Tilray, Inc. and its wholly owned subsidiaries (collectively “Tilray”, the “Company”, “we”, “our”, or “us”) is a global medical cannabis research, cultivation, processing and distribution organization, and is one of the leading suppliers of adult-use cannabis in Canada. The Company also markets and distributes food products from hemp seed and offers a broad range of natural and organic hemp based food products and ingredients that are sold through retailers and websites globally.

The accompanying unaudited condensed consolidated financial statements (the “financial statements”) reflect the accounts of the Company. The financial statements were prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”) for interim financial information. The information included in this Form 10-Q should be read in conjunction with the audited consolidated financial statements included in the Company’s annual report on Form 10-K for the year ended December 31, 2019 (the “Annual Financial Statements”). These financial statements reflect all adjustments, which, in the opinion of management, are necessary for a fair presentation of the results for the interim periods presented. Interim results are not necessarily indicative of results for a full year.

These financial statements have been prepared on a going concern basis, which assumes that the Company will continue in operation for the foreseeable future and, accordingly, will be able to realize its assets and discharge its liabilities in the normal course of operations as they come due.

For the three and nine months ended September 30, 2020, the Company reported a consolidated net loss of $2,316 and $268,124, and a net loss of $36,351 and $102,021 for the three and nine months ending September 30, 2019.

For the nine months ended September 30, 2020, the Company had cash flows used in operating activities of $104,486 and cash flows used in operating activities of $167,255 for the nine months ended September 30, 2019.

As at September 30, 2020 and December 31, 2019 the Company had working capital of $171,349 and $166,600, respectively.

Current management forecasts and related assumptions support the view that the Company can adequately manage the operational needs of the business with the current cash on hand for the next twelve months from the date of issuance of these financial statements.

On March 17, 2020, the Company received net proceeds of $85,289 ($90,439 of gross proceeds) from its registered equity offering (refer to Note 14). 19,000,000 warrants were issued as part of the offering. All the warrants remain outstanding as of September 30, 2020. The warrants issued contain an anti-dilution provision that was approved by a vote of the Company’s stockholders at its Annual Meeting held on May 28, 2020. While the Company has the ability to issue securities under its at-the-market program, because warrants from the equity offering remain outstanding as of September 30, 2020, the Company may only issue up to $20,000 in aggregate gross proceeds under its at-the-market offering program at prices less than the exercise price of the warrants (currently $5.95 per share), and in no event more than $6,000 per quarter at prices below the exercise price of the warrants, without triggering the warrant’s anti-dilution price protection feature. During the three months ended September 30, 2020, the Company received gross proceeds of $46,153 from shares sold under its at-the-market offering program. All shares were sold at share prices above $5.95 per share.

On February 28, 2020, the Company completed a debt financing under its Senior Facility with maximum aggregate principal amount of $59,600 and borrowed an aggregate principal amount of $49,700. The Senior Facility provided for an additional draw of $9,900. On June 5, 2020, as a result of COVID-19 related financial markets conditions that affected the lender and not because of any material changes to the business of Tilray or its subsidiaries, the lender requested that Tilray withdraw its then outstanding request for the additional draw of $9,900 and entered into an amendment to its Senior Facility which provides for, among other things, interest-only payments for the remainder of its term with all outstanding principal payments due at February 28, 2022 (refer to Note 13).

As of September 30, 2020, the Company had cash and cash equivalents of $155,205. During the last nine months management has implemented a series of cost reduction strategies including headcount reductions and the closure of certain facilities. Currently, management’s forecasts and related assumptions indicate that the Company will remain in compliance with all its debt covenants and, over the next twelve months from the date of issuance of these financial statements, will be able to satisfy all its contractual obligations such as payment of interest on the 5% convertible notes (refer to Note 12 and Note 18), interest-only payments on the Senior Facility (refer to Note 13 and Note 18), non-cancelable minimum purchase commitments for inventory (refer to Note 18), payment of the ABG finance liability (refer to Note 18), payment of the Company’s lease commitments (refer to Note 18) and payment of the Company’s Portugal construction commitments (refer to Note 18). Due to uncertainties the Company may face in raising additional equity financing in the future, which may be further impacted by the economic downturn and unprecedented

conditions due to COVID-19, there remains uncertainty about the impact this may have on management’s assumptions used to develop these forecasts. Accordingly, the Company has concluded it is probable that it can implement plans that would effectively mitigate the conditions and events that raise substantial doubt about the entity’s ability to continue as a going concern for the next twelve months.

These financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from uncertainty related to the Company’s ability to successfully implement its initiatives. Any such adjustments could be material.

The Company lost its emerging growth company status effective December 31, 2019 and therefore reported as a large accelerated filer in the Annual Financial Statements. As a result, the Company complies with new and revised accounting standards applicable to public companies. In the fourth quarter of 2019, the Company adopted the following accounting pronouncements issued by FASB: ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”); ASU 2016-02, Leases, codified as ASC 842 (“ASC 842”); ASU 2014-09 Revenue from Contracts with Customers and all subsequent amendments to the ASU, codified as ASC 606 (“ASC 606”); and ASU 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”), as described in the Annual Financial Statements, with an effective date of January 1, 2019. The comparative three and nine months ended September 30, 2019 included in the financial statements reflect the new and revised accounting standards and therefore does not mirror the September 30, 2019 interim period condensed consolidated financial statements previously filed. The impact to the statements of net loss and comprehensive loss for the three and nine months ended September 30, 2019 is as follows:

	Three months ended September 30, 2019						Nine months ended September 30, 2019
	Net loss			Other comprehensive (loss) income			Net (loss) income			Other comprehensive (loss) income
Unadjusted	$	(35,678	)	$	(5,164	)	$	(101,032	)	$	(2,069	)
Impact of adoption of accounting standards:
ASU 2016-01		(312	)		312			265			(265	)
ASC 842		(32	)		—			(157	)		—
ASU 2018-07		(329	)		—			(1,097	)		—
ASC 606		—			—			—			—
Adjusted	$	(36,351	)	$	(4,852	)	$	(102,021	)	$	(2,334	)

The statement of net loss and comprehensive loss for the three and nine months ended September 30, 2019 was reclassified to conform to the current period’s presentation. In addition, unrelated to the impact of adoption of accounting standards, cost of sales, which was formerly presented as a single line item, is separated between product costs and inventory valuation adjustments. Loss on disposal of property and equipment, formerly presented in other expenses (income) is now presented in general and administrative expenses.

In May 2020, the Company announced its decision to close the High Park Gardens facility in response to its anticipated future product needs and the current economic climate. As a result, the Company adopted an accounting policy for assets held for sale. Assets held for sale are accounted for in accordance with applicable accounting guidance provided in ASC Topic 360, Property, Plant and Equipment.

The Company classifies its assets as held for sale if, among other criteria, the carrying amount will be recovered principally through a sale transaction rather than continued use and a sale is considered probable and within one year. Assets classified as held for sale are measured at the lower of the carrying amount and fair value less costs to sell.

An impairment loss is recognized in impairment of assets through the statements of net loss and comprehensive loss for any initial or subsequent write-down of the asset to fair value less costs to sell. A gain is recognized for any subsequent increases in fair value less costs to sell of an asset, but not in excess of any cumulative impairment loss previously recognized. A gain or loss not previously recognized by the date of the sale of the asset is recognized at the date of derecognition. Assets are not depreciated or amortized while they are classified as held for sale. Interest and other expenses attributable to the liabilities classified as held for sale continue to be recognized.

Assets classified as held for sale are combined and presented separately from the other assets in the balance sheets.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This guidance was subsequently amended by ASU 2018-19, Codification Improvements, ASU 2019-

04, Codification Improvements, ASU 2019-05, Targeted Transition Relief, ASU 2019-10, Effective Dates, and ASU 2019-11, Codification Improvements. These ASUs are referred to collectively as the new guidance on current expected credit loss (“CECL”). As a result of the adoption of the new CECL guidance on January 1, 2020, the Company has changed its accounting policy for the allowance for credit losses, as it relates to accounts receivable and available-for-sale debt securities. The adoption of the CECL guidance did not have a material impact on the consolidated financial statements at January 1, 2020.

Accounts receivable – The Company maintains an allowance for credit losses at an amount sufficient to absorb losses inherent in its accounts receivable portfolio as of the reporting dates based on the projection of expected credit losses.

The Company applies the aging method to estimate the allowance for expected credit losses. The aging method is applied to accounts receivables at the business unit level to reflect shared risk characteristics, such as receivable type, customer type and geographical location. The aging method assigns accounts receivables to a level of delinquency and applies loss rates to each class based on historical loss experience. The Company also considers relevant qualitative and quantitative factors to assess whether historical loss experience should be adjusted to better reflect the risk characteristics of the current classes and the expected future loss. This assessment incorporates all available information relevant to considering the collectability of its current classes, including considering economic and business conditions, default trends, changes in its class composition, among other internal and external factors. The expected credit loss estimates are adjusted for current conditions and reasonable supportable forecasts.

As part of the Company’s analysis of expected credit losses, it may analyze contracts on an individual basis in situations where such accounts receivables exhibit unique risk characteristics and are not expected to experience similar losses to the rest of their class.

Available-for-sale debt securities – The Company assesses its available-for-sale debt securities for impairment at each measurement date. When the fair value is less than the amortized cost, the Company assesses whether it intends to sell the security. When it is assessed that the Company will sell the security or the Company will be required to sell before recovery, the difference between the fair value and amortized cost is recorded as an impairment of assets in the statements of net loss and comprehensive loss. When the Company does not intend to sell and it is not more likely than not that the Company will be required to sell before recovery, the Company assesses whether a portion of the unrealized loss is a result of a credit loss. The Company recognizes the portion related to credit loss as credit loss expenses in general and administrative expenses within the statements of net loss and comprehensive loss and the portion of unrealized loss related to factors other than credit losses in other comprehensive loss. The Company determines the best estimate of the present value of cash flows expected to be collected from the available-for-sale debt securities on an individual basis based on past events, current conditions and forecasts relevant to the individual securities.

In August 2018, the FASB issued ASU 2018-13, Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (Topic 820) (“ASU 2018-13”). ASU 2018-13 removes (a) the prior requirement to disclose the amount and reason for transfers between Level 1 and Level 2 of the fair value hierarchy contained in ASC Topic 820, (b) the policy for timing of transfers between levels, and (c) the valuation process used for Level 3 fair value measurements. ASU 2018-13 also adds, among other items, a requirement to disclose the range and weighted average of significant unobservable inputs used in Level 3 fair value measurements. The Company adopted ASU 2018-13 effective January 1, 2020 and such adoption did not have a material effect on its financial statements.

In March 2020, the Company closed on a registered offering including Class 2 common stock, warrants, and pre-funded warrants (refer to Note 14). Warrants are accounted for in accordance with applicable accounting guidance provided in ASC Topic 815, Derivatives and Hedging – Contracts in Entity's Own Equity (“ASC 815”), as either liabilities or as equity instruments depending on the specific terms of the warrant agreement. The Company's warrants are classified as liabilities and are recorded at fair value. The warrants are subject to remeasurement at each balance sheet date until settlement and any change in fair value is recognized as a component of change in fair value of warrant liability in the statements of net loss and comprehensive loss. Transaction costs allocated to warrants that are presented as a liability are expensed immediately within other expenses (income) in the statements of net loss and comprehensive loss.

Assets held for sale – The Company uses a third party real estate agent to assist management in its determination of the fair value of the assets held for sale. The Company estimates the fair value by reviewing market data from recent sales of similar properties and determining an implied sale price per acre of land and greenhouse space.

Allowance for credit losses – The Company’s projections of expected credit losses are inherently uncertain, and as a result the Company cannot predict with certainty the amount of such losses. Changes in economic conditions, the risk characteristics and composition of the portfolio, bankruptcy laws, and other factors could impact the actual and projected expected credit losses and the

related allowance for credit losses. Actual losses may vary from current estimates. Due to potential COVID-19 disruptions in the marketplace it is possible the Company may experience unforeseen and greater credit losses than anticipated or experienced historically.

Warrant liability – The Company estimates the fair value of the warrant liability using a Monte Carlo pricing model. The Company is required to make assumptions and estimates in determining an appropriate risk-free interest rate, volatility, term, dividend yield and discount due to exercise restrictions and fair value of common stock.

Basic net loss per share is computed by dividing reported net loss by the weighted average number of common shares outstanding for the reported period. Diluted net loss per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock of the Company during the reporting period. Diluted net loss per share is computed by dividing net loss by the sum of the weighted average number of common shares and the number of potential dilutive common share equivalents outstanding during the period. Potential dilutive common share equivalents consist of the incremental common shares issuable upon the exercise of vested share options and the incremental shares issuable upon conversion of the convertible notes. Potential additional dilutive common share equivalents consist of warrants, stock options, restricted stock units (“RSUs”) and restricted stock awards.

In computing diluted earnings per share, common share equivalents are not considered in periods in which a net loss is reported, as the inclusion of the common share equivalents would be anti-dilutive. As of September 30, 2020, there were 13,141,298 common share equivalents with potential dilutive impact (September 30, 2019 – 8,043,920). Because the Company is in a net loss for all periods presented in these financial statements, there is no difference between the Company’s basic and diluted net loss per share for the periods presented.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. ASU 2019-12 is effective for the Company beginning January 1, 2021. The Company is currently evaluating the effect of adopting this ASU.

In January 2020, the FASB issued ASU 2020-01, Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) (“ASU 2020-01”), which is intended to clarify the interaction of the accounting for equity securities under Topic 321 and investments accounted for under the equity method of accounting in Topic 323 and the accounting for certain forward contracts and purchased options accounted for under Topic 815. ASU 2020-01 is effective for the Company beginning January 1, 2021. The Company is currently evaluating the effect of adopting this ASU.

In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which is intended to address issues identified as a result of the complexity associated with applying generally accepted accounting principles (GAAP) for certain financial instruments with characteristics of liabilities and equity. ASU 2020-06 is effective for the Company beginning January 1, 2022. The Company is currently evaluating the effect of adopting this ASU.