acquisition-related costs were $3,256 in the third quarter of fiscal 2020, as compared to $4,520 in the third quarter of fiscal 2019. The decrease of $1,264 is attributable to less mergers and acquisitions activity as compared to the prior year. In the third quarter of fiscal 2019, acquisition costs were incurred in relation to the acquisitions of ebbu Inc., POS Holdings Inc. (now referred to as KeyLeaf) and Storz & Bickel. Comparatively, in the third quarter of fiscal 2020 we completed the acquisitions of BioSteel and the unowned interest in BCT, which included Spectrum UK, and the transaction to launch More Life Growth Company. These transactions were largely evaluated in the previous quarter. Additionally, we incurred acquisition costs in the current quarter to evaluate other potential opportunities.

Share-based compensation expense

Share-based compensation expense was $56,763 in the third quarter of fiscal 2020, as compared to $46,862 in the third quarter of fiscal 2019. The increase of $9,901, or 21%, is primarily attributable to the continued increase in the number of stock options granted to employees, which is primarily related to the increase in the number of employees of Canopy Growth from approximately 2,700 at December 31, 2018 to approximately 4,890 at December 31, 2019. The number of outstanding stock options increased from 31.6 million at December 31, 2018 to 33.6 million at December 31, 2019, an increase of approximately 6%. However, included in the outstanding stock options at December 31, 2018 were option grants totaling 10.5 million, the majority of which were granted in late December 2018 and which therefore did not result in significant share-based compensation expense in the third quarter of fiscal 2019. Excluding the December 2018 stock option grants results in outstanding stock options of 22.2 million at September 30, 2018, which increased approximately 51% to December 31, 2019. Share-based compensation expense in the current quarter was also impacted by 3.9 million forfeited or cancelled stock options.

Share-based compensation expense related to acquisition milestones was $4,916 in the third quarter of fiscal 2020, as compared to $23,849 in the third quarter of fiscal 2019. Consideration for certain acquisitions in previous fiscal years, including those of Spectrum Cannabis Colombia S.A.S. (“Spectrum Colombia”) and Canindica Capital Ltd. (“Canindica”), included the issuance of share-based compensation upon the achievement of specified cultivation and sales milestones. The year-over-year decrease of $18,933 is primarily attributable to the achievement, in earlier quarters, of the major milestones associated with these acquisitions, which had resulted in the recognition of share-based compensation expense at that time. The remaining share-based compensation expense which is being recognized currently relates largely to the final specific milestones for these acquisitions.

Depreciation and amortization expense

Depreciation and amortization expense was $13,652 in the third quarter of fiscal 2020, as compared to $5,015 in the third quarter of fiscal 2019. The increase of $8,637 is attributable to property, plant and equipment being put into operation during the first nine months of fiscal 2020 as we continue to build our infrastructure across Canada and internationally.    

Adjusted EBITDA (Non-GAAP Measure)

The Company’s “Adjusted EBITDA” is a non-GAAP measure used by management that does not have any standardized meaning prescribed by U.S. GAAP and may not be comparable to similar measures presented by other companies. Management defines the Adjusted EBITDA as the income (loss) from operations, as reported, before interest and tax, adjusted for removing share-based compensation expense, depreciation and amortization, and further adjusted to remove acquisition related costs.

The Company has provided further disclosure around Adjusted EBITDA by attributing Adjusted EBITDA to its (1) operations and corporate overhead, (2) strategic investments and business development, and (3) non-operating or under-utilized facilities. As discussed under “Part 2 – Strategy” above, we have made, and will continue to make, significant strategic investments and incur significant business development costs to expand our business into attractive new geographies in the United States, Latin America and the Caribbean, Asia / Pacific, and Africa. These investments include developing our administrative infrastructure, along with early sales and marketing initiatives focused on patient and healthcare professional education, and brand and product awareness initiatives associated with the launch of CBD products, where permissible. As part of our business development, we have also invested in research and development, particularly in relation to new product innovation, conducting clinical trials supporting new cannabis-based medicines, and optimizing our operations. The expenses associated with the aforementioned strategic investments have been

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included in General and administration, Sales and marketing, and Research and development in our condensed interim consolidated statements of operations. These investments are not consistent with the financial results from our businesses in Canada and Europe, for which our infrastructure build-out is substantially complete and revenue-generating operations have commenced. In addition, we have incurred significant costs related to facilities which are not yet cultivating or processing cannabis, not yet producing cannabis-related products, or had under-utilized capacity. These costs have been included in Inventory production costs expensed to cost of goods sold in our condensed interim consolidated statements of operations.

Accordingly, management believes that Adjusted EBITDA, and the attribution of Adjusted EBITDA in the manner described above, provides meaningful and useful financial information as these measures demonstrate the performance of our operating businesses, and the level of investment that we continue to incur in research and development and the expansion of our global business.

The following table presents Adjusted EBITDA for the three months ended December 31, 2019 and 2018:

The Adjusted EBITDA loss for the third quarter of fiscal 2020 was $96,982, as compared to an Adjusted EBITDA loss of $70,550 for the third quarter of fiscal 2019. Of the Adjusted EBITDA loss for the current quarter, $49,734 is attributed to our operations and corporate overhead, and is reflective of:

The Adjusted EBITDA loss attributed to strategic investments and business development of $39,111 has increased from a loss of $8,869 for the third quarter of fiscal 2019, and is primarily attributable to:

The Adjusted EBITDA loss attributed to non-operating or under-utilized facilities of $8,137 relates to inventory production costs expensed to cost of goods sold and is discussed further above under “Cost of goods sold and gross margin”.

Total other income, net

Total other income, net was $57,963 in the third quarter of fiscal 2020, as compared to $198,858 in the third quarter of fiscal 2019. The year-over-year decrease in the other income amount of $140,895 is primarily attributable to the following year-over-year variances:

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Income tax recovery

Income tax recovery was $27,448 in the third quarter of fiscal 2020, consisting of a deferred income tax recovery of $33,917 (compared to $3,275 in the third quarter of fiscal 2019) and current income tax expense of $6,469 ($nil in the third quarter of fiscal 2019).

The increase of $30,642 in the deferred income tax recovery balance is primarily a result: of (i) recording a reduction in deferred tax liabilities that arose in connection with the required revaluation of the accounting carrying value, but not the tax basis, of other financial assets and other assets; and (ii) the recognition of losses carried forward, net of the use of losses carried forward from prior years for which a deferred tax asset had been recorded. In connection with certain deferred tax assets, mainly in respect to losses for tax purposes, where the accounting criteria for recognition as an asset has yet to be satisfied and it is not probable that they will be used, the deferred tax asset has not been recognized.

The increase of $6,469 in the current income tax expense balance arose primarily in connection with acquired legal entities that generated taxable income, where income could not be offset against the group’s tax attributes, and legal entities which have fully utilized their loss carry forward balances and have current period taxable income.

Net (loss) income

Net loss was $109,634 in the third quarter of fiscal 2020, as compared to net income of $39,194 in the third quarter of fiscal 2019. The change from net income to net loss is reflective of the variances described above.

Segmented Analysis

The Company operates in two segments: 1) Cannabis operations, which encompasses the production, distribution and sale of both medical and recreational cannabis; and 2) Canopy Rivers, through which the Company provides growth capital and strategic support in the global cannabis sector, where federally lawful.

In the third quarters of both fiscal 2020 and fiscal 2019, all of the Company’s revenue was earned by the Cannabis operations segment. Canopy Rivers contributed a net loss of $5,102 in the third quarter of 2020, of which $1,394 was attributable to Canopy Growth. In the third quarter of fiscal 2019, Canopy Rivers contributed net income of $13,467, of which $3,114 was attributable to Canopy Growth. The change from net income in the third quarter of fiscal 2019 to a net loss in the third quarter of fiscal 2020 reflects the year-over-year decrease in the fair value changes on Canopy Rivers’ strategic equity investments, along with an increase in share-based compensation expense due to the stock options which have been granted in fiscal 2019. Refer to Note 20 of the Interim Financial Statements for further information on the non-controlling interests in Canopy Rivers and Note 18 for further information on share-based compensation expense.

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Summary of quarterly financial information

The following table presents a summary of unaudited quarterly financial information for the last eight consecutive quarters:

Additional GAAP Measure

The Company uses “Loss from operations” as an additional U.S. GAAP financial measure within the Interim Financial Statements and this MD&A, but it is not a defined term under U.S. GAAP to assess performance. Management believes that this measure provides useful supplemental information to investors and is computed on a consistent basis for each reporting period. Loss from operations is calculated as net revenue less cost of goods sold (which includes inventory production costs expensed to cost of goods sold, and less total operating expenses, all of which are derived from the consolidated statements of operations). It is used by management to analyze operating performance, but it is not intended to represent an alternative to net loss or other measures of financial performance in accordance with U.S. GAAP.

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Operational and Financial Highlights – Nine Months Ended December 31, 2019

The following table presents selected operational and financial information for the nine months ended December 31, 2019 and 2018:

The total quantity of cannabis sold during the nine months ended December 31, 2019 was 34,699 kilogram and kilogram equivalents, up from 14,994 kilograms and kilogram equivalents in the nine months ended December 31, 2018 due primarily to the launch of the recreational cannabis market in October 2018.

Recreational cannabis accounted for 28,958 kilogram and kilogram equivalents sold in the nine months ended December 31, 2019 (83% of total cannabis sold), of which 76% was sold directly to the Canadian provinces and the remainder through our direct retail and on-line consumer channels. Medical cannabis accounted for 5,741 kilogram and kilogram equivalents in the nine months ended December 31, 2019 (17% of total cannabis sold), representing a decrease of 14% from the 6,707 kilograms and kilogram equivalents sold in the nine months ended December 31, 2018 due primarily to the transition of our medical customers to the Spectrum Therapeutics online store prior to the opening of the recreational market, as discussed above. This was partially offset by the contribution from the acquisition of C³ in April 2019.

The average selling price per gram, net of excise tax, was $7.41 in the nine months ended December 31, 2019, a decrease from $7.99 in the nine months ended December 31, 2018. The average selling price per gram metric reflects the shipments made during the nine months ended December 31, 2019, which we believe provides the most meaningful and relevant metric regarding the pricing we achieved on our sales during the period. The average selling price per gram for our recreational products decreased year-over-year due largely to a general decline in selling prices for dried cannabis products since the opening of the Canadian recreational market in October 2018 and shifts in the product mix during fiscal 2020. In the third quarter of fiscal 2020 we changed the equivalency factor for our Canadian medical oil products, as described above. Assuming the application of this change to the first two quarter of fiscal 2020 and the nine months ended December 31, 2018, the impact would be (1) for the nine months ended December 31, 2018, an increase of 1,088 kilogram equivalents of oil sold, and a decrease in the average selling price per gram, net of excise tax for our Canadian

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medical business to $7.50, and (2) for the nine months ended December 31, 2019, an increase of 606 kilogram equivalents of oil sold, and a decrease in the average selling price per gram, net of excise tax for our Canadian medical business to $7.08. The year-over-year decrease in the average selling price per gram from $7.50 to $7.08 is primarily attributable to our absorption of excise taxes for our medical customers upon the opening of the Canadian recreational market in October 2018. The increase in the average selling price per gram for our international medical business is attributable to our acquisition of C³ in April 2019.

We harvested 111,450 kilograms of cannabis in the nine months ended December 31, 2019, as compared to 32,458 kilograms in the nine months ended December 31, 2018, reflecting the year-over-year growth of our production capacity.

Discussion of the Results of Operations for the Nine Months Ended December 31, 2019

Revenue

The following tables present revenue for the nine months ended December 31, 2019 and 2018:

Net revenue in the nine months ended December 31, 2019 was $290,859, as compared to $132,291 in the nine months ended December 31, 2018. The year-over-year increase of $158,568 is primarily attributable to the launch of the

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Canadian recreational cannabis market in October 2018, which resulted in a full nine months of recreational revenue contribution in the current year as compared to approximately two and a half months in the prior year. Additionally, medical revenue increased, which was primarily a result of the acquisition of C³ in April 2019, and other revenue increased due to our acquisitions of Storz & Bickel in December 2018 and This Works in May 2019.

Recreational

Canadian recreational revenue in the nine months ended December 31, 2019 was $159,536, as compared to $71,618 in the nine months ended December 31, 2018. Revenue from the business-to-business channel in the nine months ended December 31, 2019 was $120,556, net of the impact of other revenue adjustments in the amount of $46,070 related to our determination of returns and pricing adjustments, and which were described in our MD&A for the second quarter of fiscal 2020. Comparatively, revenue from the business-to-business channel in the nine months ended December 31, 2018 was $60,141, with the year-over-year increase attributable to the opening of the Canadian recreational cannabis market on October 17, 2018. Revenue from the business-to-consumer channel was $38,980 in the nine months ended December 31, 2019, an increase of $27,503 from the nine months ended December 31, 2018 due to the opening of the Canadian recreational cannabis market and our build-out our retail store platform in Canada.

Medical

Medical cannabis revenue in the nine months ended December 31, 2019 was $89,252, as compared to $65,492 in the nine months ended December 31, 2018. Canadian medical revenue in the nine months ended December 31, 2019 was $41,965, a decrease of $15,233 from the nine months ended December 31, 2018 due primarily to the transition of our medical customers to the Spectrum Therapeutics online store and its medical-focused product offerings prior to the opening of the recreational market, as discussed above. International medical revenue in the nine months ended December 31, 2019 was $47,287, an increase of $38,993 from the nine months ended December 31, 2018. The increase was primarily due to the acquisition of C³, which generated revenue of $37,576 in the current year-to-date period.

Other

Other revenue in the nine months ended December 31, 2019 was $75,770, as compared to $9,836 in the nine months ended December 31, 2018. The year-over-year increase is primarily attributable to the acquisitions of Storz & Bickel and This Works. The remainder of the increase is attributable to revenue from other strategic sources including extraction services, and clinic partners. Other revenue for the nine months ended December 31, 2018 consisted predominantly of revenue from our clinic partners and one month of revenue contribution from Storz & Bickel.

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Cost of goods sold and gross margin

The following table presents cost of goods sold and gross margin for the nine months ended December 31, 2019 and 2018:

Cost of Goods sold

Cost of goods sold in the nine months ended December 31, 2019 was $230,718, as compared to $125,091 in the nine months ended December 31, 2018. These costs were primarily comprised of the costs of the inventory sold in the period, distribution charges, and the operating costs relating to facilities that were not yet cultivating or processing cannabis, not yet producing cannabis-related products, or having under-utilized capacity.

Gross margin in the nine months ended December 31, 2019 was $60,141, or 21% of net revenue. Our gross margin was impacted by (i) charges for excess finished recreational cannabis inventory and trim inventory which, together, amounted to $19,811 and related primarily to our evaluation of the estimated on-hand provincial and territorial inventory levels compared to forecasted “sell-in” rates of certain oils and softgel products which led to our conclusion that a portion of this inventory may not be sold within a reasonable timeframe; (ii) the impact on gross margin of $9,157 reflecting the returns and pricing adjustments relating primarily to the over-supply of certain oil and softgel products; and (iii) other adjustments related to the net realizable value of inventory. The majority of these charges were recorded in the second quarter of fiscal 2020. Additionally, our margin was impacted by operating costs of $34,909 relating to facilities not yet cultivating or processing cannabis, not yet producing cannabis-related products or having under-utilized capacity. These costs primarily related to start-up costs associated with our advanced manufacturing and beverage facilities in Smiths Falls, our greenhouse in Denmark, and under-utilized capacity associated with our KeyLeaf extraction facility.

Comparatively, in the nine months ended December 31, 2018 gross margin was $7,200 or 5% of net revenue. Our gross margin was impacted by operating costs of $29,094 relating to non-producing or under-utilized facilities, and these costs had a more significant impact on our gross margin in the nine months ended December 31, 2018 than they did in the comparative period in fiscal 2020.

Operating expenses

The following table presents operating expenses for the nine months ended December 31, 2019 and 2018:

Operating Expenses

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Sales and marketing

Sales and marketing expense in the nine months ended December 31, 2019 was $176,018, as compared to $107,199 in the nine months ended December 31, 2018. The increase of $68,819 is attributable to the following areas:

Included in sales and marketing expense for the nine months ended December 31, 2019 are strategic investments of $9,901 related to sales and marketing staff, product marketing campaigns, and brand awareness and consumer education initiatives related to our continued commercial expansion into new markets, most notably the launch of CBD products in certain states in the United States in December 2019 (for the nine months ended December 31, 2018 - $1,334).

Research and development

Research and development expense in the nine months ended December 31, 2019 was $41,233, as compared to $7,964 in the nine months ended December 31, 2018. The increase of $33,269 is attributable to:

General and administration

General and administration expense in the nine months ended December 31, 2019 was $225,328, as compared to $102,777 in the nine months ended December 31, 2018. The increase of $122,551 is attributable to:

Included in general and administration expense in the nine months ended December 31, 2019 are strategic investments of $42,219 attributable to administrative staffing and facilities, insurance, information technology, regulatory, and other administrative and start-up costs incurred as we continue to expand globally (in the nine months ended December 31, 2018 - $5,778).

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Acquisition-related costs

Acquisition-related costs were $19,000 in the nine months ended December 31, 2019, as compared to $9,606 in the nine months ended December 31, 2018. The year-over-year increase of $9,394 is attributable to increased mergers and acquisitions activity in fiscal 2020, as we implemented the Acreage Plan of Arrangement, closed the acquisitions of C³, This Works, BioSteel and BCT, and closed the transaction with More Life Growth Company. Additionally, we also incurred acquisition costs in relation to evaluating other acquisition opportunities.

Share-based compensation expense

Share-based compensation expense was $217,611 in the nine months ended December 31, 2019, as compared to $101,159 in the nine months ended December 31, 2018. The increase of $116,452 is primarily attributable to the continued increase in the number of stock options granted to employees, which is primarily related to the increase in the number of employees of Canopy Growth from approximately 2,700 at December 31, 2018 to approximately 4,890 at December 31, 2019. The average number of stock options outstanding increased from 19.5 million during the nine months ended December 31, 2018 (excluding the 10.5 million stock options granted in late December 2018, as described above) to 33.2 million during the nine months ended December 31, 2019.

Our share-based compensation program was modified in the first half of fiscal 2020, and as a result we expect share-based compensation expense to decrease over the next two fiscal years.

Share-based compensation expense related to acquisition milestones was $24,311 in the nine months ended December 31, 2019, as compared to $81,674 in the nine months ended December 31, 2018. The decrease of $57,363 is primarily attributable to the achievement, in earlier quarters, of the major milestones associated with the acquisitions of Spectrum Colombia and Spectrum Cannabis Denmark Aps, and the recognition of share-based compensation expense at that time. Additionally, in the second quarter of fiscal 2019 we acquired the outstanding shares of Canindica in exchange for Canopy Growth common shares, and the consideration paid of $23,004 was recognized as share-based compensation expense as Canindica did not meet the definition of a business.

Depreciation and amortization expense

Depreciation and amortization expense was $34,579 in the nine months ended December 31, 2019, as compared to $11,640 in nine months ended December 31, 2018. The increase of $22,939 is attributable to property, plant and equipment being put into operation during the latter half of fiscal 2019 and the first nine months of fiscal 2020 as we continue to build our infrastructure across Canada and internationally.

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Adjusted EBITDA (Non-GAAP Measure)

The following table presents Adjusted EBITDA for the nine months ended December 31, 2019 and 2018

The Adjusted EBITDA loss for the nine months ended December 31, 2019 was $340,785, as compared to an Adjusted EBITDA loss of $186,955 for the nine months ended December 31, 2018. Of the Adjusted EBITDA loss for the current period, $212,565 is attributed to our operations and corporate overhead, and is reflective of:

The Adjusted EBITDA loss attributed to strategic investments and business development of $93,311 has increased from a loss of $15,076, and is primarily attributable to:

The Adjusted EBITDA loss attributed to non-operating or under-utilized facilities of $34,909 relates to inventory production costs expensed to cost of goods sold and is discussed further above under “Cost of goods sold and gross margin”.

Total other income, net

Total other income, net was $600,624 in the nine months ended December 31, 2019, as compared to total other income, net of $54,542 in the nine months ended December 31, 2018. The change of $546,082 is primarily attributable to:

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Income tax recovery

Income tax recovery was $22,948 in the nine months ended December 31, 2019, consisting of a deferred income tax recovery of $37,531 (compared to $4,765 in the nine months ended December 31, 2018) and current income tax expense of $14,583 ($nil in the nine months ended December 31, 2018).

The increase of $32,766 in the deferred income tax recovery balance is primarily a result of: (1) recording a reduction in deferred tax liabilities that arose in connection with the required revaluation of the accounting carrying value, but not the tax basis, of other financial assets and other assets; and (ii) the recognition of losses carried forward net of the use of losses carried forward from prior years for which a deferred tax asset had been recorded. In connection with certain deferred tax assets, mainly in respect to losses for tax purposes, where the accounting criteria for recognition of an asset has yet to be satisfied and it is not probable that they will be used, the deferred tax asset has not been recognized.

The increase of $14,583 in the current income tax expense balance arose primarily in connection with acquired legal entities that generated taxable income, where income could not be offset against the group’s tax attributes, and legal entities which have fully utilized their loss carry forward balances and have current period taxable income.

Net loss

Net loss was $61,035 in the nine months ended December 31, 2019, as compared to $364,533 in the nine months ended December 31, 2018. The decrease in net loss reflects the variances as described above.

Segmented Analysis

The Company operates in two segments: 1) Cannabis operations, which encompasses the production, distribution and sale of both medical and recreational cannabis; and 2) Canopy Rivers, through which the Company provides growth capital and strategic support in the global cannabis sector, where federally lawful.

In the nine months ended December 31, 2019 and 2018, all of the Company’s revenue was earned by the Cannabis operations segment. Canopy Rivers contributed a net loss of $11,052 in the nine months ended December 31, 2019, of which $3,031 was attributable to Canopy Growth. In the nine months ended December 31, 2018, Canopy Rivers contributed net income of $11,861, of which $2,533 was attributable to Canopy Growth. The increase in the net loss reflects the year-over-year decrease in the fair value changes on Canopy Rivers’ strategic equity investments, along with an increase in share-based compensation expense due to the stock options which have been granted in fiscal 2020.

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PART 4 – FINANCIAL LIQUIDITY AND CAPITAL RESOURCES

The following table presents selected balance sheet information as at December 31, 2019, March 31, 2019 and March 31, 2018:

Available liquidity and liquidity risk

As at December 31, 2019 the Company had cash and cash equivalents of $1,561,664 and short-term investments of $705,921 which, when combined, represent a decrease of $2,247,378 from March 31, 2019. This decrease was due primarily to cash used in the nine months ended December 31, 2019 to fund operations of $561,996, investments in facility enhancements of $610,858, cash consideration paid for acquisitions of subsidiaries of $511,080, and strategic investments including the Acreage Call Option totaling $441,837, and the repayment of debt in the amount of $111,470. The Company’s excess cash resources are predominantly invested in liquid securities issued by the United States and Canadian governments.

The Company manages liquidity risk by reviewing, on an ongoing basis, its capital requirements. As at December 31, 2019 the Company believes it has adequate available liquidity, in the form of cash and cash equivalents, and short-term investments, to enable it to meet working capital and other operating requirements, fund growth initiatives and capital expenditures, settle its liabilities, and repay scheduled principal and interest payments on debt. The Company’s objective is to generate sufficient cash to fund the Company’s operating requirements and expansion plans. While the Company has incurred losses to date, with an accumulated deficit of $3,826,095 at December 31, 2019 (March 31, 2019 - $777,087), management anticipates the success and eventual profitability of the business. The Company also ensures that it has access to public capital markets through its public stock exchange listings. However, there can be no assurance that the Company will gain adequate market acceptance for its products or be able to generate sufficient positive cash flow to achieve its business plans. Therefore, the Company is subject to risks including, but not limited to, its inability to raise additional funds through debt and/or equity financing to support the Company’s continued development and operations and to meet the Company’s liabilities and commitments as they come due. See “Part 7 - Risks and Uncertainties”.

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Statements of cash flows and Free cash flow (non-GAAP measure)

The table below presents Canopy Growth’s cash flows and free cash flow for the nine months ended December 31, 2019 and 2018: