AURORA CANNABIS INC (Form: F-10, Received: 04/03/2019 06:02:09)

As filed with the Securities and Exchange Commission on April 2, 2019

Registration No. 333-

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form F-10

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

AURORA CANNABIS INC.

(Exact name of Registrant as specified in its charter)

British Columbia, Canada

2833

Not Applicable

(Province or other Jurisdiction of

Incorporation or Organization)

(Primary Standard Industrial

Classification Code Number)

(I.R.S. Employer

Identification Number, if any)

Suite 500 – 10355 Jasper Avenue

Edmonton, Alberta T5J 1Y6

Canada

(604) 362-5207

(Address and telephone number of Registrant’s principal executive offices)

CORPORATION SERVICE COMPANY

251 Little Falls Drive

County of New Castle

Wilmington, Delaware 19808

1 (800) 927-9800

(Name, address (including zip code) and telephone number (including area code) of agent for service in the United States)

Copies to:

Cory Kent

McMillan LLP

Royal Centre, Suite 1500

1055 West Georgia Street, PO Box 11117

Vancouver, British Columbia V6E 4N7

Canada

(604) 691-7446

Glen Ibbott

Chief Financial Officer

Aurora Cannabis Inc.

Suite 500 – 10355 Jasper Avenue

Edmonton, Alberta T5J 1Y6

Canada

(604) 362-5207

Martin Glass

Jenner & Block LLP

919 Third Avenue

New York, NY 10022

USA

(212) 891-1672

Approximate date of commencement of proposed sale to the public: From time to time after the effective date of this registration statement.

Province of Alberta, Canada

(Principal jurisdiction regulating this offering)

It is proposed that this filing shall become effective (check appropriate box below):


A.	☐	upon filing with the Commission, pursuant to Rule 467(a) (if in connection with an offering being made contemporaneously in the United States and Canada).

B.	☒	at some future date (check appropriate box below)

	1.	☐	pursuant to Rule 467(b) on ( ) at ( ) (designate a time not sooner than seven calendar days after filing).

	2.	☐	pursuant to Rule 467(b) on ( ) at ( ) (designate a time seven calendar days or sooner after filing) because the securities regulatory authority in the review jurisdiction has issued a receipt or notification of clearance on ( ).

	3.	☐	pursuant to Rule 467(b) as soon as practicable after notification of the Commission by the Registrant or the Canadian securities regulatory authority of the review jurisdiction that a receipt or notification of clearance has been issued with respect hereto.

	4.	☒	after the filing of the next amendment to this Form (if preliminary material is being filed).

If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to the home jurisdiction’s shelf prospectus offering procedures, check the following box. ☒

CALCULATION OF REGISTRATION FEE



Title of each class of securities to be registered	Amount to be registered (1)	Proposed Maximum Aggregate Offering Price (2)	Amount of Registration Fee
Common Shares
Warrants
Options
Subscription Receipts
Debt Securities
Units
Total		$750,000,000.00	$90,900.00

(1)

There are being registered under this registration statement such indeterminate number of common shares, warrants, options, subscription receipts and debt securities of the Registrant, and a combination of such securities, separately or as units, as may be sold by the Registrant from time to time, which collectively shall have an aggregate initial offering price of not to exceed $750,000,000.00. The securities registered hereunder also include such indeterminate number of each class of identified securities as may be issued upon conversion, exercise or exchange of any other securities that provide for such conversion into, exercise for or exchange into such securities. Separate consideration may or may not be received for securities that are issuable on exercise, conversion or exchange of other securities. In addition, pursuant to Rule 416 under the Securities Act of 1933, as amended, the common shares being registered hereunder include such indeterminate number of common shares as may be issuable with respect to the shares being registered hereunder as a result of stock splits, stock dividends, or similar transactions. The proposed maximum initial offering price per security will be determined, from time to time, by the Registrant in connection with the sale of the securities under this registration statement.

(2)	Estimated solely for the purpose of calculating the amount of the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.

The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registration statement shall become effective as provided in Rule 467 under the Securities Act of 1933 or on such date as the Commission, acting pursuant to Section 8(a) of the Act, may determine.

PART I

INFORMATION REQUIRED TO BE DELIVERED TO OFFEREES OR PURCHASERS

Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state.

SUBJECT TO COMPLETION, DATED APRIL 2, 2019


PRELIMINARY SHORT FORM BASE SHELF PROSPECTUS

New Issue		April 2, 2019

LOGO

AURORA CANNABIS INC.

US$750,000,000

Common Shares

Warrants

Options

Subscription Receipts

Debt Securities

Units

This short form base shelf prospectus (the “ Prospectus ”) relates to the offering for sale of common shares (the “ Common Shares ”), warrants (the “ Warrants ”), options (the “ Options ”), subscription receipts (the “ Subscription Receipts ”), debt securities (the “ Debt Securities ”), or any combination of such securities (the “ Units ”) (all of the foregoing, collectively, the “ Securities ”) by Aurora Cannabis Inc. (the “ Company ” or “ Aurora ”) from time to time, during the 25-month period that the Prospectus, including any amendments hereto, remains effective, in one or more series or issuances, with a total offering price of the Securities in the aggregate, of up to US$750,000,000. The Securities may be offered in amounts and at prices to be determined based on market conditions at the time of the sale and set forth in an accompanying prospectus supplement (a “ Prospectus Supplement ”). In addition, Securities may be offered and issued in consideration for the acquisition of other businesses, assets or securities by the Company or a subsidiary of the Company. The consideration for any such acquisition may consist of any of the Securities separately, a combination of Securities or any combination of, among other things, Securities, cash and assumption of liabilities. One or more securityholders of the Company may also offer and sell Securities under this Prospectus. See “The Selling Securityholders”.

This offering is made by a Canadian issuer that is permitted, under a multijurisdictional disclosure system adopted by the United States and Canada, to prepare this Prospectus in accordance with Canadian

disclosure requirements. Prospective investors should be aware that such requirements are different from those of the United States. Financial statements included or incorporated by reference herein have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and may not be comparable to financial statements of United States companies. Our financial statements are audited in accordance with Canadian generally accepted auditing standards.

The enforcement by investors of civil liabilities under the United States federal securities laws may be affected adversely by the fact that the Company is incorporated under the laws of British Columbia, Canada, that the majority of its officers and directors are residents of Canada, that all of the experts named in the registration statement are not residents of the United States, and that a substantial portion of the assets of the Company and said persons are located outside the United States.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SEC PASSED UPON THE ACCURACY OR THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENCE.

Investing in Securities of the Company involves a high degree of risk. You should carefully review the risks outlined in this Prospectus (together with any Prospectus Supplement) and in the documents incorporated by reference in this Prospectus and any Prospectus Supplement and consider such risks in connection with an investment in such Securities. See “ Risk Factors ”.

Prospective investors should be aware that the acquisition of the Securities described herein may have tax consequences both in the United States and in Canada. Such consequences for investors who are resident in, or citizens of, the United States may not be described fully herein. Prospective investors should read the tax discussion contained in the applicable Prospectus Supplement with respect to a particular offering of Securities.

The specific terms of the Securities with respect to a particular offering will be set out in one or more Prospectus Supplements and may include, where applicable: (i) in the case of Common Shares, the number of Common Shares offered, the offering price and any other specific terms; (ii) in the case of Warrants or Options, the number of Warrants or Options offered, the offering price, the designation, number and terms of the Common Shares issuable upon exercise of the Warrants or Options, any procedures that will result in the adjustment of these numbers, the exercise price, dates and periods of exercise, the currency in which the Warrants or Options are issued and any other specific terms; (iii) in the case of Subscription Receipts, the number of Subscription Receipts offered, the offering price, the procedures for the exchange of the Subscription Receipts for Common Shares or Warrants, as the case may be, and any other specific terms; (iv) in the case of Debt Securities, the specific designation, aggregate principal amount, the currency or the currency unit for which the Debt Securities may be purchased, the maturity, interest provisions, authorized denominations, offering price, covenants, events of default, any terms for redemption, any exchange or conversion terms, whether the debt is senior, senior subordinated or subordinated, whether the debt is secured or unsecured and any other terms specific to the Debt Securities being offered; and (v) in the case of Units, the designation, number and terms of the Common Shares, Warrants, Subscription Receipts or Debt Securities comprising the Units. Where required by statute, regulation or policy, and where Securities are offered in currencies other than Canadian dollars, appropriate disclosure of foreign exchange rates applicable to the Securities will be included in the Prospectus Supplement describing the Securities.

In addition, the Debt Securities that may be offered may be guaranteed by certain direct and indirect subsidiaries of Aurora with respect to the payment of the principal, premium, if any, and interest on the Debt Securities. The Company expects that any guarantee provided in respect of senior Debt Securities would constitute a senior and unsecured obligation of the applicable guarantor. For a more detailed description of the Debt Securities that may be offered, see “Description of Securities – Debt Securities - Guarantees”, below.

All information permitted under applicable securities legislation to be omitted from the Prospectus will be contained in one or more Prospectus Supplements that will be delivered to purchasers together with the Prospectus, except in cases where an exemption from such delivery requirements has been obtained. Each Prospectus Supplement will be incorporated by reference into the Prospectus for the purposes of applicable securities legislation as of the date of the Prospectus Supplement and only for the purposes of the distribution of the Securities to which the Prospectus Supplement pertains. Investors should read the Prospectus and any applicable Prospectus Supplement carefully before investing in the Securities.

This Prospectus constitutes a public offering of the Securities only in those jurisdictions where they may be lawfully offered for sale and only by persons permitted to sell the Securities in such jurisdictions. We may offer and sell Securities to, or through, underwriters, dealers or selling securityholders, directly to one or more other purchasers, or through agents pursuant to exemptions from registration or qualification under applicable securities laws. A Prospectus Supplement relating to each issue of Securities will set forth the names of any underwriters, dealers, agents or selling securityholders involved in the offering and sale of the Securities and will set forth the terms of the offering of the Securities, the method of distribution of the Securities, including, to the extent applicable, the proceeds to us and any fees, discounts, concessions or other compensation payable to the underwriters, dealers or agents, and any other material terms of the plan of distribution. In connection with any offering of the Securities, other than an “at-the-market distribution” (as defined under applicable Canadian securities legislation) unless otherwise specified in a Prospectus Supplement, the underwriters or agents may over-allot or effect transactions which stabilize or maintain the market price of the Securities offered at a higher level than that which might exist in the open market. Such transaction, if commenced, may be interrupted or discontinued at any time. See “Plan of Distribution”.

No underwriter or dealer involved in an “at-the-market distribution” under this Prospectus, no affiliate of such an underwriter or dealer and no person or company acting jointly or in concert with such an underwriter or dealer will over-allot securities in connection with such distribution or effect any other transactions that are intended to stabilize or maintain the market price of the Securities.

No underwriter has been involved in the preparation of the Prospectus or performed any review of the contents of the Prospectus.

The Company’s outstanding Common Shares are listed for trading on the Toronto Stock Exchange (the “ TSX ”) and on the New York Stock Exchange (“ NYSE ”) under the trading symbol “ACB”. The closing price of the Company’s Common Shares on the TSX and NYSE on March 28, 2019 was $11.85 per Common Share and US$8.83 per Common Share, respectively. Unless otherwise disclosed in any applicable Prospectus Supplement, the Debt Securities, the Warrants, the Subscription Receipts and the Units will not be listed on any securities exchange. Unless the Securities are disclosed to be listed, there will be no market through which these Securities may be sold and purchasers may not be able to resell these Securities purchased under this Prospectus. This may affect the pricing of such Securities in the secondary market, the transparency and availability of trading prices, the liquidity of such Securities, and the extent of issuer regulation.

The corporate head office of the Company is located at 500 – 10355 Jasper Avenue, Edmonton, Alberta, T5J 1Y6. The registered office of the Company is located at Suite 1500, 1055 West Georgia Street, Vancouver, British Columbia, V6E 4N7.

iii

TABLE OF CONTENTS


General Matters			1

About This Prospectus			1

Documents Incorporated by Reference			1

Forward Looking Statements			5

Glossary Of Terms			7

Note to United States Readers Regarding Differences Between United States and Canadian Financial Reporting Practices			8

Currency Presentation and Exchange Rate Information			9

The Company			10

Our Business			12

The Selling Securityholders			17

Use of Proceeds			18

Earnings Coverage Ratio			18

Consolidated Capitalization			18

Prior Sales			19

Trading Price and Volume			38

Plan of Distribution			39

Description of Securities			41

Risk Factors			56

Certain Income Tax Considerations			68

Legal Matters			68

Transfer Agent and Registrar			68

Interest of Experts			69

Additional Information			70

Documents Filed As Part of the Registration Statement			71

Enforceability of Civil Liabilities by U.S. Investors			71

GENERAL MATTERS

In this Prospectus, “Aurora”, “we”, “us” and “our” refers, collectively, to Aurora Cannabis Inc. and our wholly owned subsidiaries.

ABOUT THIS PROSPECTUS

We are a British Columbia company that is a “reporting issuer” under Canadian securities laws in each of the provinces of Canada. In addition, our common shares are registered under Section 12(b) of the United States Securities Exchange Act of 1934, as amended (the “ Exchange Act ”). Our common shares are traded in Canada on the TSX and in the United States on the NYSE under the symbol “ACB”.

This Prospectus is a base shelf prospectus that:

•

we have filed with the securities commissions in each of the provinces of Canada, except Quebec (the “ Canadian Qualifying Jurisdictions ”) in order to qualify the offering of the Securities described in this Prospectus in accordance with Canadian National Instrument 44-102— Shelf Distributions (“NI 44-102”); and

•

forms part of a registration statement on Form F-10 (the “ Registration Statement ”) that we filed with the Securities and Exchange Commission (“ SEC ”) under the Securities Act of 1933 , as amended (the “ U.S. Securities Act ”) under the multijurisdictional disclosure system adopted by Canada and the United States (the “ MJDS ”).

Under this Prospectus, we may sell any combination of the Securities described in this Prospectus in one or more offerings up to a total aggregate initial offering price of US$750,000,000. This Prospectus provides you with a general description of the Securities that we may offer. Each time we sell Securities under this Prospectus we will provide a Prospectus Supplement that will contain specific information about the terms of that specific offering. The specific terms of the Securities in respect of which this Prospectus is being delivered will be set forth in the Prospectus Supplement.

You should rely only on the information contained in or incorporated by reference into this Prospectus and in any applicable Prospectus Supplement. The Company has not authorized anyone to provide you with different information. The Company is not making any offer of these Securities in any jurisdiction where the offer is not permitted. You should not assume that the information contained in this Prospectus and any Prospectus Supplement is accurate as of any date other than the date on the front of those documents or that any information contained in any document incorporated by reference is accurate as of any date other than the date of that document.

DOCUMENTS INCORPORATED BY REFERENCE

We incorporate by reference into this Prospectus documents that we have filed with securities commissions or similar authorities in Canada, which have also been filed with, or furnished to, the SEC. You may obtain copies of the documents incorporated herein by reference without charge from Aurora Cannabis Inc., 500 – 10355 Jasper Avenue, Edmonton, Alberta, T5J 1Y6 (Telephone: 604-362-5207) Attn: Corporate Secretary. These documents are also available electronically from the website of Canadian Securities Administrators at www.sedar.com (“ SEDAR ”) and from the EDGAR filing website of the United States Securities Exchange Commission at www.sec.gov (“ EDGAR ”). The Company’s filings through SEDAR and EDGAR are not incorporated by reference in the Prospectus except as specifically set out herein.

The following documents (“ documents incorporated by reference ” or “ documents incorporated herein by reference ”) have been filed by us with various securities commissions or similar authorities in the provinces of Canada in which we are a reporting issuer, are specifically incorporated herein by reference and form an integral part of this Prospectus:

•

the annual information form of the Company for the year ended June 30, 2018, dated September 25, 2018, filed September 25, 2018 (our “ 2018 AIF ”);

•

the audited consolidated financial statements of the Company, and the notes thereto for the years ended June 30, 2018 and 2017, together with the independent auditors’ report thereon, filed September 25, 2018;

•

the management’s discussion and analysis of financial condition and results of operations for the year ended June 30, 2018, filed September 25, 2018 (our “ 2018 Annual MD&A ”);

•

unaudited condensed interim consolidated financial statements of the Company and the notes thereto for the three and six months ended December 31, 2018 and 2017, filed February 11, 2019;

•

the management’s discussion and analysis of financial condition and results of operations for the three and six months ended December 31, 2018, filed February 11, 2019;

•

the material change report dated August 3, 2018 regarding the completion of the acquisition of MedReleaf Corp., filed August 3, 2018;

•

the material change report dated August 16, 2018 regarding the completion of the acquisition of Anandia Laboratories Inc., filed August 16, 2018;

•

the material change report dated September 10, 2018 regarding the entering into of a $200 million credit facility with Bank of Montreal, filed September 10, 2018;

•

the material change report dated September 18, 2018 regarding the entering into of an arrangement agreement for the acquisition of ICC, filed September 18, 2018;

•

the material change report dated November 28, 2018 regarding the completion of the acquisition of ICC, filed November 28, 2018;

•

the material change report dated December 7, 2018 regarding the appointment of a Chief Science Officer, filed December 7, 2018;

•

the material change report dated January 25, 2019 regarding the completion of our US$345 million offering of 5.5% Convertible Notes, filed January 25, 2019;

•

the business acquisition report dated April 30, 2018 relating to the acquisition of CanniMed, filed May 2, 2018;

•

the business acquisition report dated September 5, 2018 relating to the acquisition of MedReleaf, filed September 17, 2018, excluding the following documents incorporated therein by reference: (i) the material change report of MedReleaf dated May 24, 2018; and (ii) the management information circular of MedReleaf dated August 21, 2017, distributed in connection with the annual general meeting of MedReleaf Shareholders held on September 25, 2017;

•

the management information circular of the Company dated October 16, 2018, distributed in connection with the Company’s annual and special meeting of shareholders held on November 30, 2018, filed October 24, 2018;

•

the management information circular dated December 8, 2017, in respect of shareholder approval for the common shares issued by the Company pursuant to the take-over bid for CanniMed, filed December 12, 2017, excluding CanniMed’s interim condensed consolidated financial statements and related management discussion and analysis as at (Q1) January 31, 2017, (Q2) April 30, 2017 and (Q3) July 31, 2017 filed on SEDAR on March 16, 2017, June 12, 2017 and September 11, 2017,

respectively, and CanniMed’s audited consolidated financial statements for the year ended October 31, 2016, together with the notes thereto and the independent auditor’s report thereon, as well as our unaudited pro forma consolidated financial statements attached thereto as Appendix “C”;

•

the management information circular dated June 18, 2018, in respect of shareholder approval for the common shares issued by the Company pursuant to the acquisition of MedReleaf, filed June 20, 2018, excluding the following documents incorporated therein by reference: (i) the material change report of MedReleaf dated May 24, 2018; and (ii) the management information circular of MedReleaf dated August 21, 2017, distributed in connection with the annual general meeting of MedReleaf Shareholders held on September 25, 2017;

•

the annual information form of MedReleaf dated June 18, 2018, for the year ended March 31, 2018, filed June 19, 2018 under MedReleaf’s SEDAR Profile;

•

the audited consolidated financial statements of MedReleaf for the year ended March 31, 2018, together with the notes thereto and the independent auditor’s report thereon, filed on June 19, 2018 under MedReleaf’s SEDAR Profile; and

•

the management’s discussion and analysis of financial condition and results of operations of MedReleaf for the year ended March 31, 2018, filed on June 19, 2018 under MedReleaf’s SEDAR Profile.

Any document of the type referred to in section 11.1 of Form 44-101F1 of National Instrument 44-101 – Short Form Prospectus Distributions filed by the Company with the securities commissions or similar regulatory authorities in Canada after the date of this Prospectus and all Prospectus Supplements disclosing additional or updated information filed pursuant to the requirements of applicable securities legislation in Canada and during the period that this Prospectus is effective shall be deemed to be incorporated by reference in this Prospectus.

To the extent that any document or information incorporated by reference into the Prospectus is included in any report on Form 6-K, Form 40-F, Form 20-F, Form 10-K, Form 10-Q or Form 8-K (or any respective successor form) that is filed with or furnished to the SEC after the date of the Prospectus, such document or information shall be deemed to be incorporated by reference as an exhibit to the Registration Statement of which the Prospectus forms a part. In addition, we may incorporate by reference into the Prospectus, or the Registration Statement of which it forms a part, other information from documents that we file with or furnish to the SEC pursuant to Section 13(a) or 15(d) of the Exchange Act, if and to the extent expressly provided therein.

Any statement contained in this Prospectus or in a document incorporated or deemed to be incorporated by reference herein will be deemed to be modified or superseded to the extent that a statement contained herein, in any Prospectus Supplement or in any other subsequently filed document that is also incorporated or is deemed to be incorporated by reference herein modifies or supersedes such statement. The modifying or superseding statement need not state that it has modified or superseded a prior statement or include any other information set forth in the document that it modifies or supersedes. The making of a modifying or superseding statement will not be deemed an admission for any purpose that the modified or superseded statement, when made, constituted a misrepresentation, an untrue statement of a material fact or an omission to state a material fact that is required to be stated or that is necessary to make a statement not misleading in light of the circumstances in which it was made. Any statement so modified or superseded will not be deemed, except as so modified or superseded, to constitute a part of the Prospectus.

Upon a new annual information form and related annual financial statements being filed by us with, and where required, accepted by, the applicable securities regulatory authority during the currency of this Prospectus, the previous annual information form, the previous annual financial statements and all interim financial statements, material change reports and information circulars and all Prospectus Supplements filed prior to the commencement of our financial year in which a new annual information form is filed shall be deemed no longer

to be incorporated into this Prospectus for purposes of future offers and sales of Securities hereunder. Upon condensed consolidated interim financial statements and the accompanying management’s discussion and analysis of financial condition and results of operations being filed by us with the applicable Canadian securities commissions or similar regulatory authorities during the period that this Prospectus is effective, all condensed consolidated interim financial statements and the accompanying management’s discussion and analysis of financial condition and results of operations filed prior to such new condensed consolidated interim financial statements and management’s discussion and analysis of financial condition and results of operations shall be deemed to no longer be incorporated into this Prospectus for purposes of future offers and sales of Securities under this Prospectus. In addition, upon a new management information circular for an annual meeting of shareholders being filed by us with the applicable Canadian securities commissions or similar regulatory authorities during the period that this Prospectus is effective, the previous management information circular filed in respect of the prior annual meeting of shareholders shall no longer be deemed to be incorporated into this Prospectus for purposes of future offers and sales of Securities under this Prospectus.

All information permitted under applicable securities legislation to be omitted from the Prospectus will be contained in one or more Prospectus Supplements that will be delivered to purchasers together with the Prospectus, except in cases where an exemption from such delivery requirements has been obtained. A Prospectus Supplement containing the specific terms of an offering of Securities will be delivered to purchasers of such Securities together with this Prospectus and will be deemed to be incorporated by reference into this Prospectus as of the date of such Prospectus Supplement, but only for the purposes of the offering of Securities covered by that Prospectus Supplement. Investors should read the Prospectus and any applicable Prospectus Supplement carefully before investing in the Company’s Securities.

Any template version of any “marketing materials” (as such term is defined in NI 44-101) filed after the date of a Prospectus Supplement and before the termination of the distribution of the Securities offered pursuant to such Prospectus Supplement (together with this Prospectus) is deemed to be incorporated by reference in such Prospectus Supplement.

FORWARD LOOKING STATEMENTS

The Prospectus, including the documents incorporated by reference, contain forward-looking statements and forward-looking information (collectively referred to as “ forward-looking statements ”) which may not be based on historical fact, including without limitation statements regarding our expectations in respect of future financial position, business strategy, future production, expansion strategy and other activities, events or developments that we expect to take place in the future, projected costs and plans and objectives. Often, but not always, forward-looking statements can be identified by the use of the words “believes”, “may”, “plan”, “will”, “estimate”, “scheduled”, “continue”, “anticipates”, “intends”, “expects”, and similar expressions.

Such statements reflect our management’s current views with respect to future events and are subject to risks and uncertainties and are necessarily based upon a number of estimates and assumptions that, while considered reasonable by the Company, are inherently subject to significant business, economic, competitive, political and social uncertainties and known or unknown risks and contingencies. Many factors could cause our actual results, performance or achievements to be materially different from any future results, performance, or achievements that may be expressed or implied by such forward-looking statements, including, among others:

•

the good standing of our licenses;

•

changes in the laws, regulations and guidelines and related regulatory approvals in the jurisdictions in which we operate or propose to operate;

•

the completion of construction of production facilities, associated costs, and receipt of licenses from Health Canada to produce and sell cannabis and cannabis-related products from these facilities;

•

potential acquisitions, including the potential acquisition of Farmacias;

•

the successful integration of CanniMed, MedReleaf and our other acquisitions into our operations;

•

strategic investments and capital expenditures, and related benefits;

•

future growth, expansion plans and the availability of additional financing on favorable terms;

•

expectations regarding production capacity, costs and yields, including statements regarding increasing our production capacity and production;

•

the expansion of the market for cannabis products, in Canada and internationally and related competition for market share;

•

product sales expectations and corresponding forecasted increase in revenue; and

•

other risks detailed from time-to-time in our annual information forms, annual reports, MD&A, quarterly reports and material change reports filed with and furnished to securities regulators, and those risks which are discussed under the heading “ Risk Factors ”.

Such information is included, among other places, in this Prospectus under the headings “The Company”, “Use of Proceeds”, “Risk Factors”, in our 2018 AIF under the headings “Description of the Business” and “Risk Factors” and in our 2018 Annual MD&A, each of which documents are incorporated by reference into this Prospectus.

These factors should be considered carefully, and readers are cautioned not to place undue reliance on the forward-looking statements. Readers are cautioned that the foregoing list of risk factors is not exhaustive, and it is recommended that prospective investors consult the more complete discussion of risks and uncertainties facing the Company included in the Prospectus. See “ Risk Factors ” for a more detailed discussion of these risks.

Although we believe that the expectations conveyed by the forward-looking statements are reasonable based on the information available to us on the date such statements were made, no assurances can be given as to future results, approvals or achievements. The forward-looking statements contained in the Prospectus and the documents incorporated by reference herein are expressly qualified by this cautionary statement. We disclaim any duty to update any of the forward-looking statements after the date of the Prospectus to conform such statements to actual results or to changes in our expectations except as otherwise required by applicable law.

GLOSSARY OF TERMS

The following is a glossary of certain terms used in this Prospectus:



ABCA		the Alberta Business Corporations Act;


ACMPR		Access to Cannabis for Medical Purposes Regulations;


Anandia		Anandia Laboratories Inc.;


Aurora or the Company		Aurora Cannabis Inc., the parent company and its subsidiaries;


Aurora Deutschland		Aurora Deutschland GmbH, formerly known as Pedanios GmbH, a wholly owned subsidiary of the Company;


Aurora Eau		the Company’s 48,000 square foot production facility located in Lachute, Quebec;


Aurora Mountain		the Company’s 55,200 square foot production facility in Mountain View County near Cremona, Alberta;


Aurora Nordic		Aurora Nordic Cannabis A/S, a company incorporated under the laws of Denmark in which we own a 51% interest, and which in turn owns Aurora Nordic 1 and Aurora Nordic 2;


Aurora Nordic 1		Aurora Nordic’s 100,000 square foot production facility;


Aurora Nordic 2		Aurora Nordic’s 1,000,000 square foot production facility currently under construction;


Aurora Sky		the Company’s 800,000 square foot production facility located at Edmonton International Airport;


Aurora Sun		the Company’s 1,200,000 square foot production facility located in Medicine Hat, Alberta that is currently under construction;


Aurora Vie		the 40,000 square feet cannabis production facility in Pointe-Claire, Quebec;


BCBCA		the British Columbia Business Corporations Act;


Cannabis Act		An Act respecting cannabis and to amend the Controlled Drugs and Substances Act, the Criminal Code and other Acts, S.C. 2018 c. 16, which came into effect on October 17, 2018 legalizing the recreational use of cannabis nationwide in Canada;


CanniMed		CanniMed Therapeutics Inc., a wholly-owned subsidiary of the Company;


Health Canada		the Canadian federal department responsible for health;


IHR		Industrial Hemp Regulations;


ICC		ICC Labs Inc.;


MedReleaf		MedReleaf Corp., a wholly-owned subsidiary of the Company;



MedReleaf Bradford		the Company’s 210,000 square foot production facility located in Bradford, Ontario;


MedReleaf Exeter		the Company’s 1,000,000 square foot facility located in Exeter, Ontario;


MedReleaf Markham		the Company’s 55,000 square foot production facility in Markham, Ontario;


Pemberton Facility		the Company’s 147,000 square foot production facility currently under construction, located in Pemberton, British Columbia;


PIPEDA		the Personal Information Protection and Electronics Documents Act (Canada); and


Whistler Facility		the Company’s 12,500 square foot production facility located in Whistler, British Columbia.

NOTE TO UNITED STATES READERS REGARDING DIFFERENCES BETWEEN UNITED STATES AND CANADIAN FINANCIAL REPORTING PRACTICES

We prepare our financial statements in accordance with International Financial Reporting Standards (“ IFRS ”), as issued by the International Accounting Standards Board (the “ IASB ”), which differs from U.S. generally accepted accounting principles (“ U.S. GAAP ”). Accordingly, our financial statements incorporated by reference in the Prospectus, and in the documents incorporated by reference in this Prospectus, may not be comparable to financial statements of United States companies prepared in accordance with U.S. GAAP.

CURRENCY PRESENTATION AND EXCHANGE RATE INFORMATION

Unless stated otherwise or as the context otherwise requires, all references to dollar amounts in this Prospectus and any Prospectus Supplement are references to Canadian dollars. References to “$” or “C$” are to Canadian dollars and references to “U.S. dollars” or “US$” are to United States dollars.

Except as otherwise noted in our 2018 AIF and the Company’s financial statements and related management’s discussion and analysis of financial condition and results of operations of the Company that are incorporated by reference into this Prospectus, the financial information contained in such documents is expressed in Canadian dollars.

The high, low, average and closing noon rates for the United States dollar in terms of Canadian dollars for each of the financial periods of the Company ended December 31, 2018, June 30, 2018 and June 30, 2017, as quoted by the Bank of Canada, were as follows:


	Six months ended December 31, 2018	Year ended June 30, 2018	Year ended June 30, 2017
	(expressed in Canadian dollars)

High	1.36	1.33	1.37

Low	1.28	1.21	1.22

Average	1.31	1.27	1.33

Closing	1.36	1.32	1.32

On March 28, 2019, the exchange rate for the United States dollar in terms of Canadian dollars, as quoted by the Bank of Canada, was US$1.00 = $1.3429.

THE COMPANY

Aurora Cannabis Inc. was incorporated under the BCBCA on December 21, 2006.

Our corporate head office is located at 500 – 10355 Jasper Avenue, Edmonton, Alberta, T5J 1Y6. Our registered office is located at Suite 1500, 1055 West Georgia Street, Vancouver, British Columbia, V6E 4N7.

We currently operate our business through our 56 wholly-owned subsidiaries. Our material subsidiaries include:

•

Aurora Marijuana Inc., a holding company, which was incorporated under ABCA on September 5, 2013.

•

Aurora Cannabis Enterprises Inc. , a holder of license(s) under the Cannabis Act , which was incorporated under the ABCA on June 17, 2013.

•

1769474 Alberta Ltd., a holding company and the entity that leases the lands for some of our production facilities, which was incorporated under the ABCA on August 20, 2013.

•

2105657 Alberta Inc., a holding company and the entity that is holding land for the construction for the Aurora Sun production facility, which was incorporated under the ABCA on March 15, 2018.

•

Agropro UAB, a company incorporated under the laws of Lithuania and a producer, processor and supplier of certified organic hemp and hemp products, which we acquired on September 10, 2018.

•

Borela UAB, a company incorporated under the laws of Lithuania and a producer, processor and supplier of organic hulled hemp seeds, hemp seed protein, hemp flour and hemp seed oil, which we acquired on September 10, 2018.

•

Aurora Deutschland, a limited liability company under German law, which is a registered wholesale importer, exporter and distributor of medical cannabis in Germany and which we acquired on May 30, 2017.

•

Aurora Larssen Projects Inc., which was incorporated on December 4, 2017 under the ABCA and which acquired Larssen Ltd., a consulting company for advanced greenhouse cultivation facilities.

•

CanniMed a producer of various cannabis products, which was incorporated under the Canada Business Corporations Act on October 31, 2016 and which we acquired on May 1, 2018.

•

MedReleaf, a producer of various cannabis products, which was incorporated under the Business Corporations Act (Ontario) (the “ OBCA ”) on February 28, 2013 and which we acquired on July 25, 2018.

•

Anandia, a cannabis-focused science company, specializing in genomics, metabolite profiling, plant breeding, disease characterization and cultivar certification, as well as providing testing services to patients and patient cultivars, which was incorporated under the BCBCA and which we acquired on August 8, 2018.

•

ICC, a company incorporated under the BCBCA which we acquired on November 22, 2018, and which, through its subsidiaries, is a producer of cannabis in Uruguay.

•

Whistler, a company incorporated under the BCBCA which holds the Whistler Facility and the Pemberton Facility, and which we acquired on March 1, 2019.

The following chart sets out the material intercorporate relationships of Aurora:

LOGO

Note: This chart details the inter-corporate relationships with our material subsidiaries and is not a complete chart. In addition, certain subsidiaries have additional subsidiaries which are not material and are not reflected above.

OUR BUSINESS

Overview

Our principal business is the production, distribution and sale of cannabis products in Canada and internationally. Aurora currently conducts the following key business activities in the countries listed below:

•

Production, distribution and sale of medical and consumer market cannabis products in Canada pursuant to the Cannabis Act;

•

Distribution of wholesale medical cannabis in the European Union ( “EU” ) pursuant to the German Medicinal Products Act and German Narcotic Drugs Act;

•

Production of medical cannabis in Denmark pursuant to the Danish Medicines Act; and

•

Production and distribution of cannabis in Uruguay pursuant to Law N° 19,172 Cannabis and its derivatives: state control and regulation of the importation, production, acquisition, storage, marketing and distribution.

Through our recent acquisitions, we have expanded our business to include research and development, the production and sale of indoor cultivation systems, and the production and sale of hemp related products. In addition, with a growing number of countries beginning to adopt and develop medical cannabis legislation, we have embarked on an international expansion strategy, which includes business prospects and investments in Germany, Denmark, Italy, Poland, Australia, Cayman Islands, Malta, Lithuania, and South America.

We believe the global cannabis market is a rapidly developing business opportunity that comes along only once in a generation. We intend to be a leader in the Canadian domestic and international consumer cannabis market as well as the domestic and international medical cannabis space, both in terms of scale and profitability. We are active in five continents and 24 countries with a leading market share in the Canadian, European, Australian and Latin American markets. We have been executing on an aggressive growth strategy that is focused on developing a vertically integrated and horizontally diversified company with a diversified portfolio offering. We are well-positioned for an evolving market, including, based on the Cannabis Industry report dated October 31, 2018 prepared by BMO Capital Markets Corp. and the Recreational Marijuana report from 2016 prepared by Deloitte LLP, an estimated current $3 billion annual medical and $9 billion annual adult-use market in Canada and, if cannabis products continue to become accepted and legalized in many countries, estimated future global market, assuming legalization, of over $70 billion annual medical and $115 billion annual adult-use consumption. Our strategy includes controlling and driving down the operating costs across the entire value chain; producing high-quality cannabis at a world-leading scale; a keen commitment to science and technology; a pledge to place Canadian and global medical patients as our first priority; a prudent but aggressive deployment of capital and talent to identify, develop and win new markets; and finally, being the employer and partner of choice in the global cannabis industry. Our strategy is described in greater detail in our management discussion and analysis for the three and six months ended December 31, 2018 and 2017.

Production Facilities and Licenses

Our cannabis products are cultivated and manufactured in our nine licensed production facilities, with an additional seven facilities under construction, described in the following table.

LOCATION

SIZE

CAPACITY

STATUS

LICENSE

Cultivation

Sale

Aurora Mountain

Mountain View,

Alberta, Canada

55,200 ft ²

4,800

kg/year

Operating since 2015

●

Aurora Vie

Pointe Claire,

Quebec, Canada

40,000 ft ²

4,000

kg/year

Operating since June 2018

●

Aurora Eau

Lachute,

Quebec, Canada

48,000 ft ²

4,500

kg/year

Facility in full operation

●

Aurora Sky

Edmonton,

Alberta, Canada

800,000 ft ²

>100,000

kg/year

Facility in full operation

●

Aurora Sun

Medicine Hat,

Alberta, Canada

1,200,000 ft ²

>150,000

kg/year

Initial production beginning late calendar 2019 and full construction complete by mid calendar 2020

Aurora
Nordic 1

Odense,

Denmark

100,000 ft ²

>8,000

kg/year

Facility construction complete

●

Aurora
Nordic 2

Odense,

Denmark

1,000,000 ft ²

>120,000

kg/year

Full construction to be complete by mid calendar 2020

CanniMed

Saskatoon,

Saskatchewan,

Canada

97,000 ft ²

19,000

kg/year

Operating since 2004.

Facility upgrades underway

●

MedReleaf Markham

Markham,

Ontario, Canada

55,000 ft ²

7,000

kg/year

Operating since 2014

●

MedReleaf Bradford

Bradford, Ontario, Canada

210,000 ft ²

28,000

kg/year

Facility in full operation

●

MedReleaf Exeter

Exeter, Ontario,

Canada

1,000,000 ft ²

105,000

kg/year

Land and building purchased

Whistler Facility

Alpha Lake, British Columbia

12,500 ft ²

500
kg/year

Operating since 2014

●

Pemberton Facility

Pemberton, British Columbia

147,000 ft ²

12,000

kg/year

Phase 1 in operation and Phase 2 expected to be completed in September 2019

●

ICC Labs

Canelones, Uruguay

21,000 ft ²

>2,000

kg/year

Facility in full production

●

Estimated annual production capacity is based on the Company’s experience in growing cannabis and data available concerning the wide variety strains under growing conditions maintained at its facilities. The material assumptions on which the actual or expected annual kilograms harvested is determined include, but are not limited to:

•

the number of cultivation rooms in the facility;

•

the planned (or actual) number of plants each room is built to contain;

•

the average per gram yield per plant based on Aurora’s historical averages for the strain and growing conditions; and

•

the number of harvests (turns) planned (or realized) per year.

Distribution Methods

In addition to distributing to our registered patients and internationally, as described in the 2018 AIF, since the adoption of the Cannabis Act, we distribute non-medical cannabis products in accordance with the various regulatory frameworks in the respective provinces and territories governing adult use in Canada. We also distribute medical cannabis products internationally in accordance with applicable international laws and regulations. We have robust distribution networks spanning 98% of the Canadian population and other locations worldwide. International Opportunities

In addition to Canadian domestic operations, we continue to pursue international opportunities, including (subject to applicable laws and regulations): (a) opportunities to export our medical cannabis products to other countries; and (b) opportunities to create international alliances with local partners to apply for cultivation licenses in other countries. We are currently pursuing these opportunities in several countries.

We will only pursue international opportunities in accordance and compliance with all applicable laws. We are currently pursuing international opportunities in several countries where a legal framework for the medical and/or non-medical use of cannabis exists or is expected to be implemented. The timing of our activities in any international market is dependent on the pace of regulatory developments and, as such, it is not feasible for us to provide a timeline with respect to those activities.

Canadian Cannabis Regulatory Overview

On October 17, 2018, the Cannabis Act came into force as law with the effect of legalizing the non-medical use of cannabis by adults across Canada. The Cannabis Act, among other things, replaced the ACMPR and the IHR, both of which came into force under the CDSA, which previously permitted access to cannabis for medical purposes for only those Canadians who had been authorized to use cannabis by their health care practitioner. The ACMPR replaced the Marihuana for Medical Purposes Regulations (the “ MMPR ”), which was enacted in June 2013. The MMPR replaced the Marihuana Medical Access Regulations (the “ MMAR ”), which was enacted in 2001. The MMPR and MMAR were initial steps in the Government of Canada’s legislative path towards the eventual legalization and regulating non-medical and medical cannabis.

The Cannabis Act permits the non-medical use of cannabis by adults and regulates, among other things, the production, distribution and sale of cannabis and related oil extracts in Canada, for both non-medical and medical purposes. Under the Cannabis Act, Canadians who are authorized by their health care practitioner to use medical cannabis have the option of purchasing cannabis from one of the producers licensed by Health Canada, registering with Health Canada to produce a limited amount of cannabis for their own medical purposes or designating an individual who is registered with Health Canada to produce cannabis on their behalf for personal medical purposes.

Pursuant to the Cannabis Act, subject to provincial and territorial regulations and medical allowances, individuals over the age of 18 are able to purchase fresh cannabis, dried cannabis, cannabis oil, and cannabis plants or seeds and are able to legally possess up to 30 grams of dried cannabis (or the prescribed equivalent amount) in public. The Cannabis Act also permits households to grow a maximum of four cannabis plants, which has been restricted by certain provinces. This limit applies regardless of the number of adults that reside in the household. In addition, the Cannabis Act provides provincial and territorial governments the authority to prescribe regulations

regarding retail sales and distribution, as well as the ability to regulate certain matters, such as increasing the minimum age for purchase and consumption. All of the provinces and territories other than Alberta and Quebec have set the age of consumption at 19.

Provincial and territorial governments in Canada have varied regulatory regimes for the distribution and sale of non-medical cannabis. For example, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Yukon and the Northwest Territories have chosen the government-regulated model for distribution and sale, whereas Saskatchewan has opted for a private sector approach. Alberta, Ontario, Manitoba, Nunavut, British Columbia and Newfoundland & Labrador have announced plans to pursue a hybrid approach of public and private sale and/or distribution.

In connection with the new framework for regulating cannabis in Canada, the Federal Government of Canada has introduced new penalties under the Criminal Code (Canada), including penalties for the illegal sale of cannabis, possession of cannabis over the prescribed limit, production of cannabis beyond personal cultivation limits, taking cannabis across the Canadian border, giving or selling cannabis to a youth and involving a youth to commit a cannabis-related offence.

In addition to the Cannabis Act, the Federal Government of Canada published regulations, including the Cannabis Regulations (the “ Cannabis Regulations ”) and the new IHR (together with the Cannabis Regulations, collectively, the “ Regulations ”), along with amendments to the Narcotic Control Regulations and certain regulations under the Food and Drugs Act (Canada). The Regulations, among other things, outline additional rules for the cultivation, processing, research, analytical testing, distribution, sale, importation and exportation of cannabis and hemp in Canada, including the various classes of licenses that can be granted. The Regulations set standards for these cannabis and hemp products and include strict specifications for the plain packaging and labelling and analytical testing of all cannabis products as well as stringent physical and personnel security requirements for federally licensed sites. The Regulations also maintain a distinct system for access to cannabis.

On December 20, 2018, the Federal Government of Canada also released its proposed amendments to the Cannabis Regulations that contemplate the production of cannabis edibles, extracts and topicals, among a variety of other changes in 2019. There was a 60-day public consultation on the draft regulations. Final regulations have not yet been published.

Recent Developments

Legalization of Non-Medical Adult Cannabis Use in Canada

On October 17, 2018, the Cannabis Act came into force and replaced the ACMPR and IHR, effectively legalizing the use of non-medical cannabis by adults across Canada. Because we were licensed pursuant to the ACMPR, our licenses were deemed to be issued under the Cannabis Act and we continue to cultivate, process, and sell medical cannabis as well as cultivate, process and sell cannabis for non-medical purposes in Canada.

Changes to Board of Directors

On February 20, 2019, the Company appointed Michael Singer, previously Chairman of the Company, as Executive Chairman of the board of directors. The Company also named independent director Ronald Funk as lead independent director and appointed Shan Atkins as a new independent director and chair of the Audit Committee. Diane Jang voluntarily resigned as a director of the Company.

Changes to Executive Officers

On December 7, 2018, we appointed of Dr. Jonathan Page, Phd. as the Company’s Chief Science Officer. Dr. Page was the founder of Anandia. On February 21, we promoted Darren Karasiuk, our former Executive Vice President Adult Usage, Global, to Chief Commercial Officer, and promoted Jill Swainson, previously Senior Vice-President and General Counsel, to Chief Legal Counsel and Corporate Secretary.

Acquisition of Whistler Medical Marijuana Corp.

On March 1, 2019, we completed the acquisition of all of the issued and outstanding shares of Whistler Medical Marijuana Corp. (“ Whistler ”) in consideration of the issuance of 13,667,933 common shares with a deemed issuance price of $9.77. The transaction was completed by way of a three-cornered amalgamation among the Company, Whistler and a wholly-owned subsidiary of the Company. We are also obligated to make milestone payments to the former Whistler shareholders in the amounts of $10,000,000 (the “ First Milestone Payment ”) and $30,000,000 (the “ Second Milestone Payment ”) in Common Shares at the volume weighted average trading price of the Common Shares on the TSX for the five trading days immediately prior to the date of issuance. The First Milestone Payment will be issued on the earlier of March 1, 2020 and the date on which Whistler achieves full production. The Second Milestone Payment will be issuable upon satisfactory licensing of Whistler’s Pemberton facility.

Senior Advisory Services Agreement

On March 12, 2019 we entered into a senior advisory services agreement (the “ Services Agreement ”) with 280 Park ACI Holdings, LLC, of New York, New York (“ ACI Holdings ”), of which Mr. Nelson Peltz is the principal, and appointed Mr. Nelson Peltz as a strategic advisor to the Company. Pursuant to the Services Agreement, Mr. Peltz, acting through ACI Holdings and its partners, members, officers and employees, provides direct guidance and advice on business strategy, marketing, operations and business development to our executive management, board of directors and financial advisors. The services include direct responsibility for formulating strategic advice regarding potential US corporate initiatives and periodic reporting to our Board and executive management. As consideration for the services, we granted to Mr. Peltz options to purchase 19,961,754 Common Shares exercisable at a price of $10.34 per Common Share for a period of seven years. The options vest rateably on a quarterly basis over a four-year period. The vesting criteria includes acceleration of vesting of the options upon the occurrence of certain specified events, which include the consummation of certain defined transactions, the closing price of Common Shares being at least $31.02 for a specified period, and the closing price of Common Shares being at least $41.36 for a specified period. We have entered into a Registration Rights agreement with ACI Holdings to register these options as well as the Common Shares underlying such options so that they may be freely transferred.

THE SELLING SECURITYHOLDERS

Securities may be sold under this Prospectus by way of secondary offering by or for the account of certain of our securityholders. The Prospectus Supplement that we will file in connection with any offering of Securities by selling securityholders will include the following information:

•

the names of the selling securityholders;

•

the number or amount of Securities owned, controlled or directed of the class being distributed by each selling securityholder;

•

the number or amount of Securities of the class being distributed for the account of each selling securityholder;

•

the number or amount of Securities of any class to be owned, controlled or directed by the selling securityholders after the distribution and the percentage that number, or amount represents of the total number of our outstanding Securities;

•

whether the Securities are owned by the selling securityholders both of record and beneficially, of record only, or beneficially only; and

•

all other information that is required to be included in the applicable Prospectus Supplement.

USE OF PROCEEDS

Unless otherwise specified in a Prospectus Supplement, the net proceeds from the sale of the Securities will be used for general corporate purposes, including funding working capital, potential future acquisitions, debt repayments and capital expenditures. Each Prospectus Supplement will contain specific information concerning the use of proceeds from that sale of Securities. The Company will not receive any proceeds from any sale of any Securities by the selling securityholders.

All expenses relating to an offering of Securities and any compensation paid to underwriters, dealers or agents, as the case may be, will be paid out of our general funds, unless otherwise stated in the applicable Prospectus Supplement.

EARNINGS COVERAGE RATIO

Earnings coverage ratios will be provided as required in the applicable Prospectus Supplement(s) with respect to the issuance of Debt Securities pursuant to this Prospectus.

CONSOLIDATED CAPITALIZATION

Except as described below, there have been no material changes in our share and debt capital, on a consolidated basis, since December 31, 2018, being the date of the Company’s most recently filed unaudited interim condensed consolidated financial statements incorporated by reference in this Prospectus, other than the issuance of:

•

US$345.0 million in aggregate principal amount of Convertible Senior Notes due 2024 (“ Senior Notes ”);

•

2,524,109 common shares on the exercise of 2,524,109 stock options for gross proceeds of $10.7 million;

•

398,620 common shares on the exercise of 398,620 warrants for gross proceeds of $1.9 million;

•

25,525 common shares on vesting and exercise of 25,525 RSUs;

•

25,809 common shares issued at a deemed price of $9.69 in connection with earn out payments for a previous acquisition;

•

13,667,933 common shares issued at a deemed price of $9.77 in connection with the acquisition of Whistler; and

•

the grants of stock options and issuance of share purchase warrants

each as described further below under “Prior Sales”.

PRIOR SALES

The following table sets out details of all Common Shares issued by the Company during the 12 months prior to the date of this Prospectus.

Date of Issuance

Type of Security
Issued

Reason for Issuance

Number of
Securities Issued

Issue/ Exercise Price
per Security

April 2, 2018

Common Shares

Conversion of Debenture

19,230

$6.50

April 3, 2018

Common Shares

Exercise of Stock Options

4,168

$1.30

April 3, 2018

Common Shares

Conversion of Debenture

3,846

$6.50

April 4, 2018

Common Shares

Exercise of Stock Options

8,336

$1.30

April 4, 2018

Common Shares

Exercise of Stock Options

18,750

$2.76

April 4, 2018

Common Shares

Exercise of Warrants

75,000

$0.55

April 5, 2018

Common Shares

Conversion of Debenture

19,230

$6.50

April 6, 2018

Common Shares

Conversion of Debenture

7,692

$6.50

April 10, 2018

Common Shares

Conversion of Debenture

229

$13.05

April 11, 2018

Common Shares

Exercise of Stock Options

8,333

$2.76

April 11, 2018

Common Shares

Exercise of Stock Options

13,333

$2.39

April 12, 2018

Common Shares

Exercise of Stock Options

16,668

$1.30

April 20, 2018

Common Shares

Exercise of Stock Options

4,416

$2.76

April 27, 2018

Common Shares

Exercise of Stock Options

6,000

$2.76

April 27, 2018

Common Shares

Conversion of Debenture

4,615

$6.50

May 1, 2018

Common Shares

Exercise of Warrants

125,000

$0.55

May 1, 2018

Common Shares

Issued in connection with an acquisition

3,417,951

$7.88

May 2, 2018

Common Shares

Exercise of Warrants

$4.00

May 3, 2018

Common Shares

Exercise of Stock Options

2,000

$0.34

May 3, 2018

Common Shares

Exercise of Stock Options

4,166

$4.64

May 4, 2018

Common Shares

Exercise of Stock Options

5,836

$0.30

May 4, 2018

Common Shares

Exercise of Stock Options

8,334

$1.30

May 4, 2018

Common Shares

Exercise of Stock Options

3,333

$2.76

May 11, 2018

Common Shares

Exercise of Stock Options

2,000

$0.34

May 14, 2018

Common Shares

Exercise of Stock Options

8,500

$1.30

May 15, 2018

Common Shares

Exercise of Stock Options

3,000

$2.76

May 15, 2018

Common Shares

Exercise of Stock Options

50,000

$1.30

May 15, 2018

Common Shares

Conversion of Debenture

6,153

$6.50

May 16, 2018

Common Shares

Exercise of Stock Options

11,032

$2.76

Date of Issuance

Type of Security
Issued

Reason for Issuance

Number of
Securities Issued

Issue/ Exercise Price
per Security

May 16, 2018

Common Shares

Exercise of Stock Options

300

$1.30

May 18, 2018

Common Shares

Exercise of Stock Options

350,000

$2.25

May 18, 2018

Common Shares

Exercise of Stock Options

8,333

$2.76

May 22, 2018

Common Shares

Exercise of Stock Options

31,250

$2.49

May 22, 2018

Common Shares

Exercise of Stock Options

3,333

$2.76

May 22, 2018

Common Shares

Exercise of Stock Options

200

$1.30

May 23, 2018

Common Shares

Exercise of Warrants

17,000

$4.00

May 24, 2018

Common Shares

Exercise of Stock Options

2,500

$2.76

May 24, 2018

Common Shares

Exercise of Stock Options

4,167

$4.64

May 24, 2018

Common Shares

Exercise of Warrants

$4.00

May 24, 2018

Common Shares

Issued in connection with an acquisition

182,853

$8.26

May 25, 2018

Common Shares

Exercise of Stock Options

18,000

$1.30

May 25, 2018

Common Shares

Conversion of Debenture

1,072

$13.05

May 28, 2018

Common Shares

Exercise of Stock Options

3,000

$4.64

May 31, 2018

Common Shares

Exercise of Stock Options

700

$0.34

June 1, 2018

Common Shares

Exercise of Stock Options

6,667

$2.39

June 1, 2018

Common Shares

Exercise of Stock Options

4,166

$7.03

June 5, 2018

Common Shares

Conversion of Debenture

7,692

$6.50

June 5, 2018

Common Shares

Exercise of Warrants

158,330

$4.00

June 6, 2018

Common Shares

Exercise of Warrants

71,200

$4.00

June 7, 2018

Common Shares

Exercise of Warrants

20,000

$4.00

June 8, 2018

Common Shares

Exercise of Stock Options

200

$1.30

June 8, 2018

Common Shares

Exercise of Stock Options

3,000

$4.64

June 8, 2018

Common Shares

Exercise of Stock Options

8,333

$2.49

June 8, 2018

Common Shares

Conversion of Debenture

769

$6.50

June 14, 2018

Common Shares

Conversion of Debenture

24,615

$6.50

June 15, 2018

Common Shares

Exercise of Warrants

350

$4.00

June 18, 2018

Common Shares

Exercise of Warrants

28,500

$4.00

June 20, 2018

Common Shares

Exercise of Warrants

3,800

$4.00

June 21, 2018

Common Shares

Exercise of Stock Options

50,000

$0.30

June 21, 2018

Common Shares

Exercise of Stock Options

45,833

$0.30

June 21, 2018

Common Shares

Exercise of Stock Options

20,666

$4.64

June 21, 2018

Common Shares

Exercise of Warrants

23,200

$4.00

Date of Issuance

Type of Security
Issued

Reason for Issuance

Number of
Securities Issued

Issue/ Exercise Price
per Security

June 22, 2018

Common Shares

Exercise of Stock Options

12,500

$2.76

June 22, 2018

Common Shares

Exercise of Warrants

58,000

$4.00

June 25, 2018

Common Shares

Exercise of Stock Options

41,666

$4.64

June 25, 2018

Common Shares

Exercise of Warrants

861,100

$4.00

June 26, 2018

Common Shares

Exercise of Warrants

20,000

$4.00

June 28, 2018

Common Shares

Issued in connection with an acquisition

1,144,481

$9.41

June 29, 2018

Common Shares

Exercise of Warrants

11,200

$4.00

July 3, 2018

Common Shares

Exercise of Warrants

16,670

$4.00

July 4, 2018

Common Shares

Exercise of Stock Options

44,169

$2.76

July 4, 2018

Common Shares

Exercise of Warrants

32,500

$4.00

July 5, 2018

Common Shares

Exercise of Stock Options

1,000

$2.76

July 5, 2018

Common Shares

Exercise of Stock Options

3,500

$4.64

July 9, 2018

Common Shares

Exercise of Warrants

67,600

$4.00

July 10, 2018

Common Shares

Exercise of Stock Options

4,167

$2.76

July 10, 2018

Common Shares

Exercise of Warrants

15,000

$4.00

July 11, 2018

Common Shares

Exercise of Stock Options

7,500

$2.76

July 11, 2018

Common Shares

Exercise of Warrants

48,200

$4.00

July 12, 2018

Common Shares

Exercise of Warrants

13,500

$4.00

July 13, 2018

Common Shares

Exercise of Stock Options

25,000

$2.39

July 13, 2018

Common Shares

Exercise of Warrants

34,700

$4.00

July 16, 2018

Common Shares

Exercise of Stock Options

8,333

$4.64

July 16, 2018

Common Shares

Exercise of Warrants

9,600

$4.00

July 25, 2018

Common Shares

Exercise of Stock Options

2,000

$1.30

July 25, 2018

Common Shares

Issued in connection with an acquisition

369,902,645

$6.94

July 25, 2018

Common Shares

Issued in connection with an acquisition

217,593

$6.94

July 27, 2018

Common Shares

Exercise of Warrants

125,000

$0.55

July 30, 2018

Common Shares

Exercise of Warrants

$4.00

August 3, 2018

Common Shares

Exercise of Stock Options

5,000

$2.76

August 7, 2018

Common Shares

Exercise of Stock Options

1,000

$1.30

August 8, 2018

Common Shares

Issued in connection with an acquisition

12,716,482

$6.18

August 9, 2018

Common Shares

Exercise of Stock Options

207,513

$2.66

Date of Issuance

Type of Security
Issued

Reason for Issuance

Number of
Securities Issued

Issue/ Exercise Price
per Security

August 10, 2018

Common Shares

Exercise of Stock Options

40,000

$0.30

August 10, 2018

Common Shares

Exercise of Stock Options

3,300

$0.34

August 13, 2018

Common Shares

Exercise of Stock Options

10,374

$2.66

August 13, 2018

Common Shares

Exercise of Warrants

$4.00

August 13, 2018

Common Shares

Issued in connection with an acquisition

756,348

$5.92

August 14, 2018

Common Shares

Exercise of Stock Options

1,389

$0.30

August 14, 2018

Common Shares

Exercise of Stock Options

456,268

$2.66

August 14, 2018

Common Shares

Exercise of Warrants

93,750

$0.55

August 15, 2018

Common Shares

Exercise of Stock Options

311,260

$2.66

August 15, 2018

Common Shares

Exercise of Stock Options

20,834

$4.64

August 16, 2018

Common Shares

Exercise of Warrants

31,250

$0.55

August 17, 2018

Common Shares

Exercise of Stock Options

117,200

$2.66

August 17, 2018

Common Shares

Exercise of Warrants

756

$4.00

August 17, 2018

Common Shares

Exercise of Warrants

112,500

$4.00

August 20, 2018

Common Shares

Exercise of Warrants

$4.00

August 21, 2018

Common Shares

Exercise of Stock Options

11,667

$0.30

August 21, 2018

Common Shares

Exercise of Stock Options

3,334

$2.76

August 22, 2018

Common Shares

Exercise of Stock Options

1,236,208

$2.66

August 22, 2018

Common Shares

Conversion of Debenture

6,153

$6.50

August 23, 2018

Common Shares

Exercise of Stock Options

9,000

$4.64

August 23, 2018

Common Shares

Exercise of Stock Options

2,024,088

$2.66

August 23, 2018

Common Shares

Conversion of Debenture

3,846

$6.50

August 24, 2018

Common Shares

Exercise of Stock Options

8,333

$2.49

August 24, 2018

Common Shares

Exercise of Stock Options

2,084

$2.76

August 24, 2018

Common Shares

Exercise of Stock Options

8,334

$4.64

August 27, 2018

Common Shares

Exercise of Stock Options

311,268

$2.66

August 27, 2018

Common Shares

Exercise of Warrants

200

$4.00

August 28, 2018

Common Shares

Exercise of Stock Options

550,000

$2.66

August 28, 2018

Common Shares

Exercise of Stock Options

100,000

$0.46

August 29, 2018

Common Shares

Exercise of Stock Options

210,630

$2.66

August 29, 2018

Common Shares

Exercise of Stock Options

41,667

$0.30

August 29, 2018

Common Shares

Exercise of Stock Options

125,000

$2.56

August 29, 2018

Common Shares

Exercise of Stock Options

41,667

$2.39

Date of Issuance

Type of Security
Issued

Reason for Issuance

Number of
Securities Issued

Issue/ Exercise Price
per Security

August 29, 2018

Common Shares

Exercise of Stock Options

38,167

$2.76

August 30, 2018

Common Shares

Exercise of Stock Options

160,000

$2.66

August 30, 2018

Common Shares

Exercise of Stock Options

1,000

$2.76

August 30, 2018

Common Shares

Exercise of Stock Options

1,390

$0.30

August 31, 2018

Common Shares

Exercise of Stock Options

8,334

$4.64

September 4, 2018

Common Shares

Exercise of Stock Options

17,112

$0.30

September 7, 2018

Common Shares

Exercise of Stock Options

2,000

$2.76

September 7, 2018

Common Shares

Exercise of Warrants

507

$4.00

September 10, 2018

Common Shares

Issued in connection with an acquisition

440,858

$8.26

September 13, 2018

Common Shares

Exercise of Stock Options

100,000

$2.66

September 14, 2018

Common Shares

Exercise of Stock Options

375,102

$2.66

September 14, 2018

Common Shares

Exercise of Stock Options

35,750

$8.28

September 14, 2018

Common Shares

Exercise of Warrants

3,575

$9.65

September 17, 2018

Common Shares

Exercise of Options

1,000

$2.76

September 17, 2018

Common Shares

Exercise of Warrants

7,150

$9.65

September 19, 2018

Common Shares

Exercise of Stock Options

5,000

$7.95

September 19, 2018

Common Shares

Exercise of Stock Options

2,000

$2.76

September 19, 2018

Common Shares

Exercise of Stock Options

28,600

$8.28

September 19, 2018

Common Shares

Exercise of Stock Options

30,000

$2.66

September 19, 2018

Common Shares

Exercise of Stock Options

7,167

$4.64

September 19, 2018

Common Shares

Exercise of Warrants

1,000

$4.00

September 19, 2018

Common Shares

Exercise of Warrants

23,952

$9.65

September 20, 2018

Common Shares

Exercise of Warrants

99,563

$6.50

September 20, 2018

Common Shares

Exercise of Warrants

1,900

$4.00

September 20, 2018

Common Shares

Conversion of Debenture

2,000

$6.50

September 20, 2018

Common Shares

Exercise of Warrants

7,771

$9.37

September 20, 2018

Common Shares

Exercise of Stock Options

81,268

$2.66

September 20, 2018

Common Shares

Exercise of Stock Options

250

$4.64

September 21, 2018

Common Shares

Exercise of Stock Options

6,000

$7.10

September 21, 2018

Common Shares

Exercise of Stock Options

3,333

$7.95

September 21, 2018

Common Shares

Exercise of Stock Options

1,120,572

$2.66

September 21, 2018

Common Shares

Exercise of Stock Options

6,253

$0.30

September 21, 2018

Common Shares

Exercise of Stock Options

60,000

$1.30

Date of Issuance

Type of Security
Issued

Reason for Issuance

Number of
Securities Issued

Issue/ Exercise Price
per Security

September 21, 2018

Common Shares

Exercise of Warrants

5,180

$9.37

September 21, 2018

Common Shares

Exercise of Warrants

56,484

$9.65

September 24, 2018

Common Shares

Exercise of Stock Options

4,167

$2.76

September 24, 2018

Common Shares

Exercise of Warrants

910

$4.00

September 24, 2018

Common Shares

Conversion of Debenture

2,307

$6.50

September 25, 2018

Common Shares

Exercise of Stock Options

8,333

$7.95

September 25, 2018

Common Shares

Exercise of Stock Options

1,250

$2.76

September 25, 2018

Common Shares

Exercise of Warrants

$4.00

September 25, 2018

Common Shares

Exercise of Warrants

10,000

$4.00

September 26, 2018

Common Shares

Exercise of Stock Options

4,166

$8.18

September 26, 2018

Common Shares

Conversion of Debenture

1,846

$6.50

September 26, 2018

Common Shares

Conversion of Debenture

996

$13.05

September 26, 2018

Common Shares

Exercise of Warrants

14,943

$9.65

September 26, 2018

Common Shares

Conversion of Debenture

3,846

$6.50

September 27, 2018

Common Shares

Exercise of Warrants

64,349

$9.65

September 27, 2018

Common Shares

Exercise of Stock Options

4,000

$8.03

September 27, 2018

Common Shares

Exercise of Stock Options

12,500

$4.64

September 27, 2018

Common Shares

Exercise of Stock Options

26,750

$7.03

September 28, 2018

Common Shares

Exercise of Stock Options

622,533

$2.66

September 28, 2018

Common Shares

Exercise of Warrants

5,180

$9.37

September 28, 2018

Common Shares

Exercise of Warrants

5,898

$9.65

September 28, 2018

Common Shares

Return to Treasury

(3,575

)

$9.65

October 1, 2018

Common Shares

Exercise of Stock Options

15,000

$4.64

October 1, 2018

Common Shares

Exercise of RSUs

74,999

$2.76

October 2, 2018

Common Shares

Exercise of Warrants

13,227

$9.65

October 2, 2018

Common Shares

Exercise of Stock Options

50,100

$4.64

October 2, 2018

Common Shares

Exercise of Stock Options

1,166

$9.13

October 2, 2018

Common Shares

Exercise of Stock Options

6,916

$2.66

October 2, 2018

Common Shares

Exercise of Stock Options

29,166

$2.49

October 2, 2018

Common Shares

Exercise of Stock Options

12,500

$2.76

October 3, 2018

Common Shares

Exercise of Warrants

23,237

$9.65

October 3, 2018

Common Shares

Exercise of Stock Options

2,083

$8.07

October 3, 2018

Common Shares

Exercise of Stock Options

76,268

$2.66

Date of Issuance

Type of Security
Issued

Reason for Issuance

Number of
Securities Issued

Issue/ Exercise Price
per Security

October 4, 2018

Common Shares

Exercise of Warrants

239

$9.65

October 4, 2018

Common Shares

Exercise of Stock Options

8,434

$4.64

October 4, 2018

Common Shares

Exercise of Warrants

6,216

$9.37

October 5, 2018

Common Shares

Exercise of Stock Options

50,000

$0.46

October 5, 2018

Common Shares

Exercise of Stock Options

4,500

$2.76

October 5, 2018

Common Shares

Exercise of Warrants

36,894

$9.65

October 9, 2018

Common Shares

Exercise of Stock Options

4,166

$2.76

October 9, 2018

Common Shares

Exercise of Warrants

5,181

$9.37

October 9, 2018

Common Shares

Exercise of Warrants

3,396

$9.65

October 10, 2018

Common Shares

Exercise of RSUs

541,666

$2.76

October 10, 2018

Common Shares

Exercise of Stock Options

2,000

$1.30

October 10, 2018

Common Shares

Conversion of Debenture

3,065

$13.05

October 10, 2018

Common Shares

Conversion of Debenture

4,615

$6.50

October 10, 2018

Common Shares

Exercise of Warrants

893

$9.65

October 11, 2018

Common Shares

Exercise of Stock Options

50,000

$1.30

October 11, 2018

Common Shares

Exercise of Stock Options

75,000

$9.60

October 11, 2018

Common Shares

Exercise of Stock Options

4,333

$8.03

October 11, 2018

Common Shares

Exercise of Stock Options

2,083

$2.76

October 11, 2018

Common Shares

Exercise of Stock Options

4,166

$7.20

October 11, 2018

Common Shares

Exercise of Stock Options

2,500

$4.64

October 11, 2018

Common Shares

Conversion of Debenture

7,846

$6.50

October 12, 2018

Common Shares

Exercise of RSUs

33,332

$2.76

October 15, 2018

Common Shares

Exercise of Stock Options

4,166

$2.76

October 15, 2018

Common Shares

Conversion of Debenture

22,988

$13.05

October 16, 2018

Common Shares

Exercise of Stock Options

5,000

$1.30

October 16, 2018

Common Shares

Exercise of Stock Options

8,333

$2.76

October 16, 2018

Common Shares

Exercise of Stock Options

11,667

$0.30

October 16, 2018

Common Shares

Exercise of Stock Options

55,000

$2.66

October 16, 2018

Common Shares

Exercise of Warrants

104

$4.00

October 16, 2018

Common Shares

Exercise of Warrants

471

$9.65

October 16, 2018

Common Shares

Exercise of Warrants

10,245

$9.37

October 17, 2018

Common Shares

Exercise of Warrants

98,026

$9.65

October 17, 2018

Common Shares

Exercise of Warrants

42,094

$4.00

Date of Issuance

Type of Security
Issued

Reason for Issuance

Number of
Securities Issued

Issue/ Exercise Price
per Security

October 17, 2018

Common Shares

Conversion of Debenture

65,692

$6.50

October 17, 2018

Common Shares

Exercise of Stock Options

4,166

$2.76

October 17, 2018

Common Shares

Exercise of Stock Options

25,000

$11.53

October 17, 2018

Common Shares

Exercise of Stock Options

311,268

$2.66

October 17, 2018

Common Shares

Exercise of Stock Options

147,031

$8.28

October 17, 2018

Common Shares

Exercise of Stock Options

12,499

$10.30

October 17, 2018

Common Shares

Exercise of Stock Options

9,000

$4.64

October 17, 2018

Common Shares

Exercise of Stock Options

50,000

$9.60

October 17, 2018

Common Shares

Exercise of Stock Options

50,000

$0.46

October 17, 2018

Common Shares

Exercise of Stock Options

333

$8.61

October 17, 2018

Common Shares

Exercise of Stock Options

4,150

$7.20

October 18, 2018

Common Shares

Conversion of Debenture

3,065

$13.05

October 18, 2018

Common Shares

Exercise of Stock Options

41,500

$2.66

October 18, 2018

Common Shares

Exercise of Stock Options

66,666

$11.53

October 18, 2018

Common Shares

Exercise of Stock Options

1,083

$2.76

October 18, 2018

Common Shares

Exercise of Stock Options

100,000

$2.49

October 18, 2018

Common Shares

Exercise of Stock Options

15,000

$8.28

October 18, 2018

Common Shares

Exercise of Stock Options

50,000

$0.30

October 18, 2018

Common Shares

Exercise of Stock Options

2,500

$4.64

October 18, 2018

Common Shares

Exercise of Stock Options

22,000

$2.39

October 19, 2018

Common Shares

Conversion of Debenture

30,769

$6.50

October 19, 2018

Common Shares

Exercise of Warrants

16,087

$9.65

October 19, 2018

Common Shares

Exercise of Stock Options

24,000

$4.64

October 19, 2018

Common Shares

Exercise of Stock Options

8,333

$9.99

October 22, 2018

Common Shares

Exercise of RSUs

16,666

$2.76

October 22, 2018

Common Shares

Exercise of Warrants

10,713

$9.37

October 22, 2018

Common Shares

Exercise of Warrants

1,398

$4.00

October 22, 2018

Common Shares

Increase to shareholder for fractional share

$2.76

October 24, 2018

Common Shares

Exercise of Warrants

11,102

$9.37

October 25, 2018

Common Shares

Exercise of Warrants

190

$4.00

October 25, 2018

Common Shares

Exercise of Stock Options

10,833

$2.76

October 26, 2018

Common Shares

Exercise of Warrants

390

$4.00

October 26, 2018

Common Shares

Exercise of Warrants

9,740

$9.37

Date of Issuance

Type of Security
Issued

Reason for Issuance

Number of
Securities Issued

Issue/ Exercise Price
per Security

October 29, 2018

Common Shares

Exercise of Warrants

10,546

$9.65

October 29, 2018

Common Shares

Exercise of Warrants

$4.00

October 29, 2018

Common Shares

Exercise of Stock Options

65,000

$2.66

October 29, 2018

Common Shares

Exercise of Stock Options

2,000

$2.76

October 30, 2018

Common Shares

Exercise of Stock Options

$4.64

October 30, 2018

Common Shares

Conversion of Debenture

3,076

$6.50

October 31, 2018

Common Shares

Exercise of Stock Options

9,667

$2.76

November 1, 2018

Common Shares

Exercise of Stock Options

6,666

$2.39

November 1, 2018

Common Shares

Exercise of Stock Options

4,167

$2.76

November 1, 2018

Common Shares

Conversion of Debenture

3,065

$13.05

November 1, 2018

Common Shares

Issued in connection with an acquisition

610,023

$8.79

November 7, 2018

Common Shares

Exercise of Stock Options

35,000

$2.66

November 7, 2018

Common Shares

Exercise of Stock Options

28,600

$8.28

November 15, 2018

Common Shares

Conversion of Debenture

166,153

$6.50

November 19, 2018

Common Shares

Exercise of Stock Options

62,500

$2.56

November 19, 2018

Common Shares

Exercise of Stock Options

20,833

$2.39

November 19, 2018

Common Shares

Exercise of Stock Options

14,583

$2.76

November 19, 2018

Common Shares

Issued in connection with an acquisition

217,917

$8.02

November 20, 2018

Common Shares

Exercise of Stock Options

10,725

$4.79

November 22, 2018

Common Shares

Exercise of Stock Options

11,666

$2.76

November 22, 2018

Common Shares

Issued in connection with an acquisition

31,904,668

$8.00

November 26, 2018

Common Shares

Exercise of Stock Options

26,812

$4.79

November 26, 2018

Common Shares

Exercise of Stock Options

129,594

$2.66

November 26, 2018

Common Shares

Issued in connection with an acquisition

143,560

$7.51

November 27, 2018

Common Shares

Exercise of Stock Options

6,667

$2.76

November 27, 2018

Common Shares

Exercise of Stock Options

62,500

$2.49

November 28, 2018

Common Shares

Exercise of Stock Options

3,458

$2.66

November 29, 2018

Common Shares

Exercise of Stock Options

5,725

$4.79

November 29, 2018

Common Shares

Exercise of Stock Options

3,750

$2.76

December 11, 2018

Common Shares

Exercise of Stock Options

10,000

$2.66

December 11, 2018

Common Shares

Exercise of Stock Options

3,000

$0.34

Date of Issuance

Type of Security
Issued

Reason for Issuance

Number of
Securities Issued

Issue/ Exercise Price
per Security

December 12, 2018

Common Shares

Exercise of Stock Options

2,234

$4.79

December 13, 2018

Common Shares

Exercise of Stock Options

51,878

$2.66

December 13, 2018

Common Shares

Exercise of Stock Options

3,500

$4.64

December 13, 2018

Common Shares

Exercise of Stock Options

2,234

$4.79

December 14, 2018

Common Shares

Exercise of Stock Options

25,939

$2.66

December 20, 2018

Common Shares

Exercise of Stock Options

2,000

$4.64

December 24, 2018

Common Shares

Exercise of Stock Options

31,666

$2.39

December 27, 2018

Common Shares

Exercise of Stock Options

25,938

$2.66

December 27, 2018

Common Shares

Exercise of Stock Options

16,668

$0.30

December 31, 2018

Common Shares

Exercise of Stock Options

2,999

$2.76

January 7, 2019

Common Shares

Exercise of Stock Options

200

$2.76

January 8, 2019

Common Shares

Exercise of RSUs

8,859

$9.03

January 8, 2019

Common Shares

Exercise of RSUs

16,666

$2.76

January 9, 2019

Common Shares

Exercise of Stock Options

6,250

$2.76

January 9, 2019

Common Shares

Exercise of Stock Options

64,847

$2.66

January 11, 2019

Common Shares

Exercise of Stock Options

2,083

$2.76

January 14, 2019

Common Shares

Exercise of Stock Options

5,000

$4.79

January 15, 2019

Common Shares

Exercise of Stock Options

4,467

$4.79

January 15, 2019

Common Shares

Exercise of Stock Options

49,500

$2.66

January 16, 2019

Common Shares

Exercise of Stock Options

6,703

$4.79

January 16, 2019

Common Shares

Exercise of Stock Options

64,847

$2.66

January 16, 2019

Common Shares

Exercise of Stock Options

6,250

$2.76

January 16, 2019

Common Shares

Exercise of Stock Options

8,333

$8.02

January 16, 2019

Common Shares

Exercise of Stock Options

4,166

$4.64

January 17, 2019

Common Shares

Exercise of Stock Options

41,666

$8.10

January 17, 2019

Common Shares

Exercise of Stock Options

13,834

$2.66

January 17, 2019

Common Shares

Exercise of Stock Options

10,000

$4.64

January 18, 2019

Common Shares

Exercise of Stock Options

6,000

$4.79

January 18, 2019

Common Shares

Exercise of Stock Options

4,167

$2.76

January 21, 2019

Common Shares

Exercise of Stock Options

6,667

$2.39

January 21, 2019

Common Shares

Exercise of Stock Options

2,083

$2.76

January 21, 2019

Common Shares

Exercise of Stock Options

100

$4.00

January 22, 2019

Common Shares

Exercise of Stock Options

16,000

$2.66

Date of Issuance

Type of Security
Issued

Reason for Issuance

Number of
Securities Issued

Issue/ Exercise Price
per Security

January 22, 2019

Common Shares

Exercise of Stock Options

10,000

$9.07

January 23, 2019

Common Shares

Exercise of Warrants

$4.00

January 25, 2019

Common Shares

Exercise of Warrants

2,423

$6.94

January 28, 2019

Common Shares

Exercise of Stock Options

5,600

$2.76

January 29, 2019

Common Shares

Exercise of Stock Options

110,408

$2.66

January 29, 2019

Common Shares

Exercise of Stock Options

4,000

$5.45

January 29, 2019

Common Shares

Exercise of Stock Options

2,000

$4.64

January 29, 2019

Common Shares

Exercise of Stock Options

3,352

$4.79

January 29, 2019

Common Shares

Exercise of Stock Options

4,167

$2.76

January 29, 2019

Common Shares

Exercise of Warrants

230

$4.00

January 30, 2019

Common Shares

Exercise of Stock Options

1,000

$5.45

January 30, 2019

Common Shares

Exercise of Stock Options

6,918

$2.66

January 30, 2019

Common Shares

Exercise of Stock Options

3,352

$4.79

January 31, 2019

Common Shares

Exercise of Stock Options

4,200

$2.39

January 31, 2019

Common Shares

Exercise of Stock Options

6,916

$2.66

February 1, 2019

Common Shares

Exercise of Stock Options

1,000

$5.45

February 1, 2019

Common Shares

Exercise of Stock Options

4,000

$1.30

February 1, 2019

Common Shares

Exercise of Stock Options

1,080

$6.94

February 4, 2019

Common Shares

Exercise of Stock Options

1,000

$5.45

February 4, 2019

Common Shares

Exercise of Stock Options

2,234

$4.79

February 5, 2019

Common Shares

Exercise of Stock Options

16,918

$2.66

February 5, 2019

Common Shares

Exercise of Stock Options

1,000

$5.45

February 5, 2019

Common Shares

Exercise of Stock Options

12,500

$8.71

February 5, 2019

Common Shares

Exercise of Stock Options

2,500

$4.64

February 5, 2019

Common Shares

Exercise of Warrants

1,000

$4.00

February 6, 2019

Common Shares

Exercise of Stock Options

36,666

$2.76

February 6, 2019

Common Shares

Exercise of Stock Options

20,556

$8.28

February 6, 2019

Common Shares

Exercise of Stock Options

7,353

$4.79

February 6, 2019

Common Shares

Exercise of Stock Options

134,141

$2.66

February 6, 2019

Common Shares

Exercise of Stock Options

5,000

$2.56

February 6, 2019

Common Shares

Exercise of Stock Options

19,756

$4.64

February 6, 2019

Common Shares

Exercise of Stock Options

52,500

$2.49

February 7, 2019

Common Shares

Exercise of Warrants

1,001

$9.65

Date of Issuance

Type of Security
Issued

Reason for Issuance

Number of
Securities Issued

Issue/ Exercise Price
per Security

February 7, 2019

Common Shares

Exercise of Stock Options

4,166

$6.09

February 7, 2019

Common Shares

Exercise of Stock Options

6,253

$0.30

February 7, 2019

Common Shares

Exercise of Stock Options

10,000

$4.64

February 7, 2019

Common Shares

Exercise of Stock Options

2,733

$2.76

February 8, 2019

Common Shares

Exercise of Stock Options

35,000

$5.45

February 11, 2019

Common Shares

Exercise of Stock Options

6,088

$4.79

February 11, 2019

Common Shares

Exercise of Stock Options

50,000

$1.30

February 11, 2019

Common Shares

Exercise of Stock Options

10,416

$2.76

February 11, 2019

Common Shares

Exercise of Stock Options

6,250

$8.93

February 11, 2019

Common Shares

Exercise of Stock Options

145,633

$2.66

February 12, 2019

Common Shares

Exercise of Stock Options

3,860

$5.45

February 12, 2019

Common Shares

Exercise of Stock Options

54,825

$2.66

February 13, 2019

Common Shares

Exercise of Warrants

$4.00

February 13, 2019

Common Shares

Exercise of Warrants

1,080

$6.94

February 14, 2019

Common Shares

Exercise of Stock Options

27,500

$2.56

February 14, 2019

Common Shares

Exercise of Stock Options

6,666

$2.76

February 15, 2019

Common Shares

Exercise of Stock Options

4,167

$4.64

February 19, 2019

Common Shares

Exercise of Stock Options

1,500

$1.30

February 20, 2019

Common Shares

Exercise of Stock Options

6,450

$5.45

February 21, 2019

Common Shares

Exercise of Stock Options

4,734

$5.45

February 21, 2019

Common Shares

Exercise of Stock Options

10,000

$4.79

February 21, 2019

Common Shares

Exercise of Stock Options

16,666

$7.68

February 22, 2019

Common Shares

Exercise of Stock Options

3,500

$5.45

February 22, 2019

Common Shares

Exercise of Stock Options

16,666

$8.98

February 25, 2019

Common Shares

Exercise of Stock Options

1,000

$5.45

February 26, 2019

Common Shares

Exercise of Stock Options

1,000

$5.45

February 26, 2019

Common Shares

Exercise of Stock Options

8,704

$2.66

February 27, 2019

Common Shares

Exercise of Stock Options

5,900

$5.45

February 27, 2019

Common Shares

Exercise of Stock Options

2,750

$2.76

February 28, 2019

Common Shares

Exercise of Stock Options

19,647

$5.45

February 28, 2019

Common Shares

Exercise of Stock Options

30,243

$4.64

February 28, 2019

Common Shares

Exercise of Stock Options

20,832

$2.76

March 1, 2019

Common Shares

Exercise of Stock Options

3,000

$7.96

Date of Issuance

Type of Security
Issued

Reason for Issuance

Number of
Securities Issued

Issue/ Exercise Price
per Security

March 1, 2019

Common Shares

Shares issued for an acquisition

13,667,933

$9.72

March 1, 2019

Common Shares

Exercise of Stock Options

20,000

$8.54

March 4, 2019

Common Shares

Exercise of Stock Options

18,750

$7.96

March 4, 2019

Common Shares

Exercise of Stock Options

1,341

$9.72

March 4, 2019

Common Shares

Exercise of Warrants

705

$4.00

March 7, 2019

Common Shares

Exercise of Stock Options

4,117

$4.79

March 7, 2019

Common Shares

Exercise of Stock Options

7,000

$9.03

March 7, 2019

Common Shares

Exercise of Stock Options

78,938

$2.66

March 7, 2019

Common Shares

Exercise of Stock Options

6,250

$8.93

March 7, 2019

Common Shares

Exercise of Stock Options

5,000

$1.30

March 7, 2019

Common Shares

Exercise of Stock Options

12,500

$7.10

March 8, 2019

Common Shares

Exercise of Stock Options

8,000

$2.56

March 8, 2019

Common Shares

Exercise of Stock Options

10,725

$5.45

March 8, 2019

Common Shares

Exercise of Stock Options

4,000

$2.66

March 8, 2019

Common Shares

Exercise of Stock Options

5,000

$4.64

March 8, 2019

Common Shares

Exercise of Warrants

$4.00

March 13, 2019

Common Shares

Exercise of Stock Options

1,500

$7.03

March 13, 2019

Common Shares

Exercise of Compensation Options

149

$4.63

March 13, 2019

Common Shares

Exercise of Warrants

7,364

$9.65

March 14, 2019

Common Shares

Exercise of Stock Options

5,000

$2.66

March 14, 2019

Common Shares

Exercise of Stock Options

14,000

$8.71

March 14, 2019

Common Shares

Exercise of Warrants

35,000

$4.00

March 14, 2019

Common Shares

Exercise of Warrants

42,900

$9.65

March 15, 2019

Common Shares

Exercise of Stock Options

28,500

$4.64

March 15, 2019

Common Shares

Exercise of Stock Options

10,000

$7.95

March 15, 2019

Common Shares

Exercise of Stock Options

400

$4.79

March 15, 2019

Common Shares

Exercise of Stock Options

5,000

$8.18

March 15, 2019

Common Shares

Exercise of Stock Options

15,000

$7.96

March 15, 2019

Common Shares

Exercise of Stock Options

28,600

$8.28

March 15, 2019

Common Shares

Exercise of Stock Options

16,500

$8.03

March 15, 2019

Common Shares

Exercise of Stock Options

2,000

$5.45

March 15, 2019

Common Shares

Exercise of Stock Options

20,062

$2.66

Date of Issuance

Type of Security
Issued

Reason for Issuance

Number of
Securities Issued

Issue/ Exercise Price
per Security

March 15, 2019

Common Shares

Exercise of Stock Options

333

$8.61

March 15, 2019

Common Shares

Exercise of Stock Options

600

$4.00

March 18, 2019

Common Shares

Exercise of Stock Options

12,448

$2.66

March 18, 2019

Common Shares

Exercise of Stock Options

5,000

$9.07

March 19, 2019

Common Shares

Exercise of Warrants

47,600

$4.00

March 19, 2019

Common Shares

Exercise of Stock Options

10,000

$10.22

March 19, 2019

Common Shares

Exercise of Stock Options

26,666

$11.53

March 19, 2019

Common Shares

Exercise of Stock Options

24,583

$5.45

March 19, 2019

Common Shares

Exercise of Stock Options

6,667

$9.56

March 19, 2019

Common Shares

Exercise of Stock Options

16,666

$6.81

March 19, 2019

Common Shares

Exercise of Stock Options

2,000

$8.07

March 19, 2019

Common Shares

Exercise of Stock Options

4,583

$2.76

March 19, 2019

Common Shares

Exercise of Stock Options

25,000

$9.60

March 19, 2019

Common Shares

Exercise of Stock Options

12,000

$4.64

March 19, 2019

Common Shares

Exercise of Stock Options

33,333

$12.24

March 19, 2019

Common Shares

Exercise of Warrants

4,290

$9.65

March 19, 2019

Common Shares

Shares issued for an Acquisition

25,809

$9.69

March 20, 2019

Common Shares

Exercise of Warrants

36,110

$4.00

March 20, 2019

Common Shares

Exercise of Stock Options

500

$4.79

March 20, 2019

Common Shares

Exercise of Stock Options

16,667

$7.95

March 20, 2019

Common Shares

Exercise of Stock Options

3,900

$9.03

March 20, 2019

Common Shares

Exercise of Stock Options

5,000

$11.53

March 20, 2019

Common Shares

Exercise of Stock Options

20,750

$8.28

March 20, 2019

Common Shares

Exercise of Stock Options

900

$5.45

March 20, 2019

Common Shares

Exercise of Stock Options

4,167

$10.30

March 20, 2019

Common Shares

Exercise of Stock Options

6,250

$8.07

March 20, 2019

Common Shares

Exercise of Stock Options

25,786

$2.66

March 21, 2019

Common Shares

Exercise of Stock Options

3,667

$7.95

March 21, 2019

Common Shares

Exercise of Stock Options

1,234

$4.79

March 21, 2019

Common Shares

Exercise of Stock Options

10,000

$10.95

March 21, 2019

Common Shares

Exercise of Stock Options

2,000

$4.64

March 21, 2019

Common Shares

Exercise of Stock Options

500

$2.66

March 21, 2019

Common Shares

Exercise of Stock Options

11,250

$8.07

Date of Issuance

Type of Security
Issued

Reason for Issuance

Number of
Securities Issued

Issue/ Exercise Price
per Security

March 21, 2019

Common Shares

Exercise of Stock Options

100,000

$0.30

March 21, 2019

Common Shares

Exercise of Stock Options

250,000

$2.56

March 21, 2019

Common Shares

Exercise of Stock Options

83,333

$2.39

March 21, 2019

Common Shares

Exercise of Stock Options

20,833

$2.76

March 21, 2019

Common Shares

Exercise of Stock Options

1,000

$7.20

March 21, 2019

Common Shares

Exercise of Stock Options

16,667

$1.30

March 21, 2019

Common Shares

Exercise of Stock Options

334

$8.61

March 21, 2019

Common Shares

Exercise of Warrants

87,100

$4.00

March 22, 2019

Common Shares

Exercise of Stock Options

20,000

$11.53

March 22, 2019

Common Shares

Exercise of Stock Options

2,500

$4.64

March 22, 2019

Common Shares

Exercise of Warrants

38,387

$6.94

March 25, 2019

Common Shares

Exercise of Warrants

237

$4.00

March 26, 2019

Common Shares

Exercise of Stock Options

3,459

$2.66

March 26, 2019

Common Shares

Exercise of Stock Options

3,700

$9.96

March 26, 2019

Common Shares

Exercise of Warrants

2,000

$4.00

March 26, 2019

Common Shares

Exercise of Warrants

89,107

$2.81

March 27, 2019

Common Shares

Exercise of Stock Options

1,883

$2.76

March 27, 2019

Common Shares

Exercise of Stock Options

4,469

$5.45

March 27, 2019

Common Shares

Exercise of Stock Options

3,000

$4.64

March 28, 2019

Common Shares

Exercise of Stock Options

2,000

$8.18

March 28, 2019

Common Shares

Exercise of Stock Options

62,500

$8.38

The following table sets out details of all securities convertible or exercisable into Common Shares that were issued or granted by the Company during the 12 months prior to the date of this Prospectus.


Date of Issuance	Type of Security Issued	Number of Common Shares Issuable Upon Exercise or Conversion		Exercise or Conversion Price Per Common Share

March 28, 2018	Stock Options		50,000		$9.53

March 29, 2018	Stock Options		25,000		$9.03

April 3, 2018	Stock Options		100,000		$9.07

April 9, 2018	Stock Options		250,000		$8.10

April 12, 2018	Stock Options		100,000		$7.93

April 17, 2018	Stock Options		50,000		$8.93

April 23, 2018	Stock Options		100,000		$8.61

April 24, 2018	Stock Options		50,000		$8.02


Date of Issuance	Type of Security Issued	Number of Common Shares Issuable Upon Exercise or Conversion		Exercise or Conversion Price Per Common Share

April 25, 2018	Stock Options		100,000		$8.24

April 27, 2018	Stock Options		100,000		$7.72

May 3, 2018	Stock Options		350,000		$7.95

May 7, 2018	Stock Options		50,000		$8.03

May 10, 2018	Stock Options		100,000		$8.03

May 11, 2018	Stock Options		175,000		$7.96

May 14, 2018	Stock Options		455,000		$8.07

May 18, 2018	Stock Options		200,000		$7.20

May 22, 2018	Stock Options		100,000		$7.92

May 23, 2018	Stock Options		275,000		$8.38

May 28, 2018	Stock Options		125,000		$8.02

May 30, 2018	Stock Options		50,000		$8.14

May 31, 2018	Stock Options		150,000		$8.18

June 5, 2018	Stock Options		350,000		$8.18

June 6, 2018	Stock Options		225,000		$8.71

June 8, 2018	Stock Options		50,000		$9.64

June 14, 2018	Stock Options		50,000		$9.02

June 15, 2018	Stock Options		100,000		$8.98

June 19, 2018	Stock Options		50,000		$9.13

June 20, 2018	Stock Options		100,000		$9.54

June 25, 2018	Stock Options		100,000		$9.99

June 28, 2018	Stock Options		50,000		$8.96

June 29, 2018	Stock Options		100,000		$9.41

July 4, 2018	Stock Options		150,000		$9.28

July 12, 2018	Stock Options		236,000		$9.03

July 13, 2018	Stock Options		50,000		$8.93

July 17, 2018	Stock Options		65,000		$8.06

July 19, 2018	Stock Options		340,000		$7.96

July 20, 2018	Stock Options		140,000		$7.68

July 24, 2018	Stock Options		80,000		$7.70

July 26, 2018	Stock Options		11,404,830		$2.66

July 26, 2018	Stock Options		328,896		$5.45

July 26, 2018	Stock Options		436,144		$4.79


Date of Issuance	Type of Security Issued	Number of Common Shares Issuable Upon Exercise or Conversion		Exercise or Conversion Price Per Common Share

July 26, 2018	Stock Options		580,489		$8.28

July 26, 2018	Stock Options		918,775		$5.45

July 26, 2018	Stock Options		364,650		$4.79

July 26, 2018	Stock Options		80,000		$6.94

July 31, 2018	Stock Options		180,000		$6.81

August 3, 2018	Stock Options		5,527,000		$7.39

August 7, 2018	Stock Options		160,000		$6.54

August 13, 2018	Stock Options		130,000		$6.09

August 20, 2018	Stock Options		160,000		$6.50

August 21, 2018	Stock Options		70,000		$7.61

August 24, 2018	Stock Options		10,000		$8.03

August 27, 2018	Stock Options		25,000		$8.59

August 29, 2018	Stock Options		80,000		$8.54

August 31, 2018	Stock Options		40,000		$8.79

September 6, 2018	Stock Options		120,000		$8.68

September 14, 2018	Stock Options		200,000		$8.30

September 17, 2018	Stock Options		1,100,000		$8.54

September 24, 2018	Stock Options		220,000		$11.84

September 25, 2018	Stock Options		40,000		$12.27

September 28, 2018	Stock Options		200,000		$11.68

October 3, 2018	Stock Options		375,000		$11.93

October 9, 2018	Stock Options		343,000		$12.81

October 12, 2018	Stock Options		65,000		$12.62

October 23, 2018	Stock Options		130,000		$11.42

October 25, 2018	Stock Options		120,000		$9.46

October 31, 2018	Stock Options		130,000		$7.97

November 6, 2018	Stock Options		163,750		$9.56

November 8, 2018	Stock Options		40,000		$10.59

November 9, 2018	Stock Options		730,000		$9.94

November 14, 2018	Stock Options		100,000		$8.74

November 20, 2018	Stock Options		120,000		$8.02

November 27, 2018	Stock Options		288,000		$7.51

November 28, 2018	Stock Options		60,000		$7.29


Date of Issuance	Type of Security Issued	Number of Common Shares Issuable Upon Exercise or Conversion		Exercise or Conversion Price Per Common Share

November 30, 2018	Stock Options		140,000		$7.51

December 5, 2018	Stock Options		270,000		$7.12

December 6, 2018	Stock Options		30,000		$6.21

December 7, 2018	Stock Options		655,000		$7.05

December 11, 2018	Stock Options		100,000		$7.67

December 12, 2018	Stock Options		68,000		$7.93

December 13, 2018	Stock Options		120,000		$8.15

December 14, 2018	Stock Options		240,000		$7.61

December 17, 2018	Stock Options		220,000		$7.84

December 18, 2018	Stock Options		40,000		$7.41

December 21, 2018	Stock Options		702,000		$6.88

December 28, 2018	Stock Options		80,000		$6.80

January 2, 2019	Stock Options		200,000		$6.78

January 3, 2019	Stock Options		250,000		$7.09

January 4, 2019	Stock Options		195,000		$6.91

January 8, 2019	Stock Options		300,000		$6.99

January 9, 2019	Stock Options		201,000		$6.68

January 11, 2019	Stock Options		75,000		$7.88

January 14, 2019	Stock Options		205,000		$8.47

January 15, 2019	Stock Options		40,000		$9.00

January 16, 2019	Stock Options		40,000		$9.26

January 17, 2019	Stock Options		120,000		$9.72

January 21, 2019	Stock Options		68,000		$8.53

January 22, 2019	Stock Options		40,000		$8.40

January 23, 2019	Stock Options		20,000		$8.28

January 25, 2019	Stock Options		120,000		$8.84

January 28, 2019	Stock Options		40,000		$8.88

January 31, 2019	Stock Options		80,000		$9.08

February 4, 2019	Stock Options		120,000		$9.70

February 5, 2019	Stock Options		195,000		$10.55

February 11, 2019	Stock Options		80,000		$9.95

February 13, 2019	Stock Options		170,000		$9.47

February 15, 2019	Stock Options		218,000		$9.43


Date of Issuance	Type of Security Issued	Number of Common Shares Issuable Upon Exercise or Conversion		Exercise or Conversion Price Per Common Share

February 21, 2019	Stock Options		465,000		$9.30

February 26, 2019	Stock Options		40,000		$9.59

February 27, 2019	Stock Options		40,000		$10.20

March 5, 2019	Stock Options		315,000		$9.60

March 8, 2019	Stock Options		140,000		$10.20

March 12, 2019	Stock Options		160,000		$10.62

March 13, 2019	Stock Options ⁽¹⁾		19,961,754		$10.34

March 13, 2019	Stock Options		650,000		$10.64

March 15, 2019	Stock Options		220,000		$11.92

March 18, 2019	Stock Options		525,000		$12.83

March 21, 2019	Stock Options		320,000		$13.03

March 25, 2019	Stock Options		150,000		$12.10

March 28, 2019	Stock Options		512,500		$11.83

*Convertible Notes*

January 24, 2019	Senior Notes ⁽³⁾		47,737,650		US$7.32

*Warrants*

July 25, 2018	Warrants		10,278,125		$9.65

August 8, 2018	Warrants		6,358,210		$9.37

November 22, 2018	Warrants		2,255,219		$6.94

March 13, 2019	Warrants		74		$6.94

*RSU and DSUs*

July 12, 2018	RSUs		128,527		$9.03

August 3, 2018	RSUs		440,000		$7.39

September 17, 2018	RSUs		55,000		$8.54

November 9, 2018	RSUs		10,000		$9.94

November 30, 2018	DSUs		24,000		$7.51

February 15, 2019	RSUs		5,000		$9.43

February 15, 2019	DSUs		5,000		$9.43

February 21, 2019	RSUs		75,000		$9.30

(1)

These options were granted to ACI Holdings. See “Our Business – Recent Developments – Senior Advisory Services Agreement.” These are inducement options and do not form part of the allocation under our Stock Option Plan.

(2)

These Senior Notes are unsecured, mature on February 28, 2024 and bear interest at a rate of 5.5% per annum, payable semi-annually. The initial conversion rate for the Senior Notes is 138.37 Common Shares per US$1,000 principal amount of Senior Notes, equivalent to an initial conversion price of approximately US$7.23 per Common Share. The initial conversion rate is subject to adjustment in certain events.

TRADING PRICE AND VOLUME

Our common shares are listed on the TSX and NYSE under the trading symbol “ACB”. The following tables set forth information relating to the trading of the common shares on the TSX and NYSE for the months indicated.


Month	TSX Price Range		Total Volume
Month	High	Low	Total Volume

January 2018	15.20	8.90	604,723,498

February 2018	12.55	7.11	365,286,690

March 2018	11.98	8.81	217,623,205

April 2018	9.34	6.75	226,335,287

May 2018	8.77	7.17	149,828,955

June 2018	10.72	8.02	243,443,443

July 2018	9.52	6.53	189,587,987

August 2018	9.38	5.29	428,603,704

September 2018	13.48	7.65	740,328,157

October 2018	16.24	7.25	872,736,309

November 2018	10.65	7.07	372,391,491

December 2018	8.31	6.21	253,376,955

January 2019	9.97	6.59	406,049,392

February 2019	10.94	8.83	325,088,920

March 1 – 28, 2019	13.67	9.35	432,097,832


Month	NYSE Price Range (in US$)		Total Volume
Month	High	Low	Total Volume

October 23 – October 31, 2018	8.63	5.39	170,861,074

November 2018	8.12	5.31	306,636,109

December 2018	6.23	4.58	263,352,848

January 2019	7.52	4.83	505,506,097

February 2019	8.34	6.66	522,841,015

March 1 – 28, 2019	10.32	7.01	949,028,119

PLAN OF DISTRIBUTION

We may offer and sell Securities directly to one or more purchasers, through agents, or through underwriters or dealers designated by us from time to time. We may distribute the Securities from time to time in one or more transactions at fixed prices (which may be changed from time to time), at market prices prevailing at the times of sale, at varying prices determined at the time of sale, at prices related to prevailing market prices or at negotiated prices including sales in transactions that are deemed to be “at-the-market distributions” as defined in National Instrument 44-102— Shelf Distributions , including sales made directly on the TSX, NYSE or other existing trading markets for the Securities. A description of such pricing will be disclosed in the applicable Prospectus Supplement. We may offer different classes of Securities in the same offering, or we may offer different classes of Securities in separate offerings.

This Prospectus may also, from time to time, relate to the offering of our Securities by certain selling securityholders. The selling securityholders may sell all or a portion of our Securities beneficially owned by them and offered thereby from time to time directly or through one or more underwriters, broker-dealers or agents. Our Securities may be sold by the selling securityholders in one or more transactions at fixed prices (which may be changed from time to time), at market prices prevailing at the time of the sale, at varying prices determined at the time of sale, at prices related to prevailing market prices or at negotiated prices.

A Prospectus Supplement will describe the terms of each specific offering of Securities, including: (i) the terms of the Securities to which the Prospectus Supplement relates, including the type of Security being offered; (ii) the name or names of any agents, underwriters or dealers involved in such offering of Securities; (iii) the name or names of any selling securityholders; (iv) the purchase price of the Securities offered thereby and the proceeds to, and the portion of expenses borne by, the Company from the sale of such Securities; (v) any agents’ commission, underwriting discounts and other items constituting compensation payable to agents, underwriters or dealers; and (vi) any discounts or concessions allowed or re-allowed or paid to agents, underwriters or dealers.

If underwriters are used in an offering, the Securities offered thereby will be acquired by the underwriters for their own account and may be resold from time to time in one or more transactions, including negotiated transactions, at a fixed public offering price or at varying prices determined at the time of sale. The obligations of the underwriters to purchase Securities will be subject to the conditions precedent agreed upon by the parties and the underwriters will be obligated to purchase all Securities under that offering if any are purchased. Any public offering price and any discounts or concessions allowed or re-allowed or paid to agents, underwriters or dealers may be changed from time to time.

Underwriters, dealers and agents who participate in the distribution of the Securities may be entitled under agreements to be entered into with the Company to indemnification by the Company against certain liabilities, including liabilities under the U.S. Securities Act and Canadian securities legislation, or to contribution with respect to payments which such underwriters, dealers or agents may be required to make in respect thereof. Such underwriters, dealers and agents may be customers of, engage in transactions with, or perform services for, the Company in the ordinary course of business.

In connection with any offering of Securities, other than an “at-the-market distribution”, the underwriters may over-allot or effect transactions which stabilize or maintain the market price of the Securities offered at a level above that which might otherwise prevail in the open market. Such transactions, if commenced, may be discontinued at any time.

The Securities may also be sold: (i) directly by the Company or the selling securityholders at such prices and upon such terms as agreed to; or (ii) through agents designated by the Company or the selling securityholders from time to time. Any agent involved in the offering and sale of the Securities in respect of which this Prospectus is delivered will be named, and any commissions payable by the Company and/or selling securityholder to such agent will be set forth, in the Prospectus Supplement. Unless otherwise indicated in the Prospectus Supplement, any agent is acting on a “best efforts” basis for the period of its appointment.

We and/or the selling securityholders may agree to pay the underwriters or agents a commission for various services relating to the issue and sale of any Securities offered under any Prospectus Supplement. In addition, underwriters or agents may sell the securities to or through dealers, and those dealers may receive compensation in the form of discounts, concessions or commissions from the underwriters or agents and/or commissions from the purchasers for which they may act as agent. Agents, underwriters or dealers who participate in the distribution of the Securities may be entitled under agreements to be entered into with the Company and/or the selling securityholders to indemnification by the Company and/or the selling securityholders against certain liabilities, including liabilities under securities legislation, or to contribution with respect to payments which such underwriters, dealers or agents may be required to make in respect thereof.

Each class or series of Warrants, Options, Subscription Receipts, Debt Securities and Units will be a new issue of Securities with no established trading market. Unless otherwise specified in the applicable Prospectus Supplement, Warrants, Options, Subscription Receipts, Debt Securities or Units will not be listed on any securities or stock exchange. Unless otherwise specified in the applicable Prospectus Supplement, there is no market through which the Warrants, Options, Subscription Receipts, Debt Securities or Units may be sold and purchasers may not be able to resell Warrants, Options, Subscription Receipts, Debt Securities or Units purchased under this Prospectus or any Prospectus Supplement. This may affect the pricing of the Warrants, Options, Subscription Receipts, Debt Securities or Units in the secondary market, the transparency and availability of trading prices, the liquidity of the Securities, and the extent of issuer regulation. Subject to applicable laws, certain dealers may make a market in the Warrants, Options, Subscription Receipts, Debt Securities or Units, as applicable, but will not be obligated to do so and may discontinue any market making at any time without notice. No assurance can be given that any dealer will make a market in the Warrants, Options, Subscription Receipts or Units or as to the liquidity of the trading market, if any, for the Warrants, Options, Subscription Receipts, Debt Securities or Units.

In connection with any offering of Securities, unless otherwise specified in a Prospectus Supplement, underwriters or agents may over-allot or effect transactions which stabilize, maintain or otherwise affect the market price of Securities offered at levels other than those which might otherwise prevail on the open market. Such transactions may be commenced, interrupted or discontinued at any time.

DESCRIPTION OF SECURITIES

The Securities may be offered under this Prospectus in amounts and at prices to be determined based on market conditions at the time of the sale and such amounts and prices will be set forth in the accompanying Prospectus Supplement. The Securities may be issued alone or in combination and for such consideration determined by our board of directors.

Common Shares

The holders of Common Shares are entitled to receive notice of any meeting of the shareholders of the Company and to attend and vote thereat, except those meetings at which only the holders shares of another class or of a particular series are entitled to vote. Each Common Share entitles its holder to one vote. The holders of Common Shares are entitled to receive on a pro-rata basis such dividends as the board of directors may declare out of funds legally available therefor. In the event of the dissolution, liquidation, winding-up or other distribution of our assets, such holders are entitled to receive on a pro-rata basis all of assets of the Company remaining after payment of all of liabilities. The Common Shares carry no pre-emptive or conversion rights.

Warrants

This section describes the general terms that will apply to any Warrants for the purchase of Common Shares. To the extent required under applicable law, we will not offer Warrants for sale separately to any member of the public in Canada unless the offering of such Warrants is in connection with and forms a part of the consideration for an acquisition or merger transaction, or unless the applicable Prospectus Supplement containing the specific terms of the Warrants to be offered separately is first approved, in accordance with applicable laws, for filing by the securities commissions or similar regulatory authorities in each of the jurisdictions where the Warrants will be offered for sale.

Subject to the foregoing, we may issue Warrants independently or together with other securities, and Warrants sold with other securities may be attached to or separate from the other securities. Warrants may be issued directly by us to the purchasers thereof or under one or more warrant indentures or warrant agency agreements to be entered into by us and one or more banks or trust companies acting as warrant agent. Warrants, like other Securities that may be sold, may be listed on a securities exchange subject to exchange listing requirements and applicable legal requirements.

This summary of some of the provisions of the Warrants is not complete. The statements made in the Prospectus relating to any warrant agreement and Warrants to be issued under the Prospectus are summaries of certain anticipated provisions thereof and do not purport to be complete and are subject to, and are qualified in their entirety by reference to, all provisions of the applicable warrant agreement. Investors should refer to the warrant indenture or warrant agency agreement relating to the specific warrants being offered for the complete terms of the Warrants. A copy of any warrant indenture or warrant agency agreement relating to an offering of Warrants will be filed by us with the applicable securities regulatory authorities in Canada following its execution.

The particular terms of each issue of Warrants will be described in the applicable Prospectus Supplement. This description will include, where applicable:

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the designation and aggregate number of Warrants;

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the price at which the Warrants will be offered;

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the currency or currencies in which the Warrants will be offered;

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the date on which the right to exercise the Warrants will commence and the date on which the right will expire;

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if applicable, the identity of the Warrant agent;

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whether the Warrants will be listed on any securities exchange;

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any minimum or maximum subscription amount;

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the number of Common Shares that may be purchased upon exercise of each Warrant and the price at which and currency or currencies in which the Common Shares may be purchased upon exercise of each Warrant;

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the designation and terms of any securities with which the Warrants will be offered, if any, and the number of the Warrants that will be offered with each security;

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the date or dates, if any, on or after which the Warrants and the related securities will be transferable separately;

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whether the Warrants will be subject to redemption and, if so, the terms of such redemption provisions;

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whether the Warrants are to be issued in registered form, “book-entry only” form, non-certificated inventory system form, bearer form or in the form of temporary or permanent global securities and the basis of exchange, transfer and ownership thereof;

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any material risk factors relating to such Warrants and the Common Shares to be issued upon exercise of the Warrants;

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any other rights, privileges, restrictions and conditions attaching to the Warrants and the Common Shares to be issued upon exercise of the Warrants;

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material Canadian and United States federal income tax consequences of owning and exercising the Warrants; and

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any other material terms or conditions of the Warrants and the Securities to be issued upon exercise of the Warrants.

The terms and provisions of any Warrants offered under a Prospectus Supplement may differ from the terms described above and may not be subject to or contain any or all of the terms described above.

Prior to the exercise of any Warrants, holders of Warrants will not have any of the rights of holders of the Common Shares purchasable upon such exercise or the right to vote such underlying securities.

Options

We may issue or grant Options in connection with acquisitions, merger transactions, or to directors, officers, employees or consultants, as applicable. This section describes the general terms that may apply to such Options and does not purport to be complete.

The particular terms and conditions applicable to each Option issue will be comprehensively described in the applicable Option Agreement and related Prospectus Supplement. This description will include, where applicable:

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the designation and aggregate number of Options;

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the price at which the Options will be offered;

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the currency or currencies in which the Options will be offered;

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the date on which the right to exercise the Options will commence and the date on which the right will expire;

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the number of Common Shares that may be issued upon exercise of each Option and the price and currency or currencies in which the Common Shares may be purchased upon exercise of each Option;

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the date or dates, if any, on or after which the Options and the related securities will be transferable separately;

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any resale restrictions and vesting criteria related to the Options;

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any applicable accelerated vesting provisions applicable to the Options;

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any early termination provisions relating to the Options;

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any material risk factors relating to such Options and the Common Shares to be issued upon exercise of the Options;

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any other rights, privileges, restrictions and conditions attaching to the Options and the Common Shares to be issued upon exercise of the Options;

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material Canadian and United States federal income tax consequences of owning and exercising the Options; and

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any other material terms and conditions of the Options and the Securities to be issued upon exercise of the Options.

Prior to the exercise of any Options, holders of Options will not have any of the voting or other rights applicable to holders of Common Shares.

Subscription Receipts

This section describes the general terms that will apply to any Subscription Receipts that may be offered by us pursuant to the Prospectus. Subscription Receipts may be offered separately or together with Common Shares or Warrants, as the case may be. The Subscription Receipts will be issued under a Subscription Receipt agreement.

In the event we issue Subscription Receipts, we will provide the original purchasers of Subscription Receipts a contractual right of rescission exercisable following the issuance of common shares to such purchasers.

The applicable Prospectus Supplement will include details of the Subscription Receipt agreement covering the Subscription Receipts being offered. A copy of the Subscription Receipt agreement relating to an offering of Subscription Receipts will be filed by us with the applicable securities regulatory authorities after it has been entered into by us. The specific terms of the Subscription Receipts, and the extent to which the general terms described in this section apply to those Subscription Receipts, will be set forth in the applicable Prospectus Supplement. This description will include, where applicable:

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the number of Subscription Receipts;

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the price at which the Subscription Receipts will be offered;

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the currency at which the Subscription Receipts will be offered and whether the price is payable in installments;

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the procedures for the exchange of the Subscription Receipts into Common Shares, Warrants or Units;

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the number of Common Shares, Warrants or Units that may be issued upon exercise or deemed conversion of each Subscription Receipt;

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the designation and terms of any other Securities with which the Subscription Receipts will be offered, if any, and the number of Subscription Receipts that will be offered with each Security;

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conditions to the conversion or exchange of Subscription Receipts into other Securities and the consequences of such conditions not being satisfied;

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terms applicable to the gross or net proceeds from the sale of the Subscription Receipts plus any interest earned thereon;

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the dates or periods during which the Subscription Receipts may be converted or exchanged;

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the circumstances, if any, which will cause the Subscription Receipts to be deemed to be automatically converted or exchanged;

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provisions applicable to any escrow of the gross or net proceeds from the sale of the Subscription Receipts plus any interest or income earned thereon, and for the release of such proceeds from such escrow;

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if applicable, the identity of the Subscription Receipt agent;

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whether the Subscription Receipts will be listed on any securities exchange;

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whether the Subscription Receipts will be issued with any other Securities and, if so, the amount and terms of these Securities;

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any minimum or maximum subscription amount;

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whether the Subscription Receipts are to be issued in registered form, “book-entry only” form, non-certificated inventory system form, bearer form or in the form of temporary or permanent global securities and the basis of exchange, transfer and ownership thereof;

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any material risk factors relating to such Subscription Receipts and the Securities to be issued upon conversion or exchange of the Subscription Receipts;

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any other rights, privileges, restrictions and conditions attaching to the Subscription Receipts and the Securities to be issued upon exchange of the Subscription Receipts;

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material Canadian and United States income tax consequences of owning or converting or exchanging the Subscription Receipts; and

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any other material terms and conditions of the Subscription Receipts and the Securities to be issued upon the exchange of the Subscription Receipts.

The terms and provisions of any Subscription Receipts offered under a Prospectus Supplement may differ from the terms described above and may not be subject to or contain any or all of the terms described above.

Prior to the exchange of any Subscription Receipts, holders of such Subscription Receipts will not have any of the rights of holders of the Securities for which the Subscription Receipts may be exchanged, including the right to receive payments of dividends or the right to vote such underlying securities.

Description of Debt Securities

We may issue Debt Securities in one or more series under an indenture (the “ Indenture ”), to be entered into among the Company and a trustee. The Indenture will be subject to and governed by the United States Trust Indenture Act of 1939, as amended (the “ Trust Indenture Act ”). A copy of the form of the Indenture will be filed with the SEC as an exhibit to the Registration Statement of which this Prospectus forms a part. The following description sets forth certain general material terms and provisions of the Debt Securities and is not intended to be complete. For a more complete description, prospective investors should refer to the Indenture and the terms of the Debt Securities. If Debt Securities are issued, we will describe in the applicable Prospectus Supplement the particular terms and provisions of any series of the Debt Securities and a description of how the general terms and provisions described below may apply to that series of the Debt Securities. Prospective investors should rely on information in the applicable Prospectus Supplement and not on the following information to the extent that the information in such Prospectus Supplement is different from the following information. We will file as exhibits to the Registration Statement, of which this Prospectus is a part, or will incorporate by reference from a report on Form 6-K that the Company furnishes to the SEC, any supplemental indenture describing the terms and conditions of Debt Securities that we are offering before the issuance of such Debt Securities.

We may issue Debt Securities and incur additional indebtedness other than through the offering of Debt Securities pursuant to this Prospectus.

General

The Indenture will not limit the aggregate principal amount of Debt Securities that we may issue under the Indenture and will not limit the amount of other indebtedness that we may incur. The Indenture will provide that we may issue Debt Securities from time to time in one or more series and may be denominated and payable in U.S. dollars, Canadian dollars or any foreign currency. Unless otherwise indicated in the applicable Prospectus Supplement, the Debt Securities will be unsecured obligations of the Company. The Indenture will also permit us to increase the principal amount of any series of the Debt Securities previously issued and to issue that increased principal amount.

The applicable Prospectus Supplement for any series of Debt Securities that we offer will describe the specific terms of the Debt Securities and may include, but is not limited to, any of the following:

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the title of the Debt Securities;

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any limit on the aggregate principal amount of the Debt Securities and, if no limit is specified, the Company will have the right to re-open such series for the issuance of additional Debt Securities from time to time;

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whether the payment of principal, interest and premium, if any, on the Debt Securities will be our senior, senior subordinated or subordinated obligations;

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whether payment of principal, interest and premium, if any, on the Debt Securities will be secured by certain assets of the Company and any applicable guarantors;

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whether payment of the Debt Securities will be guaranteed by any other person;

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the date or dates, or the method by which such date or dates will be determined or extended, on which the principal (and premium, if any) of the Debt Securities of the series is payable;

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the rate or rates at which the Securities of the series shall bear interest, if any, or the method by which such rate or rates shall be determined, whether such interest shall be payable in cash or additional Securities of the same series or shall accrue and increase the aggregate principal amount outstanding of such series, the date or dates from which such interest shall accrue, or the method by which such date or dates shall be determined;

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the place or places we will pay principal, premium and interest, if any, and the place or places where Debt Securities can be presented for registration of transfer, exchange or conversion;

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whether and under what circumstances we will be required to pay any additional amounts for withholding or deduction for taxes with respect to the Debt Securities, and whether and on what terms we will have the option to redeem the Debt Securities rather than pay the additional amounts;

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whether we will be obligated to redeem, repay or repurchase the Debt Securities pursuant to any sinking or other provision, or at the option of a holder and the terms and conditions of such redemption, repayment or repurchase;

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whether we may redeem the Debt Securities, in whole or in part, prior to maturity and the terms and conditions of any such redemption;

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the denominations in which we will issue any registered Debt Securities, if other than denominations of $2,000 and any multiple of $1,000 and, if other than denominations of $5,000, the denominations in which any unregistered Debt Security shall be issuable;

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whether we will make payments on the Debt Securities in a currency other than U.S. dollars;

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whether payments on the Debt Securities will be payable with reference to any index, formula or other method;

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whether we will issue the Debt Securities as global securities and, if so, the identity of the depositary for the global securities;

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whether we will issue the Debt Securities as unregistered securities, registered securities or both;

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any changes or additions to, or deletions of, events of default or covenants whether or not such events of default or covenants are consistent with the events of default or covenants in the Indenture;

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the applicability of, and any changes or additions to, the provisions for defeasance described under “Defeasance” below;

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whether the holders of any series of Debt Securities have special rights if specified events occur;

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the terms, if any, for any conversion or exchange of the Debt Securities for any other securities;

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provisions as to modification, amendment or variation of any rights or terms attaching to the Debt Securities; and

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any other terms, conditions, rights and preferences (or limitations on such rights and preferences).

Unless stated otherwise in the applicable Prospectus Supplement, no holder of Debt Securities will have the right to require us to repurchase the Debt Securities and there will be no increase in the interest rate if we become involved in a highly leveraged transaction or if we have a change of control.

We may issue Debt Securities bearing no interest or interest at a rate below the prevailing market rate at the time of issuance, and may offer and sell the Debt Securities at a discount below their stated principal amount. We may also sell any of the Debt Securities for a foreign currency or currency unit, and payments on the Debt Securities may be payable in a foreign currency or currency unit. In any of these cases, we will describe certain Canadian federal and U.S. federal income tax consequences and other special considerations in the applicable Prospectus Supplement.

We may issue Debt Securities with terms different from those of Debt Securities previously issued and, without the consent of the holders thereof, we may reopen a previous issue of a series of Debt Securities and issue additional Debt Securities of such series (unless the reopening was restricted when such series was created).

Guarantees

Our payment obligations under any series of Debt Securities may be guaranteed by certain of our direct or indirect subsidiaries. In order to comply with certain registration statement form requirements under U.S. law, these guarantees may in turn be guaranteed by the Company. The terms of such guarantees will be set forth in the applicable Prospectus Supplement.

Ranking and Other Indebtedness

Unless otherwise indicated in an applicable Prospectus Supplement, and except to the extent prescribed by law, each series of Debt Securities shall be senior, unsubordinated and unsecured obligations of the Company and shall rank pari passu and ratably without preference among themselves and pari passu with all other senior, unsubordinated and unsecured obligations of the Company.

Our Board of Directors may establish the extent and manner, if any, to which payment on or in respect of a series of Debt Securities will be senior, senior subordinated or will be subordinated to the prior payment of the Company’s other liabilities and obligations, and whether the payment of principal, premium, if any, and interest, if any, will be guaranteed by any other person and the nature and priority of any security.

Debt Securities in Global Form

The Depositary and Book-Entry

Unless otherwise specified in the applicable Prospectus Supplement, a series of the Debt Securities may be issued in whole or in part in global form as a “global security” and will be registered in the name of or issued in bearer form and be deposited with a depositary, or its nominee, each of which will be identified in the applicable Prospectus Supplement relating to that series. Unless and until exchanged, in whole or in part, for the Debt Securities in definitive registered form, a global security may not be transferred except as a whole by the depositary for such global security to a nominee of the depositary, by a nominee of the depositary to the depositary or another nominee of the depositary or by the depositary or any such nominee to a successor of the depositary or a nominee of the successor.

The specific terms of the depositary arrangement with respect to any portion of a particular series of the Debt Securities to be represented by a global security will be described in the applicable Prospectus Supplement relating to such series. The Company anticipates that the provisions described in this section will apply to all depositary arrangements.

Upon the issuance of a global security, the depositary therefor or its nominee will credit, on its book entry and registration system, the respective principal amounts of the Debt Securities represented by the global security to the accounts of such persons, designated as “participants”, having accounts with such depositary or its nominee. Such accounts shall be designated by the underwriters, dealers or agents participating in the distribution of the Debt Securities or by the Company if such Debt Securities are offered and sold directly by the Company. Ownership of beneficial interests in a global security will be limited to participants or persons that may hold beneficial interests through participants. Ownership of beneficial interests in a global security will be shown on, and the transfer of that ownership will be effected only through, records maintained by the depositary therefor or its nominee (with respect to interests of participants) or by participants or persons that hold through participants (with respect to interests of persons other than participants). The laws of some states in the United States may require that certain purchasers of securities take physical delivery of such securities in definitive form.

So long as the depositary for a global security or its nominee is the registered owner of the global security or holder of a global security in bearer form, such depositary or such nominee, as the case may be, will be considered the sole owner or holder of the Debt Securities represented by the global security for all purposes under the Indenture. Except as provided below, owners of beneficial interests in a global security will not be entitled to have a series of the Debt Securities represented by the global security registered in their names, will not receive or be entitled to receive physical delivery of such series of the Debt Securities in definitive form and will not be considered the owners or holders thereof under the Indenture.

Any payments of principal, premium, if any, and interest, if any, on global securities registered in the name of a depositary or securities registrar will be made to the depositary or its nominee, as the case may be, as the registered owner of the global security representing such Debt Securities. None of the Company, any trustee or any paying agent for the Debt Securities represented by the global securities will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests of the global security or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests.

The Company expects that the depositary for a global security or its nominee, upon receipt of any payment of principal, premium, if any, or interest, if any, will credit participants’ accounts with payments in amounts proportionate to their respective beneficial interests in the principal amount of the global security as shown on the records of such depositary or its nominee. The Company also expects that payments by participants to owners of beneficial interests in a global security held through such participants will be governed by standing instructions and customary practices, as is now the case with securities held for the accounts of customers registered in “street name”, and will be the responsibility of such participants.

Discontinuance of Depositary’s Services

If a depositary for a global security representing a particular series of the Debt Securities is at any time unwilling or unable to continue as depositary or, if at any time the depositary for such series shall no longer be registered or in good standing under the Exchange Act, and a successor depositary is not appointed by us within 90 days, the Company will issue such series of the Debt Securities in definitive form in exchange for a global security representing such series of the Debt Securities. If an event of default under the Indenture has occurred and is continuing, Debt Securities in definitive form will be printed and delivered upon written request by the holder to the appropriate trustee. In addition, the Company may at any time and in the Company’s sole discretion determine not to have a series of the Debt Securities represented by a global security and, in such event, will issue a series of the Debt Securities in definitive form in exchange for all of the global securities representing that series of Debt Securities.

Debt Securities in Definitive Form

A series of the Debt Securities may be issued in definitive form, solely as registered securities, solely as unregistered securities or as both registered securities and unregistered securities. Registered securities will be issuable in denominations of $2,000 and integral multiples of $1,000 and unregistered securities will be issuable in denominations of $5,000 and integral multiples of $5,000 or, in each case, in such other denominations as may be set out in the terms of the Debt Securities of any particular series. Unless otherwise indicated in the applicable Prospectus Supplement, unregistered securities will have interest coupons attached.

Unless otherwise indicated in the applicable Prospectus Supplement, payment of principal, premium, if any, and interest, if any, on the Debt Securities in definitive form will be made at the office or agency designated by the Company, or at the Company’s option the Company can pay principal, interest, if any, and premium, if any, by check mailed to the address of the person entitled at the address appearing in the security register of the trustee or electronic funds wire transfer to an account of persons who meet certain thresholds set out in the Indenture who are entitled to receive payments by wire transfer. Unless otherwise indicated in the applicable Prospectus Supplement, payment of interest, if any, will be made to the persons in whose name the Debt Securities are registered at the close of business on the day or days specified by the Company.

At the option of the holder of Debt Securities, registered securities of any series will be exchangeable for other registered securities of the same series, of any authorized denomination and of a like aggregate principal amount. If, but only if, provided in an applicable Prospectus Supplement, unregistered securities (with all unmatured coupons, except as provided below, and all matured coupons in default) of any series may be exchanged for registered securities of the same series, of any authorized denominations and of a like aggregate principal amount and tenor. In such event, unregistered securities surrendered in a permitted exchange for registered securities between a regular record date or a special record date and the relevant date for payment of interest shall be surrendered without the coupon relating to such date for payment of interest, and interest will not be payable on such date for payment of interest in respect of the registered security issued in exchange for such unregistered security, but will be payable only to the holder of such coupon when due in accordance with the terms of the Indenture. Unless otherwise specified in an applicable Prospectus Supplement, unregistered securities will not be issued in exchange for registered securities.

The applicable Prospectus Supplement may indicate the places to register a transfer of the Debt Securities in definitive form. Service charges may be payable by the holder for any registration of transfer or exchange of the Debt Securities in definitive form, and the Company may, in certain instances, require a sum sufficient to cover any tax or other governmental charges payable in connection with these transactions.

We shall not be required to:

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issue, register the transfer of or exchange any series of the Debt Securities in definitive form during a period beginning at the opening of 15 days before any selection of securities of that series of the Debt Securities to be redeemed and ending on the relevant date of notice of such redemption, as provided in the Indenture;

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register the transfer of or exchange any registered security in definitive form, or portion thereof, called for redemption, except the unredeemed portion of any registered security being redeemed in part;

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exchange any unregistered security called for redemption except to the extent that such unregistered security may be exchanged for a registered security of that series and like tenor; provided that such registered security will be simultaneously surrendered for redemption; or

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issue, register the transfer of or exchange any of the Debt Securities in definitive form which have been surrendered for repayment at the option of the holder, except the portion, if any, of such Debt Securities not to be so repaid.

Provision of Financial Information

The Company will file with the Trustee within 15 days after the Company files the same with the SEC, (i) copies of the annual reports containing audited financial statements and copies of quarterly reports containing unaudited financial statements and (ii) copies of the information, documents and other reports (or copies of such portions of any of the foregoing as the Commission may from time to time by rules and regulations prescribe) which the Company may be required to file with or furnish to the SEC pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934.

In the event that the Company is not required to remain subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, or otherwise report on an annual and quarterly basis on forms provided for such annual and quarterly reporting pursuant to rules and regulations promulgated by the SEC, it will continue to file with the SEC and provide the Trustee:

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within 140 days after the end of each fiscal year, annual reports on Form 20-F, 40-F or Form 10-K, as applicable (or any successor form), containing audited financial statements and the other financial information required to be contained therein (or required in such successor form); and

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within 60 days after the end of each of the first three fiscal quarters of each fiscal year, reports on Form 6-K or Form 10-Q (or any successor form), containing unaudited financial statements and the other financial information which, regardless of applicable requirements shall, at a minimum, contain such information required to be provided in quarterly reports under the laws of Canada or any province thereof to security holders of a corporation with securities listed on the Toronto Stock Exchange, whether or not the Company has any of its securities so listed.

Events of Default

Unless otherwise specified in the applicable Prospectus Supplement relating to a particular series of Debt Securities, the following is a summary of events which will, with respect to any series of the Debt Securities, constitute an event of default under the Indenture with respect to the Debt Securities of that series:

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the Company fails to pay principal of, or any premium on any Debt Security of that series when it is due and payable;

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the Company fails to pay interest payable on any Debt Security of that series when it becomes due and payable, and such default continues for 30 days;

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the Company fails to make any required sinking fund or analogous payment when due for that series of Debt Securities;

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the Company fails to observe or perform any of its covenants or agreements in the Indenture that affect or are applicable to the Debt Securities of that series for 90 days after written notice to the Company by the trustees or to the Company and the trustees by holders of at least 25% in aggregate principal amount of the outstanding Debt Securities of that series;

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certain events involving the Company’s bankruptcy, insolvency or reorganization; and

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any other event of default provided for in that series of Debt Securities.

A default under one series of Debt Securities will not necessarily be a default under another series. A trustee may withhold notice to the holders of the Debt Securities of any default, except in the payment of principal or premium, if any, or interest, if any, if in good faith it considers it in the interests of the holders to do so and so advises the Company in writing.

If an event of default for any series of Debt Securities occurs and continues, a trustee or the holders of at least 25% in aggregate principal amount of the Debt Securities of that series may require the Company to repay immediately:

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the entire principal and interest of the Debt Securities of the series; or

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if the Debt Securities are discounted securities, that portion of the principal as is described in the applicable Prospectus Supplement.

If an event of default relates to events involving the Company’s bankruptcy, insolvency or reorganization, the principal of all Debt Securities will become immediately due and payable without any action by the trustee or any holder.

Subject to certain conditions, the holders of a majority of the aggregate principal amount of the Debt Securities of the affected series can rescind and annul an accelerated payment requirement. If Debt Securities are discounted securities, the applicable Prospectus Supplement will contain provisions relating to the acceleration of maturity of a portion of the principal amount of the discounted securities upon the occurrence or continuance of an event of default.

Other than its duties in case of a default, a trustee is not obligated to exercise any of the rights or powers that it will have under the Indenture at the request or direction of any holders, unless the holders offer the trustee reasonable security or indemnity. If they provide this reasonable security or indemnity, the holders of a majority in aggregate principal amount of any series of Debt Securities may, subject to certain limitations, direct the time, method and place of conducting any proceeding for any remedy available to a trustee, or exercising any trust or power conferred upon a trustee, for any series of Debt Securities.

The Company will be required to furnish to the trustees a statement annually as to its compliance with all conditions and covenants under the Indenture and, if the Company is not in compliance, the Company must specify any defaults. The Company will also be required to notify the trustees as soon as practicable upon becoming aware of any event of default.

No holder of a Debt Security of any series will have any right to institute any proceeding with respect to the Indenture, or for the appointment of a receiver or a trustee, or for any other remedy, unless:

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the holder has previously given to the trustees written notice of a continuing event of default with respect to the Debt Securities of the affected series;

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the holders of at least 25% in principal amount of the outstanding Debt Securities of the series affected by an event of default have made a written request, and the holders have offered reasonable indemnity, to the trustees to institute a proceeding as trustees; and

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the trustees have failed to institute a proceeding, and have not received from the holders of a majority in aggregate principal amount of the outstanding Debt Securities of the series affected (or in the case of bankruptcy, insolvency or reorganization, all series outstanding) by an event of default a direction inconsistent with the request, within 60 days after receipt of the holders’ notice, request and offer of indemnity.

However, such above-mentioned limitations do not apply to a suit instituted by the holder of a Debt Security for the enforcement of payment of the principal of or any premium, if any, or interest on such Debt Security on or after the applicable due date specified in such Debt Security.

Defeasance

When the Company uses the term “defeasance”, it means discharge from its obligations with respect to any Debt Securities of or within a series under the Indenture. Unless otherwise specified in the applicable Prospectus Supplement, if the Company deposits with a trustee cash, government securities or a combination thereof sufficient to pay the principal, interest, if any, premium, if any, and any other sums due to the stated maturity date or a redemption date of the Debt Securities of a series, then at the Company’s option:

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the Company will be discharged from the obligations with respect to the Debt Securities of that series; or

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the Company will no longer be under any obligation to comply with certain restrictive covenants under the Indenture and certain events of default will no longer apply to the Company.

If this happens, the holders of the Debt Securities of the affected series will not be entitled to the benefits of the Indenture except for registration of transfer and exchange of Debt Securities and the replacement of lost, stolen, destroyed or mutilated Debt Securities. These holders may look only to the deposited fund for payment on their Debt Securities.

To exercise the defeasance option, the Company must deliver to the trustees:

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an opinion of counsel in the United States to the effect that the holders of the outstanding Debt Securities of the affected series will not recognize income, gain or loss for U.S. federal income tax purposes as a result of a defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if the defeasance had not occurred;

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an opinion of counsel in Canada or a ruling from the Canada Revenue Agency to the effect that the holders of the outstanding Debt Securities of the affected series will not recognize income, gain or loss for Canadian federal, provincial or territorial income or other tax purposes as a result of a defeasance and will be subject to Canadian federal, provincial or territorial income tax and other tax on the same amounts, in the same manner and at the same times as would have been the case had the defeasance not occurred; and

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a certificate of one of the Company’s officers and an opinion of counsel, each stating that all conditions precedent provided for relating to defeasance have been complied with.

If the Company is to be discharged from its obligations with respect to the Debt Securities, and not just from the Company’s covenants, the U.S. opinion must be based upon a ruling from or published by the United States Internal Revenue Service or a change in law to that effect.

In addition to the delivery of the opinions described above, the following conditions must be met before the Company may exercise its defeasance option:

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no event of default or event that, with the passing of time or the giving of notice, or both, shall constitute an event of default shall have occurred and be continuing for the Debt Securities of the affected series;

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the Company is not an “insolvent person” within the meaning of applicable bankruptcy and insolvency legislation; and

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other customary conditions precedent are satisfied.

Modification and Waiver

Modifications and amendments of the Indenture may be made by the Company and the trustees pursuant to one or more Supplemental Indentures (a “Supplemental Indenture”) with the consent of the holders of at least a majority in aggregate principal amount of the outstanding Debt Securities of each series affected by the modification. However, without the consent of each holder affected, no such modification may:

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change the stated maturity of the principal of, premium, if any, or any instalment of interest, if any, on any Debt Security;

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reduce the principal, premium, if any, or rate of interest, if any, or change any obligation of the Company to pay any additional amounts;

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reduce the amount of principal of a debt security payable upon acceleration of its maturity or the amount provable in bankruptcy;

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change the place or currency of any payment;

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affect the holder’s right to require the Company to repurchase the Debt Securities at the holder’s option;

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impair the right of the holders to institute a suit to enforce their rights to payment;

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adversely affect any conversion or exchange right related to a series of Debt Securities;

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reduce the percentage of Debt Securities required to modify the Indenture or to waive compliance with certain provisions of the Indenture; or

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reduce the percentage in principal amount of outstanding Debt Securities necessary to take certain actions.

The holders of at least a majority in principal amount of outstanding Debt Securities of any series may on behalf of the holders of all Debt Securities of that series waive, insofar as only that series is concerned, past defaults under the Indenture and compliance by the Company with certain restrictive provisions of the Indenture. However, these holders may not waive a default in any payment of principal, premium, if any, or interest on any Debt Security or compliance with a provision that cannot be modified without the consent of each holder affected.

The Company may modify the Indenture pursuant to a Supplemental Indenture without the consent of any holders to:

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evidence its successor under the Indenture;

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add covenants of the Company or surrender any right or power of the Company for the benefit of holders;

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add events of default;

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provide for unregistered securities to become registered securities under the Indenture and make other such changes to unregistered securities that in each case do not materially and adversely affect the interests of holders of outstanding Debt Securities;

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establish the forms of the Debt Securities;

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appoint a successor trustee under the Indenture;

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add provisions to permit or facilitate the defeasance and discharge of the Debt Securities as long as there is no material adverse effect on the holders;

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cure any ambiguity, correct or supplement any defective or inconsistent provision or make any other provisions in each case that would not materially and adversely affect the interests of holders of outstanding Debt Securities, if any; or

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change or eliminate any provisions of the Indenture where such change takes effect when there are no Debt Securities outstanding which are entitled to the benefit of those provisions under the Indenture.

Governing Law

The Indenture and the Debt Securities will be governed by and construed in accordance with the laws of the State of New York.

The Trustee

The Trustee under the Indenture or its affiliates may provide banking and other services to the Corporation in the ordinary course of their business.

The Indenture will contain certain limitations on the rights of the Trustee, as long as it or any of its affiliates remains the Corporation’s creditor, to obtain payment of claims in certain cases or to realize on certain property received on any claim as security or otherwise. The Trustee and its affiliates will be permitted to engage in other transactions with the Corporation. If the Trustee or any affiliate acquires any conflicting interest and a default occurs with respect to the Debt Securities, the Trustee must eliminate the conflict or resign.

Resignation and Removal of Trustee

A trustee may resign or be removed with respect to one or more series of the Debt Securities and a successor trustee may be appointed to act with respect to such series.

Consent to Jurisdiction and Service

Under the Indenture, the Corporation will irrevocably appoint an authorized agent upon which process may be served in any suit, action or proceeding arising out of or relating to the Offered Debt Securities or the Indenture that may be instituted in any United States federal or New York state court located in The City of New York, and will submit to such non-exclusive jurisdiction.

Units

We may issue Units comprised of one or more of the other Securities described in the Prospectus in any combination. Each Unit will be issued so that the holder of the Unit is also the holder of each of the Securities included in the Unit. Thus, the holder of a Unit will have the rights and obligations of a holder of each included Security. The unit agreement, if any, under which a Unit is issued may provide that the Securities included in the Unit may not be held or transferred separately, at any time or at any time before a specified date.

The particular terms and provisions of Units offered by any Prospectus Supplement, and the extent to which the general terms and provisions described below may apply thereto, will be described in the Prospectus Supplement filed in respect of such Units. This description will include, where applicable:

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the number of Units offered;

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the price or prices, if any, at which the Units will be issued;

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the currency at which the Units will be offered;

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the Securities comprising the Units;

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whether the Units will be issued with any other Securities and, if so, the amount and terms of these Securities;

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any minimum or maximum subscription amount;

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whether the Units and the Securities comprising the Units are to be issued in registered form, “book-entry only” form, non-certificated inventory system form, bearer form or in the form of temporary or permanent global securities and the basis of exchange, transfer and ownership thereof;

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any material risk factors relating to such Units or the Securities comprising the Units;

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any other rights, privileges, restrictions and conditions attaching to the Units or the Securities comprising the Units; and

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any other material terms or conditions of the Units or the Securities comprising the Units, including whether and under what circumstances the Securities comprising the Units may be held or transferred separately.

The terms and provisions of any Units offered under a Prospectus Supplement may differ from the terms described above and may not be subject to or contain any or all of the terms described above.

RISK FACTORS

Before making an investment decision to purchase any Securities, investors should carefully consider the information described in this Prospectus and the documents incorporated or deemed incorporated by reference herein, including the applicable Prospectus Supplement. There are certain risks inherent in an investment in the Securities, including the factors described in the 2018 AIF, in the 2018 MD&A and any other risk factors described herein or in a document incorporated or deemed incorporated by reference herein, which investors should carefully consider before investing. Additional risk factors relating to a specific offering of Securities will be described in the applicable Prospectus Supplement. Some of the factors described herein, in the documents incorporated or deemed incorporated by reference herein, and/or the applicable Prospectus Supplement are interrelated and, consequently, investors should treat such risk factors as a whole. If any of the adverse effects set out in the risk factors described herein, in the 2018 AIF, in the 2018 MD&A, in another document incorporated or deemed incorporated by reference herein or in the applicable Prospectus Supplement occur, it could have a material adverse effect on the business, financial condition and results of operations of the Company. Additional risks and uncertainties of which the Company currently is unaware or that are unknown or that it currently deems to be immaterial could have a material adverse effect on the Company’s business, financial condition and results of operations. The Company cannot assure you that it will successfully address any or all of these risks. There is no assurance that any risk management steps taken will avoid future loss due to the occurrence of the adverse effects set out in the risk factors herein, in the 2018 AIF, in the 2018 MD&A, in the other documents incorporated or deemed incorporated by reference herein or in the applicable Prospectus Supplement or other unforeseen risks.

Risks relating to our Business

Our business is reliant on the good standing of our licenses.

Our ability to continue our business of growth, storage and distribution of cannabis is dependent on the good standing of all of our licenses, authorizations and permits and adherence to all regulatory requirements related to such activities. Any failure to comply with the terms of the licenses, or to migrate or renew the licenses after their expiry dates, would have a material adverse impact on our financial condition and operations of the business. Although we believe that we will meet the requirements of the Cannabis Act for migration and future extensions or renewals of the licenses, there can be no assurance that Health Canada will migrate, extend or renew the licenses, or if extended or renewed, that they will be extended or renewed on the same or similar terms. Should Health Canada or the Canada Revenue Agency not extend or renew the licenses or should they renew the licenses on different terms, our business, financial condition and operating results would be materially adversely affected.

We compete for market share with a number of competitors and expect even more competitors to enter our market, and many of our current and future competitors may have longer operating histories, more financial resources and lower costs than us.

We expect significant competition from other companies in light of the recent coming into force of the Cannabis Act. A large number of companies appear to be applying for cultivation, processing and sale licenses, some of which may have significantly greater financial, technical, marketing and other resources than us, may be able to devote greater resources to the development, promotion, sale and support of their products and services, and may have more extensive customer bases and broader customer relationships. Our future success depends upon our ability to achieve competitive per unit costs through increased production and on our ability to recognize higher margins through the sale of higher margin products. To the extent that we are not able to produce our products at competitive prices or consumers prioritize established low margin products over innovative, higher margin products, our business, financial conditions and operations could be materially and adversely affected.

Should the size of the cannabis market increase as projected the overall demand for products and number of competitors will increase as well, and in order for us to be competitive we will need to invest significantly in

research and development, market development, marketing, production expansion, new client identification, distribution channels and client support. If we are not successful in obtaining sufficient resources to invest in these areas, our ability to compete in the market may be adversely affected, which could materially and adversely affect our business, financial conditions and operations.

Change in the laws, regulations and guidelines that impact our business may cause adverse effects on our operations.

Our business is subject to a variety of laws, regulations and guidelines relating to the marketing, acquisition, manufacture, management, transportation, storage, sale, labeling and disposal of cannabis as well as laws and regulations relating to health and safety, the conduct of operations and the protection of the environment. Changes to such laws, regulations and guidelines may cause adverse effects on our operations.

The Cannabis Act and its regulations came into force in Canada on October 17, 2018. The legislative framework pertaining to the Canadian non-medical cannabis market is subject to significant provincial and territorial regulation. The legal framework varies across provinces and territories and results in an asymmetric regulatory and market environment, different competitive pressures and significant additional compliance and other costs and/or limitations on our ability to participate in such market.

We operate in a highly regulated business and any failure or significant delay in obtaining regulatory approvals could adversely affect our ability to conduct our business.

Achievement of our business objectives are contingent, in part, upon compliance with the regulatory requirements, including those imposed by Health Canada, enacted by applicable government authorities and obtaining all regulatory approvals, where necessary, for the sale of our products. We cannot predict the time required to secure all appropriate regulatory approvals for our products, or the extent of testing and documentation that may be required by government authorities. Any delays in obtaining, or failure to obtain regulatory approvals would significantly delay the development of markets and products and could have a material adverse effect on our business, results of operation and financial condition.

We have a limited operating history and there is no assurance we will be able to achieve or maintain profitability.

Aurora Marijuana Inc., prior to the completion of the reverse takeover of Prescient Mining Corp. on December 9, 2014, was the entity in which our business was organized, was incorporated in 2013, and our business began operations in 2015, and started generating revenues from the sale of medical cannabis in January 2016. We are subject to all of the business risks and uncertainties associated with any early-stage enterprise, including under-capitalization, cash shortages, limitations with respect to personnel, financial and other resources, and lack of revenues.

We have incurred operating losses in recent periods. We may not be able to achieve or maintain profitability and may continue to incur significant losses in the future. In addition, we expect to continue to increase operating expenses as we implement initiatives to grow our business. If our revenues do not increase to offset these expected increases in costs and operating expenses, we will not be profitable. There is no assurance that we will be successful in achieving a return on shareholders’ investments and the likelihood of success must be considered in light of the early stage of our operations.

The cannabis business may be subject to unfavorable publicity or consumer perception.

The success of the cannabis industry may be significantly influenced by the public’s perception of cannabis. Cannabis is a controversial topic, and there is no guarantee that future scientific research, publicity, regulations, medical opinion and public opinion relating to cannabis will be favorable. Consumer perception of our products

can be significantly influenced by scientific research or findings, regulatory investigations, litigation, media attention and other publicity regarding the consumption of cannabis products. There can be no assurance that future scientific research, findings, regulatory proceedings, litigation, media attention or other research findings or publicity will be favorable to the cannabis market or any particular product, or consistent with earlier publicity. Future scientific research, findings, regulatory proceedings, litigation, media attention or other research findings or publicity that are perceived as less favorable than, or that question, earlier research reports, findings or publicity could have a material adverse effect on the demand for our products and our business, financial condition, results of operations and prospects. Our dependence upon consumer perceptions means that adverse scientific research, findings, regulatory proceedings, litigation, media attention or other research findings or publicity, whether or not accurate or with merit, could have a material adverse effect on us, the demand for products, and our business, financial condition, results of operations and prospects. Further, adverse publicity reports or other media attention regarding the safety, efficacy and quality of cannabis in general, or our products specifically, or associating the consumption of cannabis with illness or other negative effects or events, could have such a material adverse effect on us. Such adverse publicity reports or other media attention could arise even if the adverse effects associated with such products resulted from consumers’ failure to consume such products legally, appropriately or as directed.

We may not be able to realize our growth targets.

Our ability to continue the production of cannabis products at the same pace as we are currently producing or at all, and our ability to continue to increase both our production capacity and our production, may be affected by a number of factors, including plant design errors, non-performance by third party contractors, increases in materials or labor costs, construction performance falling below expected levels of output or efficiency, environmental pollution, contractor or operator errors, breakdowns, aging or failure of equipment or processes, labor disputes, as well as factors specifically related to indoor agricultural and processing practices, such as reliance on provision of energy and utilities to the facility, and potential impacts of major incidents or catastrophic events on the facility, such as fires, explosions, earthquakes or storms.

Our continued growth may require additional financing, which may not be available on acceptable terms or at all.

Our continued development may require additional financing. The failure to raise such capital could result in the delay or indefinite postponement of our current business strategy or our ceasing to carry on business. There can be no assurance that additional capital or other types of financing will be available if needed or that, if available, the terms of such financing will be available on favorable terms. If additional funds are raised through issuances of equity or convertible debt securities, existing shareholders could suffer significant dilution. In addition, from time to time, we may enter into transactions to acquire assets or the shares of other companies. These transactions may be financed wholly or partially with debt, which may increase our debt levels above industry standards or our ability to service such debt. Any debt financing obtained in the future could involve restrictive covenants relating to capital raising activities and other financial and operational matters, which could make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. Debt financings may contain provisions, which, if breached, entitle lenders to accelerate repayment of debt and there is no assurance that we would be able to repay such debt in such an event or prevent the enforcement of security, if any, granted pursuant to such debt financing.

We may be subject to uninsured or uninsurable risks.

We may be subject to liability for risks against which we cannot insure or against which we may elect not to insure due to the high cost of insurance premiums or other factors. The payment of any such liabilities would reduce the funds available for our normal business activities. Payment of liabilities for which we do not carry insurance may have a material adverse effect on our financial position and operations.

Our success will depend on attracting and retaining key personnel.

Our success will depend on our directors’ and officers’ ability to develop and execute on our business strategies and manage our ongoing operations, and on our ability to attract and retain key personnel. As the Cannabis Act requires us to retain certain prescribed personnel that can obtain security clearance, the loss of any such key personnel, their failure to maintain security clearance or our inability to find and retain new key persons could have a material adverse effect on our business. Competition for qualified technical, sales and marketing staff, as well as officers and directors can be intense, and no assurance can be provided that the Company will be able to attract or retain key personnel in the future, which may adversely impact the Company’s operations.

We have expanded and intend to further expand our business and operations into jurisdictions outside of Canada, and there are risks associated with doing so.

We intend to continue to expand our operations and business into jurisdictions outside of Canada. There can be no assurance that any market for our products will develop in any such foreign jurisdiction. We may face new or unexpected risks or significantly increase our exposure to one or more existing risk factors, including economic instability, changes in laws and regulations and the effects of additional competition. These factors may limit our capability to successfully expand our operations and may have a material adverse effect on our business, financial condition and results of operations.

Failure to comply with the Corruption of Foreign Public Officials Act (Canada) (“CFPOA”) and the United States Foreign Corrupt Practices (“FCPA”), as well as the other anti-bribery laws of the other nations in which we conduct business, could subject us to penalties and other adverse consequences.

We are subject to the CFPOA and the FCPA, which generally prohibit companies and company employees from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business. The CFPOA and the FCPA also require companies to maintain accurate books and records and internal controls, including at foreign controlled subsidiaries. In addition, we are subject to other anti-bribery laws of the nations in which we conduct business that apply similar prohibitions as the CFPOA and FCPA (e.g. the Organization for Economic Co-operation and Development Anti-Bribery Convention). Our employees or other agents may, without our knowledge and despite our efforts, engage in prohibited conduct under our policies and procedures and the CFPOA, the FCPA or other anti-bribery laws to which we may be subject for which we may be held responsible. If our employees or other agents are found to have engaged in such practices, we could suffer severe penalties and other consequences that may have a material adverse effect on our business, financial condition and results of operations.

Third parties with whom we do business may perceive themselves as being exposed to reputational risk by virtue of their relationship with us and may ultimately elect not to do business with us.

The parties with which we do business may perceive that they are exposed to reputational risk as a result of our cannabis business activities. Failure to establish or maintain business relationships could have a material adverse effect on us.

We may enter into strategic alliances or expand the scope of currently existing relationships with third parties that we believe compliment or augment our business, financial condition and results of operation and there are risks associated with such activities.

We have entered into, and may in the future enter into, strategic alliances with third parties that we believe will complement or augment our existing business. Our ability to complete strategic alliances is dependent upon, and may be limited by, the availability of suitable candidates and capital. In addition, strategic alliances could present unforeseen regulatory issues, integration obstacles or costs, may not enhance our business, and may involve risks

that could adversely affect us, including significant amounts of management time that may be diverted from operations in order to pursue and complete such transactions or maintain such strategic alliances. Future strategic alliances could result in the incurrence of additional debt, costs and contingent liabilities, and there can be no assurance that future strategic alliances will achieve, or that our existing strategic alliances will continue to achieve, the expected benefits to our business or that we will be able to consummate future strategic alliances on satisfactory terms, or at all. Any of the foregoing could have a material adverse effect on our business, financial condition and results of operations.

We may be subject to product liability claims .

As a manufacturer and distributor of products designed to be inhaled and ingested by humans, we face an inherent risk of exposure to product liability claims, regulatory action and litigation if our products are alleged to have caused significant loss or injury. In addition, the manufacture and sale of cannabis products involves the risk of injury to consumers due to tampering by unauthorized third parties or product contamination. Previously unknown adverse reactions resulting from human consumption of cannabis products alone or in combination with other medications or substances could occur. We may be subject to various product liability claims, including, among others, that the products produced by us caused or contributed to injury or illness, include inadequate instructions for use or include inadequate warnings concerning possible side effects or interactions with other substances. A product liability claim or regulatory action against us could result in increased costs, could adversely affect our reputation and goodwill with our customers and consumers generally, and could have a material adverse effect on our business, financial condition and results of operations. There can be no assurances that we will be able to obtain or maintain product liability insurance on acceptable terms or with adequate coverage against potential liabilities. Such insurance is expensive and may not be available in the future on acceptable terms, or at all. The inability to obtain sufficient insurance coverage on reasonable terms or to otherwise protect against potential product liability claims could prevent or inhibit the commercialization of products.

Our cannabis products may be subject to recalls for a variety of reasons.

Manufacturers and distributors of products are sometimes subject to the recall or return of their products for a variety of reasons, including product defects, such as contamination, unintended harmful side effects or interactions with other substances, packaging safety and inadequate or inaccurate labeling disclosure. If any of the products produced by us are recalled due to an alleged product defect or for any other reason, we could be required to incur the unexpected expense of the recall and any legal proceedings that might arise in connection with the recall. We may lose a significant amount of sales and may not be able to replace those sales at an acceptable margin or at all. In addition, a product recall may require significant management attention. Although we have detailed procedures in place for testing finished products, there can be no assurance that any quality, potency or contamination problems will be detected in time to avoid unforeseen product recalls, regulatory action or lawsuits, whether frivolous or otherwise. Additionally, if any of the products produced by us were subject to recall, the reputation and goodwill of that product and/or us could be harmed. A recall for any of the foregoing reasons could lead to decreased demand for our products and could have a material adverse effect on our business, financial condition and results of operations. Additionally, product recalls may lead to increased scrutiny of our operations by Health Canada or other regulatory agencies, requiring further management attention, increased compliance costs and potential legal fees, fines, penalties and other expenses. Furthermore, any product recall affecting the cannabis industry more broadly could lead consumers to lose confidence in the safety and security of the products sold by holders of licenses under the Cannabis Act generally, which could have a material adverse effect on our business, financial condition and results of operations.

We may not be able to successfully develop new products or find a market for their sale.

The medical and non-medical cannabis industries are in their early stages of development and it is likely that we, and our competitors, will seek to introduce new products in the future. In attempting to keep pace with any new

market developments, we may need to expend significant amounts of capital in order to successfully develop and generate revenues from new products introduced by us. As well, we may be required to obtain additional regulatory approvals from Health Canada and any other applicable regulatory authorities, which may take significant amounts of time and entail significant costs. We may not be successful in developing effective and safe new products, bringing such products to market in time to be effectively commercialized, or obtaining any required regulatory approvals, which, together with any capital expenditures made in the course of such product development and regulatory approval processes, may have a material adverse effect on our business, financial condition and results of operations.

Certain of our directors and officers may have conflicts of interests due to other business relationships.

Certain of our directors and officers are also directors and officers of other companies. Situations may arise in connection with potential acquisitions or opportunities where the other interests of these directors and officers conflict with or diverge from our interests. In accordance with the BCBCA, directors who have a material interest in any person who is a party to a material contract or a proposed material contract are required, subject to certain exceptions, to disclose that interest and generally abstain from voting on any resolution to approve the contract.

We may become party to litigation, mediation and/or arbitration from time to time.

We may become party to regulatory proceedings, litigation, mediation and/or arbitration from time to time in the ordinary course of business which could adversely affect our business. Monitoring and defending against legal actions, whether or not meritorious, can be time-consuming, divert management’s attention and resources and cause us to incur significant expenses. In addition, legal fees and costs incurred in connection with such activities may be significant and we could, in the future, be subject to judgments or enter into settlements of claims for significant monetary damages. While we have insurance that may cover the costs and awards of certain types of litigation, the amount of insurance may not be sufficient to cover any costs or awards. Substantial litigation costs or an adverse result in any litigation may adversely impact our business, operating results or financial condition.

Our business is subject to the risks inherent in agricultural operations.

Since our business revolves mainly around the growth and processing of cannabis, an agricultural product, the risks inherent with agricultural businesses apply to our business. Such risks may include disease and insect pests, among others. Although we currently grow and expect to grow the significant majority of our product in climate controlled, monitored, indoor locations, there is no guarantee that changes in outside weather and climate will not adversely affect production. Further, any rise in energy costs may have a material adverse effect on our ability to produce cannabis.

The price of production of cannabis will vary based on a number of factors outside of our control.

Our revenues are in a large part derived from the production, sale and distribution of cannabis. The price of production, sale and distribution of cannabis is dependent on a number of key inputs and their related costs, including raw materials and supplies related to our growing operations, as well as electricity, water and other utilities. Our cannabis growing operations consume considerable energy, making us vulnerable to rising energy costs. Any significant interruption or negative change in the availability or economics of the supply chain for key inputs could materially impact our financial condition and operating results. Any inability to secure required supplies and services or to do so on appropriate terms could have a materially adverse impact on our business, financial condition, results of operations and prospects. This includes any change in the price of adult use products set by the applicable province or territory.

Any prolonged disruption in courier service used to distribute our product could impact our business and ability to operate profitably.

We depend on fast, cost-effective and efficient courier services to distribute our product to both wholesale and retail customers. Any prolonged disruption of this courier service could have an adverse effect on our financial

condition and results of operations. Rising costs associated with the courier service we use to ship our products may also adversely impact our business and our ability to operate profitably.

Our operations are subject to various environmental and employee health and safety regulations.

Our operations are subject to environmental and safety laws and regulations concerning, among other things, emissions and discharges to water, air and land, the handling and disposal of hazardous and non-hazardous materials and wastes, and employee health and safety. We incur ongoing costs and obligations related to compliance with environmental and employee health and safety matters. Failure to obtain an environmental compliance approval under applicable regulations or otherwise comply with environmental and safety laws and regulations may result in additional costs for corrective measures, penalties or in restrictions on our manufacturing operations. In addition, changes in environmental, employee health and safety or other laws, more vigorous enforcement thereof or other unanticipated events could require extensive changes to our operations or give rise to material liabilities, which could have a material adverse effect on our business, results of operations and financial condition.

We may not be able to protect our intellectual property.

Our success depends in part on our ability to protect our ideas and technology. Even if we move to protect our technology with trademarks, patents, copyrights or by other means, we are not assured that competitors will not develop similar technology, business methods or that we will be able to exercise our legal rights. Other countries may not protect intellectual property rights to the same standards as does Canada. Actions taken to protect or preserve intellectual property rights may require significant financial and other resources such that said actions have a meaningfully impact our ability to successfully grow our business.

Our business may be affected by political and economic instability.

We may be affected by possible political or economic instability. The risks include, but are not limited to, terrorism, military repression, extreme fluctuations in currency exchange rates and high rates of inflation. Changes in medicine and agricultural development or investment policies or shifts in political attitude in certain countries may adversely affect our business. Operations may be affected in varying degrees by government regulations with respect to restrictions on production, distribution, price controls, export controls, income taxes, expropriation of property, maintenance of assets, environmental legislation, land use, land claims of local people and water use. The effect of these factors cannot be accurately predicted.

Our expansion efforts may not be successful.

There is no guarantee that our intentions to acquire and/or construct additional cannabis production and manufacturing facilities in Canada and in other jurisdictions with legal cannabis markets, and to expand our marketing and sales initiatives will be successful. Any such activities will require, among other things, various regulatory approvals, licenses and permits (such as additional licenses from Health Canada under the Cannabis Act, as applicable) and there is no guarantee that all required approvals, licenses and permits will be obtained in a timely fashion or at all. There is also no guarantee that we will be able to complete any of the foregoing activities as anticipated or at all. Our failure to successfully execute our expansion strategy (including receiving required regulatory approvals and permits) could adversely affect our business, financial condition and results of operations and may result in our failing to meet anticipated or future demand for our cannabis-based pharmaceutical products, when and if it arises.

In addition, the construction of Aurora Sky, Aurora Sun and Aurora Nordic II are subject to various potential problems and uncertainties, and may be delayed or adversely affected by a number of factors beyond our control, including the failure to obtain regulatory approvals, permits, delays in the delivery or installation of equipment by our suppliers, difficulties in integrating new equipment with its existing facilities, shortages in materials or

labor, defects in design or construction, diversion of management resources, or insufficient funding or other resource constraints. Moreover, actual costs for construction may exceed our budgets. As a result of construction delays, cost overruns, changes in market circumstances or other factors, we may not be able to achieve the intended economic benefits from the construction of the new facilities, which in turn may materially and adversely affect our business, prospects, financial condition and results of operations.

We may not be able to successfully identify and execute future acquisitions or dispositions, or to successfully manage the impacts of such transactions on our operations.

Over the past 24 months, we have completed a number of significant acquisitions, including our acquisitions of MedReleaf and CanniMed. Material acquisitions, dispositions and other strategic transactions involve a number of risks, including: (i) potential disruption of our ongoing business; (ii) distraction of management; (iii) we may become more financially leveraged; (iv) the anticipated benefits and cost savings of those transactions may not be realized fully or at all or may take longer to realize than expected; (v) increasing the scope and complexity of our operations, and (vi) loss or reduction of control over certain of the our assets.

The presence of one or more material liabilities of an acquired company that are unknown to us at the time of acquisition could have a material adverse effect on our results of operations, business prospects and financial condition. A strategic transaction may result in a significant change in the nature of our business, operations and strategy. In addition, we may encounter unforeseen obstacles or costs in implementing a strategic transaction or integrating any acquired business into our operations.

We may experience breaches of security at our facilities or in respect of electronic documents and data storage and may face risks related to breaches of applicable privacy laws.

Given the nature of our product and its lack of legal availability outside of channels approved by the Government of Canada, as well as the concentration of inventory in our facilities, despite meeting or exceeding Health Canada’s security requirements, there remains a risk of shrinkage as well as theft. A security breach at one of our facilities could expose us to additional liability and to potentially costly litigation, increase expenses relating to the resolution and future prevention of these breaches and may deter potential customers from choosing our products.

In addition, we collect and store personal information about our customers and are responsible for protecting that information from privacy breaches. A privacy breach may occur through procedural or process failure, information technology malfunction, or deliberate unauthorized intrusions. Theft of data for competitive purposes, particularly patient lists and preferences, is an ongoing risk whether perpetrated via employee collusion or negligence or through deliberate cyber-attack. Any such theft or privacy breach would have a material adverse effect on our business, financial condition and results of operations.

Furthermore, there are a number of federal and provincial laws protecting the confidentiality of certain patient health information, including patient records, and restricting the use and disclosure of that protected information. In particular, the privacy rules under PIPEDA, protect medical records and other personal health information by limiting their use and disclosure of health information to the minimum level reasonably necessary to accomplish the intended purpose. If we were found to be in violation of the privacy or security rules under PIPEDA or other laws protecting the confidentiality of patient health information, we could be subject to sanctions and civil or criminal penalties, which could increase our liabilities, harm our reputation and have a material adverse effect on our business, results of operations and financial condition.

We may be subject to risks related to our information technology systems, including cyber-attacks.

We have entered into agreements with third parties for hardware, software, telecommunications and other IT services in connection with its operations. Our operations depend, in part, on how well we and our suppliers

protect networks, equipment, IT systems and software against damage from a number of threats, including, but not limited to, cable cuts, damage to physical plants, natural disasters, intentional damage and destruction, fire, power loss, hacking, computer viruses, vandalism and theft. Our operations also depend on the timely maintenance, upgrade and replacement of networks, equipment, IT systems and software, as well as pre-emptive expenses to mitigate the risks of failures. Any of these and other events could result in information system failures, delays and/or increase in capital expenses. The failure of information systems or a component of information systems could, depending on the nature of any such failure, adversely impact our reputation and results of operations.

We have not experienced any material losses to date relating to cyber-attacks or other information security breaches, but there can be no assurance that we will not incur such losses in the future. Our risk and exposure to these matters cannot be fully mitigated because of, among other things, the evolving nature of these threats. As a result, cyber security and the continued development and enhancement of controls, processes and practices designed to protect systems, computers, software, data and networks from attack, damage or unauthorized access is a priority. As cyber threats continue to evolve, we may be required to expend additional resources to continue to modify or enhance protective measures or to investigate and remediate any security vulnerabilities.

As a holding company, Aurora Cannabis Inc. is dependent on its operating subsidiaries to pay dividends and other obligations.

Aurora Cannabis Inc. is a holding company and essentially all of its operating assets are the capital stock of its subsidiaries and its business is conducted through subsidiaries which are separate legal entities. Consequently, our cash flows and ability to complete current or desirable future enhancement opportunities are dependent on the earnings of our subsidiaries and the distribution of those earnings to us. The ability of these entities to pay dividends and other distributions will depend on their operating results and will be subject to applicable laws and regulations which require that solvency and capital standards be maintained by such companies and contractual restrictions contained in the instruments governing their debt. In the event of a bankruptcy, liquidation or reorganization of any of our subsidiaries, holders of indebtedness and trade creditors will generally be entitled to payment of their claims from the assets of those subsidiaries before any assets are made available for distribution to us.

The integration of MedReleaf may not occur as planned and synergy targets may not be achieved.

It is expected that the acquisition of MedReleaf will result in enhanced production capacity, increased earnings and cost savings by taking advantage of operating and other synergies to be realized from our consolidation with MedReleaf and enhanced growth opportunities for the combined company. These anticipated benefits will depend in part on whether MedReleaf and our operations can be integrated in an efficient and effective manner. The integration of the two companies will present challenges to management, including the integration of systems and personnel of the two companies, and special risks, including possible unanticipated liabilities, unanticipated costs, and the loss of key employees. The performance of operations acquired from us from the acquisition of MedReleaf could be adversely affected if the combined company cannot retain key employees to assist in the integration and operation of us and MedReleaf. As a result of these factors, it is possible that the cost reductions and synergies expected from our combination with MedReleaf will not be realized.

Risks Related to our Common Shares

The price of our common shares historically has been volatile. This volatility may affect the price at which you could sell our common shares and the sale of substantial amounts of our common shares could adversely affect the price of our common shares and the value of your notes.

The market price for our common shares on the TSX has varied between a high of $16.24 on October 16, 2018 and a low of $5.29 on August 14, 2018 in the twelve-month period ending on March 28, 2019, and on the NYSE

has varied between a high of US$10.32 on March 19, 2019 and a low of US$4.58 on December 24, 2018, during the period since the commencement of trading on the NYSE on October 23, 2018. This volatility may affect the price at which you could sell our common shares, and the sale of substantial amounts of our common shares could adversely affect the price of our common shares. Our share price is likely to continue to be volatile and subject to significant price and volume fluctuations in response to market and other factors, including the other factors discussed in “Risks Related to our Business;” variations in our quarterly operating results from our expectations or those of securities analysts or investors; downward revisions in securities analysts’ estimates; and announcement by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments.

We may not pay dividends in the future.

We have not paid dividends in the past and do not anticipate paying dividends in the near future. We expect to retain our earnings to finance further growth and, when appropriate, retire debt. Any decision to pay dividends on our common shares in the future will be at the discretion of our board of directors (the “ Board ”) and will depend on, among other things, our results of operations, current and anticipated cash requirements and surplus, financial condition, any future contractual restrictions and financing agreement covenants, solvency tests imposed by corporate law and other factors that the Board may deem relevant. As a result, investors may not receive any return on an investment in our common shares unless they are able to sell their shares for a price greater than that which such investors paid for them.

Future sales or issuances of equity securities could decrease the value of our common shares, dilute investors’ voting power and reduce our earnings per share.

We may sell additional equity securities in subsequent offerings (including through the sale of securities convertible into equity securities and may issue equity securities in acquisitions, such as our proposed acquisitions of Farmacias). We cannot predict the size of future issuances of equity securities or the size and terms of future issuances of debt instruments or other securities convertible into equity securities or the effect, if any, that future issuances and sales of our securities will have on the market price of our common shares.

Additional issuances of our securities may involve the issuance of a significant number of common shares at prices less than the current market price for the common shares. Issuances of substantial numbers of common shares, or the perception that such issuances could occur, may adversely affect prevailing market prices of our common shares. Any transaction involving the issuance of previously authorized but unissued common shares, or securities convertible into common shares, would result in dilution, possibly substantial, to security holders.

Sales of substantial amounts of our securities by us or our existing shareholders, or the availability of such securities for sale, could adversely affect the prevailing market prices for our securities and dilute investors’ earnings per share. Exercises of presently outstanding share options or warrants may also result in dilution to security holders. A decline in the market prices of our securities could impair our ability to raise additional capital through the sale of securities should we desire to do so.

As of March 28, 2019, we had outstanding approximately 1,014,724,749 shares of our common shares and securities exercisable for and convertible into approximately 159,588,423 common shares (of which approximately 103,100,202 were exercisable as of that date). The sale or the availability for sale of a large number of our common shares in the public market could cause the price of our common shares to decline.

The regulated nature of our business may impede or discourage a takeover, which could reduce the market price of our common shares and the value of your notes.

We require and hold various government licenses to operate our business, which would not necessarily continue to apply to an acquiror of our business following a change of control. These licensing requirements could impede

a merger, amalgamation, takeover or other business combination involving us or discourage a potential acquirer from making a tender offer for our common shares, which, under certain circumstances, could reduce the market price of our common shares.

There is no assurance we will continue to meet the listing standards of the NYSE and the TSX.

We must meet continuing listing standards to maintain the listing of our common shares on the NYSE and the TSX. If we fail to comply with listing standards and the NYSE and/or the TSX delists our common shares, we and our shareholders could face significant material adverse consequences, including:

•

a limited availability of market quotations for our common shares;

•

reduced liquidity for our common shares;

•

a determination that our common shares are “penny stock,” which would require brokers trading in our common shares to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our common shares;

•

a limited amount of news about us and analyst coverage of us; and

•

a decreased ability for us to issue additional equity securities or obtain additional equity or debt financing in the future.

Risks Related to Future Offerings

There is no existing trading market for the Warrants, Subscription Receipts, Debt Securities or Units.

There is no existing trading market for the Warrants, Subscription Receipts, Debt Securities or Units. As a result, there can be no assurance that a liquid market will develop or be maintained for those Securities, or that a purchaser will be able to sell any of those Securities at a particular time (if at all). We may not list the Warrants, Subscription Receipts, Debt Securities or Units on any Canadian or U.S. securities exchange.

Future Sales May Affect the Market Price of the Company Shares.

In order to finance future operations, we may determine to raise funds through the issuance of additional Common Shares or the issuance of debt instruments or other securities convertible into Common Shares. We cannot predict the size of future issuances of Common Shares or the issuance of debt instruments or other securities convertible into Common Shares or the dilutive effect, if any, that future issuances and sales of our securities will have on the market price of our Common Shares. These sales may have an adverse impact on the market price of our Common Shares.

Our management will have substantial discretion concerning the use of proceeds.

Our management will have substantial discretion concerning the use of proceeds of an offering under any Prospectus Supplement as well as the timing of the expenditure of the proceeds thereof. As a result, investors will be relying on the judgment of management as to the specific application of the proceeds of any offering of Securities under any Prospectus Supplement. Management may use the net proceeds of any offering of Securities under any Prospectus Supplement in ways that an investor may not consider desirable. The results and effectiveness of the application of the net proceeds are uncertain.

The Company is a Canadian company and shareholder protections differ from shareholder protections in the United States and elsewhere.

We are organized and exist under the laws of British Columbia, Canada and, accordingly, are governed by the BCBCA. The BCBCA differs in certain material respects from laws generally applicable to United States corporations and shareholders, including the provisions relating to interested directors, mergers and similar arrangements, takeovers, shareholders’ suits, indemnification of directors and inspection of corporation records.

The Company is a foreign private issuer within the meaning of the rules under the Exchange Act, and as such is exempt from certain provisions applicable to United States domestic public companies.

Because we are a “foreign private issuer” under the U.S. Exchange Act, we are exempt from certain provisions of the securities rules and regulations in the United States that are applicable to U.S. domestic issuers, including:

•

the rules under the U.S. Exchange Act requiring the filing of quarterly reports on Form 10-Q or current reports on Form 8-K with the SEC;

•

the sections of the U.S. Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the U.S. Exchange Act;

•

the sections of the U.S. Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and

•

the selective disclosure rules by issuers of material non-public information under Regulation FD.

We are required to file an annual report on Form 40-F with the United States Securities and Exchange Commission within three months of the end of each fiscal year. We do not intend to voluntarily file annual reports on Form 10-K and quarterly reports on Form 10-Q in lieu of Form 40-F requirements. For so long as we choose to only comply with foreign private issuer requirements, the information we are required to file with or furnish to the SEC will be less extensive and less timely compared to that required to be filed with the SEC by U.S. domestic issuers. As a result, you may not be afforded the same protections or information which would be made available to you if you were investing in a U.S. domestic issuer.

CERTAIN INCOME TAX CONSIDERATIONS

The applicable Prospectus Supplement will describe certain Canadian federal income tax consequences to investors described therein of acquiring Securities.

The applicable Prospectus Supplement will also describe certain United States federal income tax consequences of the acquisition, ownership and disposition of Securities by an initial investor who is a “U.S. person” (within the meaning of the United States Internal Revenue Code), if applicable, including, to the extent applicable, any such consequences relating to Securities payable in a currency other than the United States dollar, issued at an original issue discount for United States federal income tax purposes or other special terms.

LEGAL MATTERS

Certain legal matters relating to the Securities offered by this Prospectus will be passed upon for us by (i) McMillan LLP, Vancouver, B.C., with respect to matters of Canadian law, and (ii) Jenner & Block LLP with respect to matters of United States law. As of the date hereof, the partners and associates of McMillan LLP, as a group, and the partners and associates of Jenner & Block LLP, as a group, each beneficially own less than 1% of the outstanding Common Shares of the Company.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Shares of the Company is Computershare Trust Company of Canada at its principal office in Vancouver, British Columbia and Toronto, Ontario.

INTEREST OF EXPERTS

The following are the names of each person or company who has prepared or certified a report, valuation, statement or opinion in this Prospectus, either directly or in a document incorporated by reference, and whose profession or business gives authority to the report, valuation, statement or opinion made by the person or company:

•

McMillan LLP, as the Company’s counsel with respect to Canadian legal matters;

•

Jenner & Block LLP, as the Company’s counsel with respect to United States legal matters;

•

MNP LLP, Chartered Professional Accountants, as the former external auditor of the Company who reported on the Company’s audited financial statements for the years ended June 30, 2018 and 2017, as filed on SEDAR and incorporated into this Prospectus by reference;

•

Deloitte LLP, Chartered Professional Accountants, Licensed Professional Accountants, as the external auditor of CanniMed who reported on CanniMed’s audited financial statements for the years ended October 31, 2017 and 2016, included in our business acquisition report dated April 30, 2018 which is incorporated into this Prospectus by reference;

•

KPMG LLP, Chartered Professional Accountants, as the external auditor of MedReleaf who reported on MedReleaf’s audited financial statements for the years ended March 31, 2018 and 2017, incorporated by reference in our business acquisition report dated September 17, 2018 which is incorporated into this Prospectus by reference.

Each of KPMG LLP are the auditors of the Company and were, prior to the acquisition of MedReleaf, the auditors of MedReleaf, and MNP LLP was the former auditor of the Company. Each of KPMG and MNP have confirmed with respect to the Company, that they are independent within the meaning of the relevant rules and related interpretations prescribed by the relevant professional bodies in Canada and any applicable legislation or regulations. Deloitte LLP was the independent auditor of CanniMed for the year ended October 31, 2017, and as of January 29, 2018 and throughout the period covered by the consolidated financial statements of CanniMed on which they reported, Deloitte LLP was independent with respect to CanniMed within the meaning of the rules of professional conduct of the Chartered Professional Accountants of Saskatchewan.

ADDITIONAL INFORMATION

We have filed with the SEC a Registration Statement on Form F-10 under the U.S. Securities Act relating to the offering of the Securities. The Prospectus, which constitutes a part of the Registration Statement, does not contain all of the information contained in the Registration Statement, certain items of which are contained in the exhibits to the Registration Statement as permitted by the rules and regulations of the SEC. Statements included or incorporated by reference in the Prospectus about the contents of any contract, agreement or other documents referred to are not necessarily complete, and in each instance, you should refer to the exhibits for a more complete description of the matter involved. Each such statement is qualified in its entirety by such reference.

We are subject to the informational reporting requirements of the Exchange Act as the Common Shares are registered under Section 12(b) of the Exchange Act. Accordingly, we are required to publicly file reports and other information with the SEC. Under the MJDS, the Company is permitted to prepare such reports and other information in accordance with Canadian disclosure requirements, which are different from United States disclosure requirements.

As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the furnishing and content of proxy statements in connection with meetings of its shareholders. In addition, the officers, directors and principal shareholders of the Company are exempt from the reporting and short-swing profit recovery rules contained in Section 16 of the Exchange Act.

We file annual reports on Form 40-F with the SEC under the MJDS, which annual reports include:

◾

the annual information form;

◾

management’s annual discussion and analysis of financial condition and results of operations;

◾

consolidated audited financial statements, which are prepared in accordance with IFRS, as issued by the IASB; and

◾

other information specified by the Form 40-F.

As a foreign private issuer, we are required to furnish the following types of information to the SEC under cover of Form 6-K:

◾

material information that the Company otherwise makes publicly available in reports that the Company files with securities regulatory authorities in Canada;

◾

material information that the Company files with, and which is made public by, the TSX and NYSE; and

◾

material information that the Company distributes to its shareholders in Canada.

Investors may read and copy, for a fee, any document that the Company has filed with or furnished to the SEC at the SEC’s public reference room in Washington, D.C. at 100 F Street, N.E., Washington, D.C. 20549. Investors should call the SEC at 1-800-SEC-0330 or access its website at www.sec.gov for further information about the public reference room. Investors may read and download the documents the Company has filed with the SEC’s Electronic Data Gathering and Retrieval system (“EDGAR”) at www.sec.gov. Investors may read and download any public document that the Company has filed with the securities commissions or similar regulatory authorities in Canada at www.sedar.com.

DOCUMENTS FILED AS PART OF THE REGISTRATION STATEMENT

The following documents have been or will be filed with the SEC as part of the Registration Statement of which this Prospectus forms a part:

(i)

the documents set out under the heading “ Documents Incorporated by Reference ”;

(ii)

the consents of the Company’s auditor and legal counsel;

(iii)

the powers of attorney from the directors and certain officers of the Company; and

(iv)

the form of Indenture.

A copy of the form of any warrant indenture or subscription receipt agreement, as applicable, will be filed by post-effective amendment or by incorporation by reference to documents filed or furnished with or furnished to the SEC under the U.S. Exchange Act.

ENFORCEABILITY OF CIVIL LIABILITIES BY U.S. INVESTORS

The Company is a corporation existing under the Business Corporations Act (British Columbia). All of our directors and officers, and all of the experts named in the Prospectus, are residents of Canada or otherwise reside outside the United States, and all or a substantial portion of their assets, and a majority of our assets, are located outside the United States. We have appointed an agent for service of process in the United States, but it may be difficult for holders of the Securities who reside in the United States to effect service within the United States upon those directors, officers and experts who are not residents of the United States. It may also be difficult for holders of the Securities who reside in the United States to realize upon judgments of courts of the United States predicated upon the Company’s civil liability and the civil liability of its directors, officers and experts under the United States federal securities laws.

We have been advised by our Canadian legal counsel, McMillan LLP, that a judgment of a United States court predicated solely upon civil liability under United States federal securities laws would probably be enforceable in Canada if the United States court in which the judgment was obtained has a basis for jurisdiction in the matter that would be recognized by a Canadian court for the same purposes. We have also been advised by McMillan LLP, however, that there is substantial doubt whether an action could be brought in Canada in the first instance on the basis of liability predicated solely upon United States federal securities laws.

We have filed with the SEC, concurrently with our Registration Statement on Form F-10, an appointment of agent for service of process on Form F-X. Under the Form F-X, we appointed Corporation Service Company as our agent for service of process in the United States in connection with any investigation or administrative proceeding conducted by the SEC, and any civil suit or action brought against or involving the Company in a United States court arising out of, related to, or concerning the offering of the Securities under the Prospectus.

PART II

INFORMATION NOT REQUIRED TO BE DELIVERED TO

OFFEREES OR PURCHASERS

Indemnification of Directors and Officers.

Aurora Cannabis Inc. (“we”, “us” or “our company”) is subject to the provisions of Part 5, Division 5 of the Business Corporations Act (British Columbia) (the “Act”).

Under Section 160 of the Act, we may, subject to Section 163 of the Act:

(a)

indemnify an individual who:

(i)

is or was a director or officer of our company,

(ii)

is or was a director or officer of another corporation (A) at a time when such corporation is or was an affiliate of our company; or (B) at our request, or

(iii)

at our request, is or was, or holds or held a position equivalent to that of, a director or officer of a partnership, trust, joint venture or other unincorporated entity,

including, subject to certain limited exceptions, the heirs and personal or other legal representatives of that individual (collectively, an “eligible party”), against all eligible penalties, defined below, to which the eligible party is or may be liable; and

(b)

after final disposition of an eligible proceeding, pay the expenses actually and reasonably incurred by an eligible party in respect of that proceeding, where:

(i)

“eligible penalty” means a judgment, penalty or fine awarded or imposed in, or an amount paid in settlement of, an eligible proceeding,

(ii)

“eligible proceeding” means a proceeding in which an eligible party or any of the heirs and personal or other legal representatives of the eligible party, by reason of the eligible party being or having been a director or officer of, or holding or having held a position equivalent to that of a director or officer of, our company or an associated corporation (A) is or may be joined as a party, or (B) is or may be liable for or in respect of a judgment, penalty or fine in, or expenses related to, the proceeding,

(iii)

“expenses” includes costs, charges and expenses, including legal and other fees, but does not include judgments, penalties, fines or amounts paid in settlement of a proceeding, and

(iv)

“proceeding” includes any legal proceeding or investigative action, whether current, threatened, pending or completed.

Under Section 161 of the Act, and subject to Section 163 of the Act, we must, after the final disposition of an eligible proceeding, pay the expenses actually and reasonably incurred by an eligible party in respect of that proceeding if the eligible party (a) has not been reimbursed for those expenses, and (b) is wholly successful, on the merits or otherwise, in the outcome of the proceeding or is substantially successful on the merits in the outcome of the proceeding.

Under Section 162 of the Act, and subject to Section 163 of the Act, we may pay, as they are incurred in advance of the final disposition of an eligible proceeding, the expenses actually and reasonably incurred by an eligible party in respect of the proceeding, provided that we must not make such payments unless we first receive from the eligible party a written undertaking that, if it is ultimately determined that the payment of expenses is prohibited under Section 163 of the Act, the eligible party will repay the amounts advanced.

Under Section 163 of the Act, we must not indemnify an eligible party against eligible penalties to which the eligible party is or may be liable or pay the expenses of an eligible party in respect of that proceeding under Sections 160, 161 or 162 of the Act, as the case may be, if any of the following circumstances apply:

(a)

if the indemnity or payment is made under an earlier agreement to indemnify or pay expenses and, at the time that the agreement to indemnify or pay expenses was made, we were prohibited from giving the indemnity or paying the expenses by our memorandum or articles;

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(b)

if the indemnity or payment is made otherwise than under an earlier agreement to indemnify or pay expenses and, at the time that the indemnity or payment is made, we are prohibited from giving the indemnity or paying the expenses by our memorandum or articles;

(c)

if, in relation to the subject matter of the eligible proceeding, the eligible party did not act honestly and in good faith with a view to the best interests of our company or the associated corporation, as the case may be; or

(d)

in the case of an eligible proceeding other than a civil proceeding, if the eligible party did not have reasonable grounds for believing that the eligible party’s conduct in respect of which the proceeding was brought was lawful.

If an eligible proceeding is brought against an eligible party by or on behalf of our company or by or on behalf of an associated corporation, we must not either indemnify the eligible party against eligible penalties to which the eligible party is or may be liable, or pay the expenses of the eligible party under Sections 160, 161 or 162 of the Act, as the case may be, in respect of the proceeding.

Under Section 164 of the Act, and despite any other provision of Part 5, Division 5 of the Act and whether or not payment of expenses or indemnification has been sought, authorized or declined under Part 5, Division 5 of the Act, on application of our company or an eligible party, the court may do one or more of the following:

(a)

order us to indemnify an eligible party against any liability incurred by the eligible party in respect of an eligible proceeding;

(b)

order us to pay some or all of the expenses incurred by an eligible party in respect of an eligible proceeding;

(c)

order the enforcement of, or any payment under, an agreement of indemnification entered into by us;

(d)

order us to pay some or all of the expenses actually and reasonably incurred by any person in obtaining an order under Section 164 of the Act; or

(e)

make any other order the court considers appropriate.

Section 165 of the Act provides that we may purchase and maintain insurance for the benefit of an eligible party or the heirs and personal or other legal representatives of the eligible party against any liability that may be incurred by reason of the eligible party being or having been a director or officer of, or holding or having held a position equivalent to that of a director or officer of, our company or an associated corporation.

Under Part 21.2 of our articles, and subject to the Act, we must indemnify an eligible party and his or her heirs and legal personal representatives against all eligible penalties to which such person is or may be liable, and we must, after the final disposition of an eligible proceeding, pay the expenses actually and reasonably incurred by such person in respect of that proceeding. Each eligible party is deemed to have contracted with our company on the terms of the indemnity contained in our articles.

Under Part 21.3 of our articles, and subject to the Act, we may agree to indemnify and may indemnify any person (including an eligible party) against eligible penalties and pay expenses incurred in connection with the performance of services by that person for our company. We have entered into indemnity agreements with certain of our directors and officers.

Under Part 21.4 of our articles, we may advance expenses to an eligible party to the extent permitted by and in accordance with the Act.

Pursuant to Part 21.5 of our articles, the failure of an eligible party of our company to comply with the Act, our articles or, if applicable, any former Companies Act or former articles does not, of itself, invalidate any indemnity to which he or she is entitled under our articles.

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Under Part 21.6 of our articles, we may purchase and maintain insurance for the benefit of any eligible party (or his or her heirs or legal personal representatives of any eligible party) against any liability incurred by any eligible party.

Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, may be permitted to directors, officers or persons controlling our company pursuant to the foregoing provisions, we have been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is therefore unenforceable.

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EXHIBITS


Exhibit		Description

4.1		Annual information form of the Company for the year ended June 30, 2018, dated September 25, 2018, filed September 25, 2018 (incorporated by reference to Exhibit 99.205 to the Annual Report on Form 40-F of Aurora Cannabis Inc., filed on October 5, 2018) (File No. 001-38691).

4.2		Audited consolidated financial statements of the Company, and the notes thereto for the years ended June 30, 2018 and 2017, together with the independent auditors’ report thereon, filed September 25, 2018 (incorporated by reference to Exhibit 99.203 to the Annual Report on Form 40-F of Aurora Cannabis Inc., filed on October 5, 2018) (File No. 001-38691).

4.3		Management’s discussion and analysis of financial condition and results of operations for the year ended June 30, 2018, filed September 25, 2018 (incorporated by reference to Exhibit 99.204 to the Annual Report on Form 40-F of Aurora Cannabis Inc., filed on October 5, 2018 (File No. 001-38691).

4.4		Unaudited condensed interim consolidated financial statements of the Company and the notes thereto for the three and six months ended December 31, 2018 and 2017, filed February 11, 2019 (incorporated by reference to Exhibit 99.1 to the Report on Form 6-K of Aurora Cannabis Inc. containing such document, filed on February 12, 2019) (File No. 001-38691).

4.5		Management’s discussion and analysis of financial condition and results of operations for the six months ended December 31, 2018, filed February 11, 2019 (incorporated by reference to Exhibit 99.2 to the Report on Form 6-K of Aurora Cannabis Inc. containing such document, filed on February 12, 2019 (File No. 001-38691).

4.6		Material change report dated August 3, 2018 regarding the completion of the acquisition of MedReleaf Corp., filed August 3, 2018 (incorporated by reference to Exhibit 99.170 to the Annual Report on Form 40-F of Aurora Cannabis Inc., filed on October 5, 2018) (File No. 001-38691).

4.7		Material change report dated August 16, 2018 regarding the completion of the acquisition of Anandia Laboratories Inc., filed August 16, 2018 (incorporated by reference to Exhibit 99.180 to the Annual Report on Form 40-F of Aurora Cannabis Inc., filed on October 5, 2018 (File No. 001-38691).

4.8		Material change report dated September 10, 2018 regarding the entering into of a $200 million credit facility with Bank of Montreal, filed September 10, 2018 (incorporated by reference to Exhibit 99.190 to the Annual Report on Form 40-F of Aurora Cannabis Inc., filed on October 5, 2018) (File No. 001-38691).

4.9		Material change report dated September 18, 2018 regarding the entering into of an arrangement agreement for the acquisition of ICC; filed September 18, 2018 (incorporated by reference to Exhibit 99.199 to the Annual Report on Form 40-F of Aurora Cannabis Inc., filed on October 5, 2018) (File No. 001-38691).

4.10		Material change report dated November 28, 2018 regarding the completion of the acquisition of ICC, filed November 28, 2018.

4.11		Material change report dated December 7, 2018 regarding the appointment of a Chief Science Officer, filed December 7, 2018 (incorporated by reference to Exhibit 99.1 to the Report on Form 6-K of Aurora Cannabis Inc. containing such document, filed on December 10, 2018 (File No. 001-38691).

4.12		Material change report dated January 25, 2019 regarding the completion of our US$345 million offering of 5.5% Convertible Notes (incorporated by reference to Exhibit 99.2 to the Report on Form 6-K of Aurora Cannabis Inc. containing such document, filed on January 28, 2019 (File No. 001-38691).

4.13		Business acquisition report dated April 30, 2018 relating to the acquisition of CanniMed, filed May 2, 2018 (incorporated by reference to Exhibit 99.124 to the Annual Report on Form 40-F of Aurora Cannabis Inc., filed on October 5, 2018) (File No. 001-38691).

4.14		Business acquisition report dated September 5, 2018 relating to the acquisition of MedReleaf, filed September 17, 2018, excluding the following documents incorporated therein by reference: (i) the material change report of MedReleaf dated May 24, 2018; and (ii) the management information circular of MedReleaf dated August 21, 2017, distributed in connection with the annual general meeting of MedReleaf Shareholders held on September 25, 2017 (incorporated by reference to Exhibit 99.194 to the Annual Report on Form 40-F of Aurora Cannabis Inc., filed on October 5, 2018) (File No. 001-38691).

II-4



4.15		Management information circular of the Company dated October 16, 2018, distributed in connection with the Company’s annual and special meeting of shareholders to be held on November 30, 2018, filed October 24, 2018 (incorporated by reference to Exhibit 99.3 to the Report on Form 6-K of Aurora Cannabis Inc., containing such document, filed on December 4, 2018) (File No. 001-38691).

4.16		Management information circular dated December 8, 2017, in respect of shareholder approval for the common shares issued by the Company pursuant to the take-over bid for CanniMed, filed December 12, 2017 (incorporated by reference to Exhibit 99.69 to the Annual Report on Form 40-F of Aurora Cannabis Inc., filed on October 5, 2018) (File No. 001-38691).

4.17		Management information circular dated June 18, 2018, in respect of shareholder approval for the common shares issued by the Company pursuant to the acquisition of MedReleaf, filed June 20, 2018, excluding the following documents incorporated therein by reference: (i) the material change report of MedReleaf dated May 24, 2018; and (ii) the management information circular of MedReleaf dated August 21, 2017, distributed in connection with the annual general meeting of MedReleaf Shareholders held on September 25, 2017 (incorporated by reference to Exhibit 99.148 to the Annual Report on Form 40-F of Aurora Cannabis Inc., filed on October 5, 2018) (File No. 001-38691).

4.18		Annual information form of MedReleaf dated June 18, 2018, for the year ended March 31, 2018, filed June 19, 2018 under MedReleaf’s SEDAR Profile.

4.19		Audited consolidated financial statements of MedReleaf for the year ended March 31, 2018, together with the notes thereto and the independent auditor’s report thereon, filed on June 19, 2018 under MedReleaf’s SEDAR Profile.

4.20		Management’s discussion and analysis of financial condition and results of operations of MedReleaf for the year ended March 31, 2018, filed on June 19, 2018 under MedReleaf’s SEDAR Profile.

5.1		Consent of KPMG LLP.

5.2		Consent of MNP LLP.

5.3		Consent of Deloitte LLP.

5.4		Consent of McMillan LLP.

5.5		Consent of Jenner & Block LLP.

6.1		Powers of Attorney (included on the signature page of this Registration Statement).

7.1		Form of Indenture*

*	To be filed by amendment.

II-5

PART III

UNDERTAKING AND CONSENT TO SERVICE OF PROCESS

Item 1. Undertaking.

Aurora Cannabis Inc. undertakes to make available, in person or by telephone, representatives to respond to inquiries made by the Securities and Exchange Commission (the “Commission”) staff, and to furnish promptly, when requested to do so by the Commission staff, information relating to the securities registered pursuant to Form F-10 or to transactions in said securities.

Item 2. Consent to Service of Process.

Concurrently with the filing of this Registration Statement, Aurora Cannabis Inc. has filed with the Commission a written Appointment of Agent for Service of Process and Undertaking on Form F-X.

Any change to the name or address of the agent for service of Aurora Cannabis Inc. shall be communicated promptly to the Commission by an amendment to Form F-X referencing the file number of this Registration Statement.

III-1

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, Aurora Cannabis Inc. certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form F-10 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Edmonton, Alberta, Canada, on April 2, 2019.


		AURORA CANNABIS INC.

By:		/s/ Terry Booth
		Name: Terry Booth
		Title: Chief Executive Officer

POWERS OF ATTORNEY

Each person whose signature appears below constitutes and appoints Terry Booth and Glen Ibbott, and each of them, either of whom may act without the joinder of the other, as his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any or all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities indicated and on April 2, 2019:


Signature				Title

/s/ Terry Booth				Chief Executive Officer, Director
Terry Booth

/s/ Glen Ibbott				Chief Financial Officer
Glen Ibbott

/s/ Michael Singer				Director, Executive Chairman of the Board of Directors
Michael Singer

/s/ Steve Dobler				Director, President
Steve Dobler

/s/ Adam Szweras				Director
Adam Szweras

/s/ Jason Dyck				Director
Dr. Jason Dyck

/s/ Shan Atkins				Director
Shan Atkins

/s/ Norma Beauchamp				Director
Norma Beauchamp

/s/ Ronald Funk				Director
Ronald Funk

III-2

AUTHORIZED REPRESENTATIVE

Pursuant to the requirements of Section 6(a) of the Securities Act of 1933, the undersigned has signed this Registration Statement, solely in its capacity as the duly authorized representative of Aurora Cannabis Inc. in the United States, on April 2, 2019.


		PUGLISI & ASSOCIATES

By:		/s/ Donald J.Puglisi
		Name: Donald J.Puglisi
		Title: Managing Director

III-3

Exhibit 4.10

FORM 51-102F3

MATERIAL CHANGE REPORT


Item 1.		Name and Address of Company

		Aurora Cannabis Inc. (“ Aurora ” or the “ Company ”)
		500 – 10355 Jasper Avenue
		Edmonton, Alberta
		T5J 1Y6

Item 2.		Date of Material Change

		November 22, 2018

Item 3.		News Release

		A news release with respect to the material change referred to in this report was issued in Canada through the facilities of Canada Newswire and filed on SEDAR on November 22, 2018.

Item 4.		Summary of Material Change

		On November 22, 2018, Aurora announced that it had completed its previously announced plan of arrangement (the “ Arrangement ”) pursuant to an arrangement agreement dated September 8, 2018 (the “ Arrangement Agreement ”) with ICC Labs Inc. (“ ICC ”), whereby Aurora acquired all of ICC’s issued and outstanding common shares (“ ICC Shares ”) for a total of 31,904,668 common shares of Aurora (“ Aurora Shares ”). ICC is now a wholly-owned subsidiary of Aurora.

Item 5.		Full Description of Material Change

		5.1 Full Description of Material Change

		On November 22, 2018, Aurora announced that the Arrangement had been completed. The Arrangement was approved by ICC’s shareholders at a special meeting of shareholders held on November 6, 2018 (the “ Special Meeting ”) and by the Supreme Court of British Columbia on November 8, 2018. Pursuant to the terms of the Arrangement Agreement, each former shareholder of ICC received for each ICC share held 0.2161* Aurora common shares, equal to $1.95 divided by the volume-weighted average trading price of the Aurora Shares on the Toronto Stock Exchange (the “ TSX ”) during the twenty trading day period ending on the second to last trading day on the TSX immediately prior to the effective date of the Arrangement. A total of 147,605,409 ICC Shares were acquired by Aurora in consideration of 31,904,668 Aurora Shares.

		Aurora assumed all of the common share purchase warrants of ICC (“ ICC Warrants ”), and upon the exercise of such ICC Warrants, the holders will be entitled to receive such number of Aurora Shares which the holder would have been entitled to receive as a result of the transactions contemplated by the Arrangement if the holder had been a registered holder of ICC Shares. Each holder of ICC compensation warrants (“ ICC Compensation Options ”) will be entitled to receive upon the exercise of such holder’s ICC Compensation Options, i) such number of Aurora Shares which the holder would have been entitled to receive as a result of the transactions contemplated by the Arrangement if the holder had been a registered holder of ICC Shares, and ii) one-half of one ICC Warrant for each ICC Compensation Option exercised by such holder.


		Approval by shareholders of Aurora for the Arrangement was not required. The ICC Shares were delisted from the TSX-V as of the close of trading on or about November 27, 2018. ICC will also file an application to cease to be a reporting issuer with the relevant securities regulatory authorities.

		Further information regarding the Arrangement is available in the management information circular of ICC dated October 3, 2018 provided to ICC shareholders in connection with the Special Meeting, which is available under ICC’s profile on SEDAR at www.sedar.com . The Arrangement Agreement has been filed on SEDAR under the profiles of each of Aurora and ICC.

		* Former ICC Shareholders received 0.216148453496238 Aurora Shares for each ICC Share held.

		5.2 Disclosure for Restructuring Transactions

		Not applicable.

Item 6.		Reliance on Subsection 7.1(2) of National Instrument 51-102

		Not applicable.

Item 7.		Omitted Information

		Not applicable.

Item 8.		Executive Officer

		The following senior officer of the Company is knowledgeable about the material change and this Material Change Report and may be contacted:

		Terry Booth, Chief Executive Officer
		(604) 362-5207

Item 9.		Date of Report

		November 28, 2018

Exhibit 4.18

LOGO

MEDRELEAF CORP.

ANNUAL INFORMATION FORM

For the fiscal year ended March 31, 2018

Dated: June 18, 2018

TABLE OF CONTENTS


ANNUAL INFORMATION FORM			1
FORWARD-LOOKING INFORMATION			1
CORPORATE STRUCTURE			2
GENERAL DEVELOPMENT OF THE BUSINESS			3
DESCRIPTION OF THE BUSINESS			7
RISK FACTORS			15
DIVIDENDS			33
DESCRIPTION OF CAPITAL STRUCTURE			33
MARKET FOR SECURITIES			34
PRIOR SALES			34
ESCROWED SECURITIES AND SECURITIES SUBJECT TO RESTRICTION ON TRANSFER			34
DIRECTORS AND OFFICERS			35
LEGAL PROCEEDINGS AND REGULATORY ACTIONS			41
INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS			41
TRANSFER AGENT AND REGISTRAR			41
MATERIAL CONTRACTS			42
AUDIT COMMITTEE INFORMATION			42
INTERESTS OF EXPERTS			43
ADDITIONAL INFORMATION			43
GLOSSARY			44
Schedule A AUDIT COMMITTEE CHARTER			1

ANNUAL INFORMATION FORM

In this annual information form ( “Annual Information Form”), unless otherwise noted or the context indicates otherwise, the “Company” , “MedReleaf” , “we” , “us” and “our” refer to MedReleaf Corp. All financial information in this Annual Information Form is reported in Canadian dollars. Certain defined terms used herein have the meanings given to them under “Glossary” .

The information contained herein is dated as of March 31, 2018 unless otherwise stated.

FORWARD-LOOKING INFORMATION

This Annual Information Form contains “forward-looking information”, within the meaning of applicable Canadian securities legislation, which is based upon the Company’s current internal expectations, estimates, projections, assumptions and beliefs and views of future events. Forward-looking information can be identified by the use of forward-looking terminology such as “expect”, “likely”, “may”, “will”, “should”, “intend”, “anticipate”, “potential”, “proposed”, “estimate” and other similar words, including negative and grammatical variations thereof, or statements that certain events or conditions “may”, “would” or “will” happen, or by discussions of strategy. Forward-looking information include estimates, plans, expectations, opinions, forecasts, projections, targets, guidance or other statements that are not statements of fact. Statements containing forward-looking information are made as of the date of this Annual Information Form and include, but are not limited to, statements with respect to:

•

the intended use of proceeds from equity financings;

•

the performance of the Company’s business and operations;

•

the Company’s expectations regarding revenues, expenses and anticipated cash needs;

•

the intention to grow MedReleaf’s business and operations;

•

the build-out of the Bradford Facility and the respective costs and timing associated therewith and the intentions of the Company with respect to the potential retrofit of the Exeter Property;

•

the expected growth in the amount of medical cannabis products sold by MedReleaf;

•

the growth in the Company’s cultivation capacity and the maintenance of minimum levels of inventory;

•

future production costs and capacity, including potential acquisitions of additional property or facilities;

•

the renewal of the MedReleaf Licences;

•

the competitive conditions of the industry in which the Company operates;

•

the legalization of cannabis for recreational use in Canada, including federal and provincial regulations pertaining thereto and the timing related thereof and the Company’s intention to participate in such market, if and when legalized;

•

laws and any amendments thereto applicable to the Company;

•

the medical benefits, viability, safety, efficacy, dosing and social acceptance of cannabis;

•

the Company’s future product offerings;

•

the legalization of the use of cannabis for medical and/or recreational use in jurisdictions outside of Canada;

•

the Company’s plans with respect to the payment of dividends;

•

the ability of the Company and Aurora to consummate the Arrangement on the terms of the Arrangement Agreement;

•

the receipt of necessary approvals in connection with the Arrangement including court, shareholder, stock exchange, regulatory and other third party approvals; and

•

the special meeting of shareholders of MedReleaf to be held to consider and approve the Arrangement and the anticipated timing thereof.

Forward-looking information in this Annual Information Form is based on our opinions, estimates and assumptions in light of our experience and perception of historical trends, current conditions and expected future developments, as well as other factors that we currently believe are appropriate and reasonable in the circumstances. Despite a careful process to prepare and review the forward-looking information, there can be no assurance that the underlying opinions, estimates and assumptions will prove to be correct. In particular, we have made assumptions in respect of the build-out of the Bradford Facility and the retrofit of the Exeter Property; the expected legalization of cannabis use in Canada; the growth of our business and expansion into new markets; the development of new products and product formats for our medical cannabis products; our ability to retain key personnel; our ability to continue investing in our infrastructure to support our growth; our ability to obtain and maintain financing on acceptable terms; the impact of competition; the changes and trends in the medical cannabis industry; changes in laws, rules and regulations; and the ability to consummate the Arrangement on the terms and conditions negotiated in the Arrangement Agreement.

Forward-looking information is necessarily based on a number of opinions, estimates and assumptions that we considered appropriate and reasonable as of the date such statements are made, are subject to known and unknown risks, uncertainties, assumptions and other factors that may cause the actual actions, events, results, performance or achievements to differ materially from what is projected in forward-looking information, including but not limited to the following risks described in greater detail under “Risk Factors”.

Although we have attempted to identify important factors that could cause actual actions, events, results, performance or achievements to differ materially from those described in forward-looking information, there may be other factors not presently known to us or that we presently believe are not material that may cause actions, events, results, performance or achievements to differ from those anticipated, estimated or intended. Should one or more of these risks or uncertainties materialize or should assumptions underlying the forward-looking information prove incorrect, actual actions, events, results, performance or achievements may vary materially from those expressed and implied by such statements contained in this Annual Information Form. The purpose of forward-looking information is to provide the reader with a description of management’s expectations, and such statements may not be appropriate for any other purpose. Accordingly, readers should not place undue reliance on forward-looking information contained in this Annual Information Form. Although the Company believes that the expectations reflected in statements containing forward-looking information are reasonable, it can give no assurance that such expectations will prove to be correct. The Company disclaims any obligation to update any forward-looking information, whether as a result of new information or future events or results, except to the extent required by applicable securities laws.

CORPORATE STRUCTURE

The Company was incorporated on February 28, 2013 under the Business Corporations Act (Ontario) (the “ OBCA ”) with the name “MedReleaf Corp.”. The Company’s articles were amended on December 16, 2013 in order to create the former class B shares (which were subsequently amended and then deleted from the Company’s authorized capital pursuant to the Capital Reorganization), and the Company’s articles were amended again on May 27, 2015 in order to create the former class C shares (which were subsequently re-designated as class B shares pursuant to the Capital Reorganization (the “ Class B Shares”)) .

In connection with the completion of its initial public offering and a secondary offering (the “ IPO ”), on June 6, 2017 the Company completed a capital reorganization (the “ Capital Reorganization”) to simplify the Company’s capital structure. The related amendments to the Company’s articles: (i) replaced the conversion provisions of the former class B shares to permit the implementation of the Capital Reorganization in connection with the IPO; (ii) eliminated the former class B shares from the authorized capital of the Company; (iii) re-designated the class A common shares as common shares with rights, privileges, restrictions and conditions described under “Capital Structure” (the “ Common Shares”); (iv) re-designated the former class C shares as Class B Shares; (v) subdivided the Common Shares at a ratio of 116.0909 to one; and (vi) deleted private company transfer restrictions contained in the Company’s articles.

The Company’s head office is located at Markham Industrial Park, Markham, Ontario L3R 6G3 and its registered office is located at Suite 3800, Royal Bank Plaza, South Tower, 200 Bay Street, Toronto, Ontario M5J 2Z4. The Company has a fiscal year end of March 31 ^st .

GENERAL DEVELOPMENT OF THE BUSINESS

Early Developments

In February 2013, MedReleaf was incorporated under the OBCA for the purpose of becoming a Licensed Producer under the Marihuana for Medical Purposes Regulations (Canada) (the “ MMPR ”) (which has since been repealed and replaced with the current ACMPR) and participating in the Canadian medical cannabis market. In July 2013, the Company entered into a strategic alliance with Tikun Olam Ltd. (“ Tikun Olam”) whereby the Company obtained an exclusive licence to exploit exclusive varieties of cannabis and access to extensive data that Tikun Olam had gathered from thousands of its patients for over a decade. In consideration for this licence, the Company granted Tikun Olam a royalty of 2.5% of the net revenue earned from the exploitation of Tikun Olam’s varieties of cannabis, and a royalty of 0.5% of the net revenue earned from any other variety of cannabis, subject to adjustment in certain cases. In September 2013, the Company entered into a lease in respect of its 55,000 square foot facility in Markham, Ontario (the “ Markham Facility”) .

In February 2014, the Company completed the first phase of the build-out of the Markham Facility, including its first cultivation room, and received its first licence under the MMPR in respect of such facility (such licence, as amended and renewed from time to time by Health Canada, the “ MMPR Licence”), which initially authorized the Company to produce, sell, possess, ship, transport and deliver dried cannabis.

In March 2014, the Company opened its patient registration platform and began cultivating cannabis at the Markham Facility. In August 2014, the Company shipped its first order of medical cannabis product under the MMPR.

In June 2014, the Company completed the second phase of the build-out of the Markham Facility, adding three cultivation rooms, and was granted an amendment to its MMPR Licence to cover these rooms, bringing the total number of cultivation rooms to four.

Developments during the Financial Year ended March 31, 2016

In August 2015, MedReleaf received an amendment to the MMPR Licence to cover its research and development and plant breeding areas at the Markham Facility. In November 2015, Health Canada issued a licence to the Company pursuant to an exemption from certain sections of the Controlled Drugs and Substances Act (Canada) (the “ CDSA ”), the Narcotic Control Regulations (Canada) issued pursuant to the CDSA, and relevant provisions of the MMPR authorized by Health Canada that allowed Licensed Producers to conduct activities with cannabis and cannabis oil. This exemption authorized the Company to produce, possess, transport, deliver and destroy cannabis oil, at its Markham Facility (such licence, as amended and renewed by Health Canada from time to time, the “ Supplemental Licence”) . In December 2015, the Company completed the third phase of the build-out of its Markham Facility and was granted an amendment to the MMPR Licence to cover three additional cultivation rooms at the Markham Facility, bringing the total number of cultivation rooms to seven, and which also increased the Company’s production and sales capacity to 3,000 kilograms during the term of the licence.

In February 2016, the MMPR Licence was renewed effective February 15, 2016 for a one year term, which included a renewal to the Supplemental Licence. In connection with this renewal, MedReleaf completed the final phase of the build-out of its Markham Facility and was granted an amendment to the MMPR Licence to cover three additional cultivation rooms at such facility, bringing the total number of cultivation rooms to 10.

Developments during the Financial Year ended March 31, 2017

In July 2016, the Company completed the purchase of its 210,596 square foot facility in Bradford, Ontario (the “Bradford Facility”) for approximately $8.75 million, which was financed primarily from the proceeds of a $7.5 million credit facility provided by a Canadian financial institution, which was subsequently repaid using loan proceeds advanced under the Credit Facilities.

In August 2016, the ACMPR was introduced to replace the MMPR and the Company’s MMPR Licence and Supplemental Licence were continued under the ACMPR and are referred to as the “ Markham Licence ”.

In November 2016, the Markham Licence was amended to authorize the Company to sell cannabis oil and cannabis oil capsules.

In February 2017, the Company licensed certain of its intellectual property to Indica Industries Pty Ltd. (“ Indica ”), an Australian corporation, in order to support an application for Australian cannabis cultivation and manufacturing licences by such corporation. Under the terms of the agreements, MedReleaf, through its wholly-owned subsidiary, MedReleaf Holdings (Australia) Ltd., acquired a 10% equity interest in Indica. As well, subject to the execution of additional documentation, it is contemplated that the Company would become entitled to receive certain royalties on the gross revenues of Indica, as well as MedReleaf Holdings (Australia) Ltd. receiving potential additional equity in Indica.

Developments during the Financial Year ended March 31, 2018

On April 12, 2017, the Company was issued a “second site” cultivation licence from Health Canada pursuant to the ACMPR in respect of its Bradford Facility, permitting the cultivation of up to 100 kilograms of dried cannabis, of which it may sell or provide up to three kilograms, solely for the purpose of analytical testing (as amended and renewed from time to time, the “ Bradford Licence” and together with the Markham Licence, the “ MedReleaf Licences”) .

On April 17, 2017, the Company entered into a credit agreement with a Canadian chartered bank and another Canadian financial institution (as amended, the “ Credit Agreement”), providing for revolving loans to a maximum credit limit of $10 million and non-revolving term loans to a maximum aggregate amount of $10 million (collectively, the “ Credit Facilities”) .

On May 26, 2017, Health Canada announced it was enabling Licensed Producers to increase production of cannabis by permitting Licensed Producers to, among other things, increase cannabis production within existing facilities to the maximum amount authorized for storage, based on the capacity and security level of their vault(s) or safe(s), in order to better manage production and meet demand. As a result, the Company was authorized to produce greater amounts of medical cannabis products under the Licences than were previously authorized when the MedReleaf Licences were initially granted.

On May 30, 2017 the Company received certification that its production processes met the requirements set by the International Conference on Harmonization of Technical Requirements for Registration of Pharmaceuticals for Human Use (ICG Q7): Good Manufacturing Practices Guide for Active Pharmaceutical Ingredients (ICH Good Manufacturing Practices).

On June 7, 2017 the Company completed its IPO. In connection with the IPO, the Company issued and sold 8,494,742 Common Shares at $9.50 per share for gross proceeds to the Company of $80,700,049. In addition, certain shareholders sold an aggregate of 2,105,258 Common Shares at $9.50 per share. On the closing of the IPO the Common Shares also commenced trading on the Toronto Stock Exchange (the “ TSX ”) under the symbol “LEAF”.

On October 11, 2017, the Company received an amended Bradford Licence for the use of its mother room and clone room to support the growing capacity at the Bradford Facility and, on October 20, 2017, the Bradford Licence was amended again to include the use of two additional cultivation rooms. On November 3, 2017, the Bradford Licence was amended to authorize the commercial sale of medical cannabis products from the Bradford Facility.

On November 14, 2017, the Company announced that Indica had been granted a licence from the Australian Government Office of Drug Control for the cultivation and production of medical cannabis. The licence to undertake authorized cannabis activities commences on November 10, 2018 in order to allow time to complete infrastructure development of a production facility.

On December 4, 2017, the Company completed an offering on a “bought deal” basis by way of short-form prospectus, which also included a secondary offering, pursuant to which the Company issued 3,625,470 Common Shares at a price of $16.55 per Common Share, for gross proceeds to the Company of approximately $60 million (the “ December 2017 Offering”) . Certain selling shareholders of the Company sold an aggregate of 2,447,130 Common Shares for aggregate gross proceeds to the selling shareholders of approximately $40 million. The Company intends to use the net proceeds from the December 2017 Offering to finance the acquisition and/or construction of additional cannabis production and manufacturing facilities in Canada as well in other jurisdictions with federal legal cannabis markets, where warranted by the opportunities available to the Company, and the expansion of the Company’s marketing and sales initiatives.

On December 21, 2017, the Company announced that it had entered into an agreement to become a supplier to Shoppers Drug Mart of MedReleaf-branded medical cannabis products, with such agreement being contingent on Shoppers Drug Mart receiving a distribution licence from Health Canada.

On January 31, 2018 the Company completed an offering on a “bought deal” basis by way of short-form prospectus (the “ January 2018 Offering”) pursuant to which the Company issued 5,000,000 units of the Company at a price of $26.50 per unit, for gross proceeds of $132.5 million. Each unit consisted of one Common Share and one-half of one common share purchase warrant (each full Common Share purchase warrant, a “ Warrant ”). The Warrants were issued pursuant to a common share warrant indenture dated January 31, 2018 between the Company and TSX Trust Company, as warrant agent (the “ Warrant Indenture”) . Each Warrant entitles the holder to purchase one Common Share at an exercise price of $34.50 (subject to adjustment in certain circumstances) until January 31, 2020 (subject to accelerated expiry at the Company’s option if the volume-weighted average trading price of the Common Shares for 10 consecutive trading days exceeds $51.75). The underwriters of the January 2018 Offering exercised the over-allotment option for the purchase of 375,000 Warrants, which closed on February 1, 2018. The Company intends to use the net proceeds from the January 2018 Offering for the same purposes as the net proceeds received in connection with the December 2017 Offering.

On February 6, 2018, the Company announced that Health Canada had approved the sale by the Company of cannabis oil softgel capsules.

On March 6, 2018 the Company announced that it had entered into an exclusive licencing agreement with Woodstock Cannabis Company for use of the iconic Woodstock brand in the Canadian cannabis market. Under the terms of the agreement, MedReleaf would grow and sell a variety of strains and formats under the Woodstock banner, expanding the offering of products as regulations allow.

On March 19, 2018, the Company announced that it had entered into an agreement to become the largest supplier of medical cannabis products to Cannamedical Pharma GMBH, a leading medical cannabis distributor to pharmacies in Germany.

Developments Subsequent to the Financial Year ended March 31, 2018

On April 11, 2018, the Company announced that it had completed a supply agreement with Société des alcools du Québec (“ SAQ ”) to supply the Province of Québec with a guaranteed minimum 8,000 kilograms per year of high-quality adult recreational-use cannabis.

On April 12, 2018, the Company announced that it had purchased one million square feet of existing greenhouse infrastructure on a 69 acre property located in Exeter, Ontario, together with 95 acres of adjacent land (collectively, the “ Exeter Property”) for a total purchase price of approximately $26 million, consisting of cash and Common Shares.

On May 14, 2018, the Company and Aurora Cannabis Inc. (“ Aurora ”) entered into a definitive arrangement agreement (as amended, the “ Arrangement Agreement”) pursuant to which Aurora will acquire all of the issued and outstanding Common Shares by way of a court-approved plan of arrangement under the OBCA (the “ Arrangement ”). Under the terms of the transaction, holders of Common Shares will receive 3.575 common shares of Aurora and $0.000001 in cash for each Common Share held (subject to the making of joint tax elections). Upon completion of the Arrangement, existing Aurora and MedReleaf shareholders would own approximately 61% and 39% of the pro forma company, respectively, on a fully-diluted basis. The Arrangement has been unanimously approved by the board of directors of each of MedReleaf and Aurora and each board has recommended that their respective shareholders vote in favour of the Arrangement.

Pursuant to the Arrangement, among other steps and procedures, the following transactions will occur:

(a)

the Company and a wholly-owned subsidiary incorporated under the OBCA (“ MedReleaf Sub”) will amalgamate (the “ First Amalgamation”) to continue as one corporation (“ Amalco ”) and, upon such First Amalgamation; (i) all of the issued and outstanding shares of MedReleaf Sub will be cancelled without any repayment of capital in respect thereof: (ii) the by-laws and articles of amalgamation of Amalco will be the same as the by-laws and articles of amalgamation of the Company; (iii) the issued and outstanding Common Shares shall continue to remain issued and outstanding as common shares of Amalco; (iv) each option to purchase Common Shares outstanding will be exchanged for a like option of Amalco; (v) each Warrant will be exchanged for a like common share purchase warrant of Amalco; (vi) the property of the Company and MedReleaf Sub will continue as the property of Amalco; (vii) all rights, contracts, permits and interest of the Company or MedReleaf Sub will continue as rights, contracts, permits and interests of Amalco; (viii) Amalco shall be liable for the obligations of the Company and MedReleaf Sub; and (ix) all existing causes of action, claims or liabilities to prosecution, and all civil, criminal or administrative actions or proceedings pending by or against the Company or MedReleaf Subco and all convictions against, or rulings, orders or judgments in favour of or against the Company or MedReleaf Sub will be unaffected by the First Amalgamation;

(b)

each Common Share held by a dissenting shareholder of the Company will be deemed to have been transferred and assigned to Aurora in consideration for a debt claim against Aurora determined and payable in accordance with the Arrangement;

(c)

each Common Share outstanding immediately following the First Amalgamation that is held by an electing holder shall be deemed to be assigned and transferred by the holder to Aurora solely in exchange for share consideration under the Arrangement; and (i) each holder of such Common Shares shall cease to be a holder thereof; and (ii) Aurora shall be deemed the transferee of such Common Shares;

(d)

concurrently with the above step, each Common Share outstanding immediately following the First Amalgamation (other than Common Shares held by electing holders described in (c) above) shall be deemed to be assigned and transferred by the holder to Aurora in exchange for the share and cash consideration under the Arrangement; and (i) each holder of such Common Shares shall cease to be a holder thereof; and (ii) Aurora shall be deemed the transferee of such Common Shares;

(e)

the Common Shares held by Aurora will be transferred to a wholly-owned subsidiary of Aurora (the “ Aurora Sub”) in consideration of the issue by the Aurora Sub of one common share of Aurora Sub for each Common Share transferred; and

(f)

Aurora Sub and Amalco shall amalgamate (the “Second Amalgamation”) to continue as one corporation (“ New Amalco”) .

The implementation of the Arrangement will be subject to, among other things, the approval of at least 66 ² ⁄ ₃ % of the votes cast by holders of Common Shares at a special meeting of MedReleaf shareholders expected to take place on July 18, 2018, unless adjourned or postponed. The Arrangement is also subject to the receipt of shareholder approval by Aurora shareholders, as well as certain regulatory, court and stock exchange approvals and certain other closing conditions customary in transactions of this nature.

DESCRIPTION OF THE BUSINESS

Overview

MedReleaf is a Licensed Producer of medical cannabis products based in Markham, Ontario. The Company produces and sells its medical cannabis products to patients across Canada. MedReleaf is a research and development-driven company dedicated to patient care, scientific innovation, research and advancing the understanding of the therapeutic benefits of cannabis.

Currently, the Company primarily derives its revenues from the sale to its patients of dried cannabis, cannabis oils, cannabis oil capsules and, recently, a topical cream (designed to work with the Company’s cannabis oils). MedReleaf’s sales are supported by a variety of initiatives, including health conference sponsorships, as well as through its cannabis education and outreach team of employees. The Company expects both its portfolio of products and the jurisdictions in which it operates to expand as applicable federal laws allow, resources permit, and where market research indicates opportunity. See “ Description of the Business – International Opportunities”.

MedReleaf’s medical cannabis products are cultivated and manufactured in its two production facilities, its 55,000 square foot Markham Facility and its 210,956 square foot Bradford Facility (collectively, the “ MedReleaf Facilities”) . See “ Description of the Business – MedReleaf’s Facilities”.

MedReleaf has quality management and environmental management systems that are certified to the internationally recognized standards of ISO 9001 and ISO 14001 respectively, as well as an occupational health and safety management system certified to the internationally recognized standards of OHSAS 18001, which collectively cover research and development, production, processing, distribution, selling and destruction of medical cannabis. These certified systems provide the framework to optimize management control, increase staff safety and reduce environmental impact. Moreover, the Company’s ISO 9001 certified quality management system has been designed to maintain the consistency and quality of the Company’s medical cannabis products. The Company’s systems require regular, in-process controls, testing and analysis to ensure the consistency of medical cannabis products and that the Company’s products meet stringent specifications during production and until delivery to patients.

MedReleaf currently employs approximately 220 full-time employees. The Company also engages agency staff as its needs require.

The MedReleaf Licences

The Markham Licence is specific to the Markham Facility and permits the Company to, among other things, produce, sell, possess, ship, transport, deliver and destroy dried cannabis, bottled cannabis oil, cannabis oil capsules, cannabis plants and seed at such facility. The Markham Licence provides that the substances inventory at the Markham Facility cannot exceed at any given time a maximum storage capacity value of $31,250,000 for its security level 9 vault.

The Company also produces and sells medical cannabis products from the Bradford Facility pursuant to the Bradford Licence. The Bradford Licence is specific to the Bradford Facility and presently permits the Company to, among other things, produce, sell, possess, ship, transport, deliver and destroy dried cannabis at such facility. The Bradford Licence provides that the substances inventory at the Bradford Facility cannot exceed at any given time a maximum storage capacity value of $150,000,000 for its security level 10 vault.

As the MedReleaf Licences are specific to the respective MedReleaf Facilities, adverse changes or developments affecting such facilities could have a material and adverse effect on the Company’s ability to continue producing and/or selling medical cannabis products, its business, financial condition and prospects. See “ Risk Factors”.

As it has done successfully in the past, the Company expects to apply for amendments to the MedReleaf Licences and seek additional licences where required, in order to meet the Company’s expanding operational and production capabilities. The time it takes Health Canada to process any such amendment application or application for a new licence varies depending on the complexity of the application and other factors outside the control of the Company. Accordingly, no assurance can be given that any amendment(s) sought in respect of the MedReleaf Licences, or any new licences sought by the Company, will be obtained on terms desired, or at all. See “ Risk Factors”.

In addition, unless renewed, the MedReleaf Licences will expire at the end of their respective terms, with the Markham Licence expiring on February 14, 2020 and the Bradford Licence expiring on April 10, 2020. However, as the Company has successfully done in the past, the Company intends to seek the renewal of its licences prior to the expiration of their respective terms. Despite the Company’s previous successes in obtaining renewals of its licences, there can be no assurance that the Company will be able to renew the MedReleaf Licences on the same terms, or at all. See “ Risk Factors”.

MedReleaf’s Facilities

Markham Facility

The Company currently operates the 55,000 square foot Markham Facility, which is covered by the Markham Licence. The Markham Facility is occupied pursuant to a lease agreement dated September 3, 2013 (the “ Markham Lease”) . The initial term of the Markham Lease expires on March 31, 2024, however the Company has the right (provided it is not then in default of the Markham Lease) to extend the Markham Lease for two further terms of five years. The Markham Lease permits the Company to use the lands and building comprising the Markham Facility for the production of medical cannabis, to the extent permitted by all laws and in keeping with the standards of a first-class industrial building. As of the date of this Annual Information Form, the Markham Lease is in good standing.

The Markham Facility is a modern, fully operational facility that was built out in three phases, with each phase capitalizing on the insights and knowledge gained from MedReleaf’s operations over time. The Markham Facility has approximately 23,500 square feet of dedicated cultivation space organized into 10 cultivation rooms, and approximately 31,500 square feet of support and auxiliary services space, including areas for propagation, trimming, drying, oil extraction, shipping, storage, water treatment, laboratories, quality assurance and quality control facilities, maintenance areas, shipping and distribution areas, management offices, and a patient care centre.

The Company believes that its indoor cultivation techniques, using proprietary know-how developed at the Markham Facility, have enabled it to produce premium, indoor-grown medical cannabis products at costs comparable with greenhouse operators.

Bradford Facility

The 210,596 square foot Bradford Facility represents a generational improvement over the Markham Facility, incorporating both the Company’s insights and elements of the latest agricultural industry improvements in cultivation methodology, facility control and irrigation system design. The Bradford Facility is an indoor cultivation facility. Subsequent to the financial year ended March 31, 2018, the Company also purchased property adjacent to the Bradford Facility which will be used for ancillary purposes, such as administrative offices.

Upon full build-out completion, the Bradford Facility will have approximately 86,000 square feet of dedicated cultivation space organized into 19 cultivation rooms and approximately 124,000 square feet of support and auxiliary services space which will include areas for propagation, trimming, drying, commercial-scale oil extraction, pharmaceutical-grade manufacturing, an industrial kitchen, shipping, storage, water treatment, laboratories, plant-based and analytical research and development facilities, quality assurance and quality control facilities, maintenance areas, shipping and distribution areas, and administrative offices.

No assurance can be provided that the Company will be able to obtain any required amendments to the Bradford Licence or that the completion of the remaining phases of the build-out of the Bradford Facility will be completed on time or on budget, or at all. See “ Risk Factors ”.

Exeter Property

The Company also recently acquired the Exeter Property, consisting of one million square feet of existing greenhouse infrastructure on a 69 acre property in Exeter, Ontario, along with 95 acres of adjacent land. The Company is continuing to consider the manner and scope of retrofitting the Exeter Property.

It is expected that, after retrofitting, the Exeter Property will have production capacity of up to 105,000 kilograms of cannabis product annually with a first harvest anticipated by the end of calendar 2018, subject to receipt of a licence from Health Canada.

The retrofitted Exeter Property is expected to add large scale, low-cost greenhouse production alongside the Markham Facility and Bradford Facility and, when fully operational, is expected to increase the Company’s fully funded capacity to approximately 140,000 kilograms of cannabis product per year. The adjacent lands on the Exeter Property could also accommodate a greenhouse approximately 1.5 times larger than the existing greenhouse infrastructure on the Exeter Property, providing for future expansion of cultivation capacity.

No assurance can be provided that the Exeter Property will be developed on the timelines anticipated, or at all. See “ Risk Factors ”.

Storage and Security

The ACMPR prescribes physical security requirements that are necessary to secure sites where Licensed Producers conduct activities with cannabis for medical purposes.

As required by the ACMPR, the Markham Facility contains a storage vault that is deemed to be “security level nine”, as defined by the Health Canada D irective on Physical Security Requirements for Controlled Substances (the “ Security Directive ”), and as determined by the construction of the vault and MedReleaf’s proximity to a major city (Toronto). The vault can only be accessed by a “Responsible Person in Charge” (as defined under the ACMPR) and at least one Responsible Person in Charge must be present in the vault at all times if the doors are open. The Bradford Facility contains a vault deemed to be “security level ten”, as defined by the Security Directive.

The Markham Facility features a robust security system consisting of security cameras, motion sensors, code locked doors, seismic sensors, and a staff of security personnel. These security measures ensure MedReleaf is compliant with Health Canada’s security requirements. The Bradford Facility is safeguarded with a security system similar to the Markham Facility.

On January 25, 2018, Health Canada announced changes to the physical security requirements under the ACMPR, providing that Licensed Producers were no longer required to meet the vault and storage measures outlined in the Security Directive, but rather Licensed Producers may store cannabis within a secure area of their facility. In addition, Licensed Producers are no longer required to maintain constant video surveillance inside the rooms where cannabis is being cultivated, propagated or harvested. All access points to cultivation, propagation and harvesting rooms continue to be subject to constant surveillance requirements to record all entries and exits.

It is possible that Health Canada may make further changes to the physical storage and security requirements, including changes that are more or less onerous to those presently required. Any such changes to existing regulations and regulatory requirements may affect the Company’s business and operations, potentially adversely. See “ Risk Factors”.

Principal Products

Medical Cannabis Products

Under the ACMPR and the MedReleaf Licences, the Company is authorized to cultivate and sell cannabis products for medical purposes in both dried and oil form, to residents of Canada who comply with the requirements of the ACMPR. The Company’s medical cannabis products can be ingested in a variety of ways, including smoking, vaporizing, and consumption in the form of oil or edibles.

MedReleaf strongly believes that maintaining both the cannabinoids and terpenes in their original relative ratios is important in order to maximize the medicinal properties of medical cannabis products and therefore it endeavours to do so with its products.

The Company’s plant genetics department carefully breeds new varieties of cannabis plants resulting in unique varieties of cannabis. Together with those varieties of medical cannabis products supplied on an exclusive basis by Tikun Olam, MedReleaf is able to offer a broad spectrum of medical cannabis products designed to address a wide variety of therapeutic needs.

MedReleaf currently sells numerous strain varieties of cannabis in three main product lines: dried cannabis, cannabis oils, and cannabis oil capsules. The Company intends to introduce new formats for its medical cannabis products if and when authorized by Health Canada.

Additionally, MedReleaf also seeks to maintain a minimum level of inventory to ensure that it can continue to provide its patients with quality cannabis products on a consistent basis, without supply interruption, while also acquiring new patients.

New Products and Accessories

MedReleaf has a variety of new medical cannabis products at various stages of development, including oral products, topical products, edible products and inhalable products. These products will need to be approved by Health Canada before they can be offered. No assurance can be given that the Company will succeed in bringing any of these products to market. See “ Risk Factors”.

In addition to its medical cannabis products, the Company also sells a variety of accessories including grinders, vaporizers and its exclusive lockable containers, and continues to explore expanding these offerings for its patients.

Principal Markets

New patients are acquired by the Company through physician and clinic referrals or by word-of-mouth recommendations from existing patients. The Company has long believed that Canadian Forces veterans suffering from conditions for which cannabis consumption may be helpful represent an underserved market opportunity. MedReleaf has dedicated significant resources to servicing this patient community, including physician and patient education, outreach initiatives and medical research.

The Company also strives to lead in the non-veteran patient segments, while maintaining a strong position in the Canadian Forces veteran market. In addition, if and when recreational usage of cannabis products is legalized in Canada, the Company plans to take advantage of such market opportunities by entering the recreational market. See “ Description of the Business—Expected Legalization of Recreational Cannabis in Canada”.

Finally, the Company intends to address market opportunities internationally, where applicable federal laws allow, resources permit, and where market research indicates opportunity. See “ Description of the Business – International Opportunities”.

Distribution Methods

The Company’s patients order medical cannabis products through the Company’s online store or by phone. Medical cannabis is and will continue to be delivered by secured courier or other methods permitted by the ACMPR or future regulation.

The Company will distribute recreational cannabis products in accordance with the finalized regulatory framework in relation to cannabis for recreational purposes in Canada. For example, the Company has entered into an agreement to become a supplier to Shoppers Drug Mart of MedReleaf-branded medical cannabis products, with such agreement being contingent on Shoppers Drug Mart receiving a distribution licence from Health Canada. In addition, the Company entered into a supply agreement with SAQ to supply the Province of Québec with a guaranteed minimum 8,000 kilograms per year of high-quality adult recreational-use cannabis, pending the legalization of cannabis for recreational purposes.

The Company may also distribute medical and/or recreational cannabis products internationally in accordance with all domestic and international laws and regulations. For example, in March, 2018, the Company entered into an agreement to become the largest supplier of medical cannabis products to Cannamedical Pharma GMBH, a leading medical cannabis distributor to pharmacies in Germany.

Research and Development

In addition to the production and sale of medical cannabis products, the Company is also focused on research and development activities, which are organized into the following four main areas: plant and process productivity; plant genetics; product engineering and innovation and clinical research.

Specialized Knowledge, Skills and Resources

Knowledge with respect to cultivating and growing cannabis is important in the cannabis industry. The nature of growing cannabis is not substantially different from the nature of growing other agricultural products. Variables such as temperature, humidity, lighting, air flow, watering and feeding cycles are meticulously defined and controlled to produce consistent product and to avoid contamination. The product is cut, sorted and dried under defined conditions that are established to protect the activity and purity of the product. Once processing is complete, each and every processing batch is subject to full testing against stringent quality specifications.

The Company grows the primary component of its finished products, namely, cannabis. The Company’s cultivation operations are dependent on a number of key inputs and their related costs including raw materials and supplies related to the Company’s growing operations, as well as electricity, water and other utilities. See “ Risk Factors”.

Staff with suitable horticultural and quality assurance expertise is generally available on the market in the locations where the Company operates or anticipates cultivation activity. The Company also requires patient care staff, which will grow as its business grows. Patient care staff is a skillset that is also generally available in the market in the locations where the Company operates.

Protection of Intangible Assets

The ownership and protection of the Company’s intellectual property is a significant aspect of the Company’s future success. Currently the Company protects its intangible assets through trade secrets, technical know-how and proprietary information. The Company protects its intellectual property by seeking and obtaining registered protection (including patents) where possible, developing and implementing standard operating procedures and entering into agreements with parties that have access to the Company’s inventions, trade secrets, technical know-how and proprietary information such as business partners, collaborators, employees and consultants, to protect the Company’s confidentiality and ownership of its intellectual property. The Company also seeks to preserve the integrity and confidentiality of its inventions, trade secrets, trademarks, technical know-how and proprietary information by maintaining physical security of the Company’s premises and physical and electronic security of the Company’s information technology systems. In addition, the Company has sought trademark and patent protection in Canada and many other countries.

Canadian Medical Cannabis Regulatory Overview

The ACMPR are the current governing regulations regarding the production, sale and distribution of cannabis and cannabis oil extracts for medical purposes in Canada. The ACMPR provide for three possible alternatives for Canadian residents who have been authorized by their health care practitioner to access cannabis for medical purposes:

•

they can continue to access quality-controlled cannabis by registering with Licensed Producers;

•

they can register with Health Canada to produce a limited amount of cannabis for their own medical purposes (starting materials must be obtained from a Licensed Producer); or

•

they can designate someone else who is registered with Health Canada to produce cannabis on their behalf (starting materials must be obtained from a Licensed Producer).

In administering the ACMPR, Health Canada has two main roles:

•

licensing and overseeing the commercial industry; and

•

registering and overseeing individuals who produce a limited amount of cannabis for their own medical purposes (or to have another individual produce it on their behalf).

The ACMPR sets out, among other things, the authorized activities and general responsibilities of Licensed Producers, including:

•

the requirement to obtain and maintain a licence from Health Canada prior to commencing any activities;

•

calculating the quantity of cannabis, other than dried cannabis, that is equivalent to a given quantity of dried cannabis;

•

security measures relating to facilities and personnel;

•

good production practices;

•

packaging, shipping, labelling, import and export and record-keeping requirements; and

•

patient registration and ordering requirements.

Health Canada requires rigorous testing of cannabis products and derivatives provided by Licensed Producers. A Licensed Producer is subject to a wide variety of compliance and enforcement activities conducted by Health Canada after it has received its licence. For instance, Health Canada will typically perform unannounced inspections on a Licensed Producer’s facility to ensure adequate security measures and production practices are in place.

Expected Legalization of Recreational Cannabis in Canada

In connection with the current Government of Canada’s platform advocating for the legalization and regulation of recreational cannabis in order to dismantle the illegal market and restrict access by under-age individuals, on April 13, 2017, the Government of Canada released Bill C-45 which, if implemented, would enact the Cannabis Act. The Cannabis Act would provide a licensing and permitting scheme for the production, testing, packaging, labeling, sending, delivery, transportation, sale, possession, and disposal of cannabis for non-medical (i.e., recreational) use, to be implemented by regulations made under the Cannabis Act. The Government of Canada advised that it intends to bring the Cannabis Act into force no later than July 2018 (or such other date that may be determined by the Government of Canada). The Cannabis Act proposes to maintain separate access to cannabis for medical or scientific purposes, however the transitional provisions of the Cannabis Act provide that every license issued under Section 35 of the ACMPR that is in force immediately before the day on which the Cannabis Act comes into force is deemed to be a licence issued under the Cannabis Act, and that such licence will continue in force until it is revoked or expires.

On October 3, 2017, the Parliamentary Standing Committee on Health proposed amendments to the Cannabis Act including, among other things, an amendment that would permit cannabis edibles and concentrates to be sold, to come into force no later than 12 months after the Cannabis Act comes into force.

On November 10, 2017, the Government of Canada proposed that federal tax on cannabis for recreational purposes should not exceed $1 per gram or 10% of the producer’s price, whichever is higher, with retail sales taxes levied on top of that amount.

While the Cannabis Act provides for the regulation of the commercial production of cannabis for recreational purposes and related matters by the federal government, the Cannabis Act proposes that the provinces and territories of Canada will have authority to regulate other aspects of recreational cannabis (similar to what is currently the case for liquor and tobacco products), such as sale and distribution, minimum age requirements, places where cannabis can be consumed, and a range of other matters.

The Governments of every Canadian province and territory have, to varying degrees, announced proposed regulatory regimes for the distribution and sale of cannabis for recreational purposes within those jurisdictions. Most of these Canadian jurisdictions have announced a minimum age of 19 years old, except for Québec and Alberta, where the minimum age will be 18.

There is no guarantee that the provincial and territorial frameworks supporting the legalization of cannabis for recreational use in Canada will be implemented on the terms anticipated, or at all. See “ Risk Factors”.

On November 21, 2017, Health Canada released for public consultation its proposed approach to the regulation of cannabis. The purpose of the consultation paper was to solicit public feedback on an initial set of regulatory proposals that Health Canada is considering, focused on the regulations that would facilitate the coming into force of the proposed Cannabis Act. On March 19, 2018, Health Canada published a summary of the comments received on the proposed regulations as well as some proposed additions to the regulatory proposal which cover seven broad categories, namely: (1) licences, permits and authorizations; (2) security clearances; (3) cannabis tracking system; (4) cannabis products; (5) packaging and labelling; (6) cannabis for medical purposes; and (7) health products and cosmetics containing cannabis. The details of the proposed regulations are subject to change until final regulations are published.

The Senate of Canada adopted Bill C-45 on June 7, 2018 with amendments that will now be considered by the House of Commons.

MedReleaf intends to participate in the Canadian recreational market, if and when the recreational use of cannabis is legalized in Canada, and only in compliance with all applicable federal and provincial laws and regulations concerning the Canadian recreational cannabis market. As it has done in the Canadian medical cannabis market, the Company’s customer acquisition strategy for the Canadian recreational cannabis market will be to focus on leveraging its analytical and consumer insight capabilities in order to identify profitable market segments, understand the unique needs of each segment, design brands and products to address market demand, and collect and analyze customer and sales data to improve the customer experience.

No assurance can be provided that the Company will be able to participate in the Canadian recreational cannabis market, if or when such market is created through the legalization of recreational cannabis use, or that the Company will, or will be able to, design products and service the market segments in which it may compete, or that the Company will be able to maintain profitability. See “ Risk Factors ”.

International Opportunities

In addition to its Canadian domestic operations, the Company is also exploring international opportunities, including (subject to applicable laws and regulations): (a) opportunities to export its medical cannabis products to other countries; and (b) opportunities to create international alliances with local partners to apply for cultivation licences in other countries. MedReleaf is currently pursuing these opportunities in several countries.

The Company does not have, and does not intend to engage in, any direct, indirect or ancillary involvement in the U.S. cannabis industry (as described in CSA Staff Notice 51-352 – Issuers with U.S. Marijuana-Related Activities (Revised) ) until it is federally legal to do so.

The Company will only pursue international opportunities in accordance and compliance with all applicable laws. The Company is currently pursuing international opportunities in several countries where a legal framework for the medical and/or recreational use of cannabis exists or is expected to be implemented. The timing of the Company’s activities in any international market is dependent on the pace of regulatory developments and, as such, it is not feasible for the Company to provide a timeline with respect to those activities. See “ Risk Factors ”.

Competitive Conditions

The principal competitive factors on which MedReleaf competes with other Licensed Producers are the price and quality of its medical cannabis products (and associated goodwill and brand recognition), physician familiarity and willingness to prescribe the Company’s medical cannabis products, and the Company’s patient services. While MedReleaf prices its cannabis products according to the Company’s perception of market demand, given its relatively low cost of production (based on management’s assessment of the Company’s own financial information against that of all publicly-traded Licensed Producers), it is expected that the Company will be able to enjoy pricing flexibility while maintaining its margins. See “ Risk Factors ”.

In addition, if the Cannabis Act and provincial and territorial recreational regulatory frameworks are implemented, the size of the medical cannabis market may be reduced and new business challenges may arise for companies participating in the medical cannabis market and/or intending to participate in the recreational cannabis market. It is expected that the recreational cannabis market will be highly competitive.

RISK FACTORS

The following specific factors could materially adversely affect MedReleaf and should be considered when deciding whether to make an investment in the Company and the Common Shares. Some of the following factors are interrelated and, consequently, investors should treat such risk factors as a whole. These risks and uncertainties are not the only ones that could affect the Company or the Common Shares and additional risks and uncertainties not currently known to the Company, or that it currently deems to be immaterial, may also impair the business, financial condition and results of operations of the Company and/or the value of the Common Shares. If any of the following risks or other risks occur, they could have a material adverse effect on the Company’s business, financial condition and results of operations and/or the value of the Common Shares. There is no assurance that any risk management steps taken by the Company will avoid future loss due to the occurrence of the risks described below or other unforeseen risks.

Risks Related to the Business and the Industry

The Company is dependent upon the MedReleaf Licences for its ability to grow, store and sell medical cannabis and other products derived therefrom and the MedReleaf Licences are subject to ongoing compliance, reporting requirements and renewal

The Company’s ability to grow, store and sell cannabis for medical purposes in Canada is dependent on the MedReleaf Licences. The MedReleaf Licences are subject to ongoing compliance, reporting requirements and renewal. Although MedReleaf believes it will meet the requirements of the ACMPR for future renewals of the MedReleaf Licences, there can be no guarantee that Health Canada will renew the MedReleaf Licences or, if renewed, that they will be renewed on the same or similar terms or that Health Canada will not revoke the MedReleaf Licences. Should the Company fail to comply with the requirements of the MedReleaf Licences or should Health Canada not renew the MedReleaf Licences when required, or renew the MedReleaf Licences on different terms or revoke the MedReleaf Licences, there would be a material adverse effect on the Company’s business, financial condition and results of operations.

Other governmental licences are currently, and in the future may be, required in connection with MedReleaf’s operations, in addition to other unknown permits and approvals which may be required. To the extent such permits and approvals are required and not obtained, the Company may be prevented from operating and/or expanding its business, which could have a material adverse effect on the Company’s business, financial condition and results of operations.

The Company may not always succeed in complying with the regulatory requirements for Licensed Producers as set out by the ACMPR and Health Canada

Successful execution of the Company’s business objectives is contingent, in part, upon compliance with regulatory requirements enacted by governmental authorities, including the ACMPR, and obtaining all regulatory approvals, where necessary, for the sale of the Company’s medical cannabis products. The commercial medical cannabis industry is a new industry in Canada and the ACMPR is a new regime and has no close precedent in Canadian law. The effect of Health Canada’s administration, application and enforcement of the regime established by the ACMPR on the Company and its business, and any delays in obtaining, or failure to obtain, applicable regulatory approvals which may be required, may significantly delay or impact the development of markets, products and sales initiatives and could have a material adverse effect on the Company’s business, financial condition and results of operations.

In addition, Health Canada inspectors routinely assess the Company’s facilities against applicable regulatory requirements and provide follow-up reports noting any observed deficiencies. Accordingly, MedReleaf regularly incurs ongoing costs and obligations related to regulatory compliance. While the Company endeavours to comply with all relevant laws, regulations and guidelines and, to the Company’s knowledge, it is in compliance or in the process of being assessed for compliance with all such laws, regulations and guidelines, any failure by the Company to comply with applicable regulatory requirements of the ACMPR, or more vigorous enforcement thereof by Health Canada, could require extensive changes to the Company’s operations, increased compliance costs, penalties or restrictions on the Company’s operations or give rise to material liabilities or a revocation of the MedReleaf Licences and other permits, which could have a material adverse effect on the Company’s business, financial condition and results of operations. Further, Health Canada may change its administration, application or enforcement procedures at any time, which could impact the Company’s costs and resources.

The laws, regulations and guidelines generally applicable to the medical cannabis industry may change in ways currently unforeseen by the Company, including the expected implementation of the Cannabis Act

MedReleaf’s operations are subject to the ACMPR and various other laws, regulations and guidelines relating to the manufacture, packaging/labelling, advertising, sale, transportation, storage and disposal of cannabis for medical purposes but also including laws and regulations relating to controlled substances, health and safety, privacy, the conduct of operations and the protection of the environment. To the knowledge of the Company’s management, other than routine corrections that may be required by Health Canada from time to time, the Company is currently in material compliance with all existing laws, regulations and guidelines. If any changes to such laws, regulations or guidelines occur, which are matters beyond the control of the Company, the Company may incur significant costs in complying with such changes or it may be unable to comply therewith, which in turn may result in a material adverse effect on the Company’s business, financial condition and results of operations.

The Liberal Party of Canada, which has formed the current federal Government of Canada, has made electoral commitments to legalize, regulate and tax recreational cannabis use in Canada. On April 13, 2017, the Government of Canada introduced the Cannabis Act. The Government of Canada has provided guidance that, subject to Parliamentary approval and Royal Assent, it intends to provide regulated and restricted access to cannabis no later than July 2018, however there is no assurance that the legalization of cannabis by the Government of Canada will occur as anticipated or at all.

Furthermore, the legislative framework pertaining to the Canadian recreational cannabis market will be subject to significant provincial and territorial regulation, which will vary across provinces and territories and result in an asymmetric regulatory and market environment, different competitive pressures and significant additional compliance and other costs and/or limitations on the Company’s ability to participate in such market.

Future clinical research studies on the effects of medical cannabis may lead to conclusions that dispute or conflict with the Company’s understanding and belief regarding the medical benefits, viability, safety, efficacy, dosing and social acceptance of cannabis

Research in Canada, the U.S. and internationally regarding the medical benefits, viability, safety, efficacy, dosing and social acceptance of cannabis or isolated cannabinoids remains in early stages. There have been relatively few clinical trials on the benefits of cannabis or isolated cannabinoids. The statements made in this Annual Information Form concerning the potential medical benefits of cannabinoids are based on published articles and reports. As a result, the statements made in this Annual Information Form are subject to the experimental parameters, qualifications and limitations in the studies that have been completed.

Although MedReleaf believes that the articles, reports and studies support its beliefs regarding the medical benefits, viability, safety, efficacy, dosing and social acceptance of cannabis as set out in this Annual Information Form, future research and clinical trials may prove such statements to be incorrect, or could raise concerns regarding, and perceptions relating to, cannabis. Given these risks, uncertainties and assumptions, undue reliance should not be placed on such articles and reports.

Future research studies and clinical trials may draw opposing conclusions to those stated in this Annual Information Form or reach negative conclusions regarding the medical benefits, viability, safety, efficacy, dosing, social acceptance or other facts and perceptions related to medical cannabis, which could have a material adverse effect on the demand for the Company’s products with the potential to lead to a material adverse effect on the Company’s business, financial condition and results of operations.

The MedReleaf Facilities are integral to the Company’s business and adverse changes or developments affecting either of the Markham Facility or the Bradford Facility may impact the Company’s business, financial condition and results of operations

Adverse changes or developments affecting the MedReleaf Facilities, including but not limited to a force majeure event or a breach of security, could have a material adverse effect on the Company’s business, financial condition and prospects. Any breach of the security measures and other facility requirements, including any failure to comply with recommendations or requirements arising from inspections by Health Canada, could also have an impact on MedReleaf’s ability to continue operating under the MedReleaf Licences or the prospect of renewing the MedReleaf Licences or could result in a revocation of the MedReleaf Licences.

The Company is also in the process of completing the build-out of its Bradford Facility. Management of the Company expects that the Bradford Facility, upon full build-out completion, will significantly increase the Company’s cultivation and growing capacity. However, no assurance can be given that Health Canada will approve necessary amendments to the Bradford Licence to take full advantage of the Bradford Facility once fully built. If the Company is unable to secure any necessary amendments to the Bradford Licence, the expectations of management with respect to the increased future cultivation and growing capacity may not be borne out, which could have a material adverse effect on the Company’s business, financial condition and results of operations. Further, construction delays or cost over-runs in respect of the build-out of the Bradford Facility, howsoever caused, could have a material adverse effect on the Company’s business, financial condition and results of operations.

The medical cannabis industry and market are relatively new in Canada, and this industry and market may not continue to exist or grow as anticipated or the Company may ultimately be unable to succeed in this new industry and market

As a Licensed Producer, MedReleaf is operating its business in a relatively new medical cannabis industry and market. In addition to being subject to general business risks, a business involving an agricultural product and a regulated consumer product, the Company needs to continue to build brand awareness in this industry and market through significant investments in its strategy, its production capacity, quality assurance, and compliance with regulations. These activities may not promote the Company’s brand and products as effectively as intended, or at all. Competitive conditions, consumer tastes, patient requirements and spending patterns in this new industry and market are relatively unknown and may have unique circumstances that differ from existing industries and markets.

In addition, the ACMPR also permits patients to produce a limited amount of cannabis for their own medical purposes or to designate a person to produce a limited amount of cannabis on their behalf and the proposed Cannabis Act provides for individuals to produce limited amounts of cannabis for their own recreational use. This could potentially significantly reduce the market for the Company’s products, which could have a material adverse effect on the Company’s business, financial condition and results of operations.

Accordingly, there are no assurances that this industry and market will continue to exist or grow as currently estimated or anticipated, or function and evolve in a manner consistent with management’s expectations and assumptions. Any event or circumstance that affects the medical cannabis industry and market could have a material adverse effect on the Company’s business, financial condition and results of operations.

The Company may compete for market share with other companies, including other Licensed Producers, which may have longer operating histories and more financial resources, manufacturing and marketing experience than the Company

The Company does and expects to continue to face intense competition from other Licensed Producers and companies, some of which can be expected to have longer operating histories and more financial resources, manufacturing and marketing experience than the Company. Increased competition by larger and better financed competitors could materially and adversely affect the business, financial condition and results of operations of the Company.

In addition, there has been and will likely continue to be industry consolidation, resulting in the creation of larger companies with financial resources, manufacturing and marketing capabilities, who may have or develop product offerings that are greater than those of the Company. As a result of this competition, the Company may be unable to maintain its operations or develop them as currently proposed on terms it considers acceptable or at all. Increased competition by larger, better-financed competitors with geographic advantages could materially and adversely affect the Company’s business, financial condition and results of operations.

The number of licences granted and the number of Licensed Producers ultimately authorized by Health Canada could also have an impact on the operations of the Company. The Company expects to face additional competition from new market entrants that are granted licences under the ACMPR or existing licence holders which are not yet active in the industry. If a significant number of new licences are granted by Health Canada in the near term, the Company may experience increased competition for market share and may experience downward price pressure on its products as new entrants increase production.

The Company also faces competition from illegal dispensaries and the black market that are unlicensed and unregulated, and that are selling cannabis and cannabis products, including products with higher concentrations of active ingredients, and using delivery methods, including edibles, that the Company is prohibited from offering to individuals as they are not currently permitted by the ACMPR. Any inability or unwillingness of law enforcement authorities to enforce existing laws prohibiting the unlicensed cultivation and sale of cannabis and cannabis-based products could result in the perpetuation of the black market for cannabis and/or have a material adverse effect on the perception of cannabis use. Any or all of these events could have a material adverse effect on the Company’s business, financial condition and results of operations.

If the number of users of cannabis for medical purposes in Canada increases, or if the legalization of cannabis for recreational purposes is implemented, the demand for cannabis products generally will likely increase and the Company expects that competition will become more intense, as current and future competitors begin to offer an increasing number of diversified products. To remain competitive, the Company will require a continued high level of investment in research and development, sales and patient support. The Company may not have sufficient resources to maintain research and development, sales and patient support efforts on a competitive basis which could have a material adverse effect on the Company’s business, financial condition and results of operations.

As well, the legal landscape for medical and recreational cannabis is changing internationally. More countries have passed laws that allow for the production and distribution of cannabis for medical purposes in some form or another. The Company has some international strategic alliances in place, which may be affected if more countries legalize medical cannabis. Increased international competition and limitations placed on the Company by Canadian regulations might lower the demand for the Company’s products on a global scale.

The Company’s expansion efforts may not be successful

There is no guarantee that the Company’s intentions to acquire and/or construct additional cannabis production and manufacturing facilities in Canada and in other jurisdictions with federal legal cannabis markets, and to expand the Company’s marketing and sales initiatives will be successful. Any such activities will require, among other things, various regulatory approvals, licences and permits (such as additional site licences from Health Canada under the ACMPR, as applicable) and there is no guarantee that all required approvals, licences and permits will be obtained in a timely fashion or at all. There is also no guarantee that the Company will be able to complete any of the foregoing activities as anticipated or at all. The failure of the Company to successfully execute its expansion strategy (including receiving required regulatory approvals and permits) could adversely affect the Company’s business, financial condition and results of operations and may result in the Company failing to meet anticipated or future demand for its cannabis-based pharmaceutical products, when and if it arises.

The legalization of cannabis for recreational purposes may not be implemented as anticipated or at all and, if implemented, differing approaches to the distribution and sales by the provinces and territories of Canada may impose barriers to participation by the Company in any recreational cannabis market, and may also result in changes to the current regulatory regime providing access to cannabis for medical purposes

The Government of Canada has provided guidance that, subject to Parliamentary approval and Royal Assent, it intends to provide regulated and restricted access to cannabis pursuant to the Cannabis Act by no later than July 2018, however there remains no assurance that the legalization of cannabis by the Government of Canada will occur as anticipated or at all. In particular, on December 20, 2017 the Prime Minister of Canada communicated that the Government of Canada intends to legalize cannabis for recreational purposes in the summer of 2018, despite previous reports of a July 1, 2018 deadline.

Health Canada’s proposed approach to the regulation of cannabis (described under “ Description of the Business—Expected Legalization of Recreational Cannabis in Canada”) includes proposals relating to cannabis for medical purposes and health products containing cannabis. Such proposals, if implemented, could result in changes to the current regulatory regime under the ACMPR, which may impact the operations of Licensed Producers or affect the Canadian medical cannabis industry generally. Any such regulatory changes could adversely affect the Company’s business, financial condition and results of operations.

In addition, if the Cannabis Act comes into effect, there is no guarantee that provincial legislation regulating the distribution and sale of cannabis for recreational purposes will be enacted according to the terms announced by such provinces, or at all, or that any such legislation, if enacted, will create the opportunities for growth anticipated by the Company. For example, the Provinces of Ontario (Canada’s most populous province), Québec and New Brunswick have announced sales and distribution models that would create government-controlled monopolies over the legal retail and distribution of cannabis for recreational purposes in such provinces, which could limit the Company’s opportunities in those provinces.

The Company may be unable to attract or retain key personnel with sufficient experience in the medical cannabis industry, and may prove unable to attract, develop, and retain additional employees required for the Company’s development and future success

The success of the Company is currently largely dependent on the performance of its management team (collectively, “Key Persons”) . The Company’s future success depends on its continuing ability to attract, develop, motivate and retain highly qualified and skilled employees. Qualified individuals are in high demand, and the Company may incur significant costs to attract and retain them. In addition, the Company’s lean management structure may be strained as the Company pursues growth opportunities in the future. The loss of the services of a Key Person, or an inability to attract other suitably qualified persons when needed, could have a material adverse effect on the Company’s ability to execute on its business plan and strategy, and the Company may be unable to find adequate replacements on a timely basis, or at all. MedReleaf does not currently maintain key-person insurance on the lives of any of its Key Persons.

Further, as a Licensed Producer, directors and officers of the Company are subject to a security clearance by Health Canada. Under the ACMPR a security clearance cannot be valid for more than five years and must be renewed before the expiry of a current security clearance. There is no assurance that any of the Company’s existing personnel who presently or may in the future require a security clearance will be able to obtain or renew such clearances or that new personnel who require a security clearance will be able to obtain one. A failure by a person required to maintain or renew his or her security clearance, would result in a material adverse effect on the Company’s business, financial condition and results of operations. In addition, if a Key Person who requires a security clearance leaves the Company, and the Company is unable to find a suitable replacement that has a security clearance required by the ACMPR in a timely manner, or at all, there could occur a material adverse effect on the Company’s business, financial condition and results of operations.

Significant interruption in the Company’s access to certain key inputs such as raw materials, electricity, water and other utilities may impair its cannabis growing operation

The Company’s business is dependent on a number of key inputs and their related costs including raw materials and supplies related to its growing operations, as well as electricity, water and other utilities. Any significant interruption, price increase or negative change in the availability or economics of the supply chain for key inputs and, in particular, rising or volatile energy costs could have a material adverse effect on MedReleaf’s business, financial condition and results of operations. In addition, the Company’s operations would be significantly affected by a prolonged power outage.

The ability of the Company to compete and grow cannabis is dependent on it having access, at a reasonable cost and in a timely manner, to labour, equipment, parts and components. No assurances can be given that the Company will be successful in maintaining its required supply of labour, equipment, parts and components. It is also possible that the final costs of the major equipment contemplated by the Company’s capital expenditure program relating to the ongoing development and expansion of its facilities may be significantly greater than anticipated by the Company’s management, in which circumstance the Company may curtail, or extend the timeframes for completing, such capital expenditure plans. This could have a material adverse effect on the Company’s business, financial condition and results of operations.

MedReleaf has expanded and intends to further expand its business and operations into jurisdictions outside of Canada, and there are risks associated with doing so

The Company has expanded and may in the future further expand its operations and business into jurisdictions outside of Canada. There can be no assurance that any market for the Company’s products will develop in any such foreign jurisdiction. The Company may face new or unexpected risks or significantly increase its exposure to one or more existing risk factors, including economic instability, changes in laws and regulations and the effects of competition. These factors may limit the Company’s capability to successfully expand its operations and may have a material adverse effect on the Company’s business, financial condition and results of operations.

The Company may enter into strategic alliances, or expand the scope of currently existing relationships with third parties with whom it believes will have a beneficial impact on its business, financial condition and results of operation and there are risks associated with such activities

The Company currently has, and may in the future enter into, strategic alliances with third parties that the Company believes will complement or augment its existing business. MedReleaf’s ability to complete strategic alliances is dependent upon, and may be limited by, the availability of suitable candidates and capital. In addition, strategic alliances could present unforeseen integration obstacles or costs, may not enhance our business, and may involve risks that could adversely affect the Company, including significant amounts of management time that may be diverted from operations in order to pursue and complete such transactions or maintain such strategic alliances. Future strategic alliances could result in the incurrence of additional debt, costs and contingent liabilities, and there can be no assurance that future strategic alliances will achieve, or that the Company’s existing strategic alliances will continue to achieve, the expected benefits to the Company’s business or that the Company will be able to consummate future strategic alliances on satisfactory terms, or at all. Any of the foregoing could have a material adverse effect on the Company’s business, financial condition and results of operations.

The Company is subject to risks inherent in an agricultural business

The Company’s business involves the growing of cannabis for medical purposes, which is an agricultural product. As such, the business is subject to the risks inherent in the agricultural business, such as insects, plant diseases and similar agricultural risks. Although MedReleaf grows its products indoors under climate controlled conditions and all growing conditions are carefully monitored with trained personnel, there can be no assurance that natural elements, such as insects and plant diseases, will not have a material adverse effect on the Company’s business, financial condition and results of operations.

MedReleaf may not be able to transport its medical cannabis products to patients in a safe and efficient manner

Due to its direct-to-patient shipping model, the Company depends on fast and efficient third party transportation services to distribute its products. Any prolonged disruption of third party transportation services could have a material adverse effect on the Company’s business, financial condition and results of operations. Rising costs associated with third party transportation services used by the Company to ship its products may also adversely impact the Company’s business, financial condition and results of operations.

Due to the nature of MedReleaf’s products, security of the product during transportation to and from the Company’s facilities is of the utmost concern. A breach of security during transport or delivery could have a material adverse effect on the Company’s business, financial condition and results of operations. Any breach of the security measures during transport or delivery, including any failure to comply with recommendations or requirements of Health Canada, could also have an impact on the Company’s ability to continue operating under the MedReleaf Licences or the prospect of renewing the MedReleaf Licences.

The Company will seek to maintain adequate insurance coverage in respect of the risks faced by it, however, insurance premiums for such insurance may not continue to be commercially justifiable and there may be coverage limitations and other exclusions which may not be sufficient to cover potential liabilities faced by the Company

The Company has insurance to protect its assets, operations and employees. While the Company believes its insurance coverage addresses all material risks to which it is exposed and is adequate and customary in its current state of operations, such insurance is subject to coverage limits and exclusions and may not be available for the risks and hazards to which the Company is exposed. In addition, no assurance can be given that such insurance will be adequate to cover the Company’s liabilities or will be generally available in the future or, if available, that premiums will be commercially justifiable. If the Company were to incur substantial liability and such damages were not covered by insurance or were in excess of policy limits, or if the Company were to incur such liability at a time when it is not able to obtain liability insurance, there could be a material adverse effect on the Company’s business, financial condition and results of operations.

If MedReleaf is not able to comply with all safety, health and environmental regulations applicable to its operations and industry, it may be held liable for any breaches thereof

Safety, health and environmental legislation affects nearly all aspects of the Company’s operations, including product development, working conditions, waste disposal, emission controls and the maintenance of air and water quality standards and land reclamation and, with respect to environmental regulation, imposes limitations on the generation, transportation, storage and disposal of solid and hazardous waste. Compliance with safety, health and environmental legislation can require significant expenditures, and failure to comply with such safety, health and environmental legislation may result in the imposition of fines and penalties, the temporary or permanent suspension of operations, clean-up costs resulting from contaminated properties, damages and the loss of important permits. Exposure to these liabilities arises not only from the Company’s existing operations, but from operations that may in the future be closed or sold to third parties. The Company could also be held liable for worker exposure to hazardous substances and for accidents causing injury or death. There can be no assurances that the Company will at all times be in compliance with all safety, health and environmental regulations or that steps to achieve compliance would not materially adversely affect the Company’s business.

Safety, health and environmental legislation is evolving in a manner which will require stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects and a heightened degree of responsibility for companies and their officers, directors and employees. The Company is not able to determine the specific impact that future changes in safety, health and environmental laws and regulations may have on its operations and activities, and its resulting financial position; however, the Company anticipates that capital expenditures and operating expenses may increase in the future as a result of the implementation of new and increasingly stringent safety, health and environmental regulation. Further changes in safety, health and environmental laws, new information on existing safety, health and environmental conditions or other events, including legal proceedings based upon such conditions or an inability to obtain necessary permits, may require increased financial reserves, compliance expenditures or otherwise have a material adverse effect on the Company’s business, financial condition and results of operations.

The Company may be subject to product liability claims

As a manufacturer and distributor of products designed to be ingested by humans, MedReleaf faces an inherent risk of exposure to product liability claims, regulatory action and litigation if its products are alleged to have caused significant loss or injury. In addition, the manufacture and sale of cannabis products for medical purposes involves the risk of injury to consumers due to tampering by unauthorized third parties or product contamination. Previously unknown adverse reactions resulting from human consumption of cannabis products alone or in combination with other medications or substances could occur. The Company may be subject to various product liability claims, including, among others, that the products produced by the Company caused or contributed to injury or illness, include inadequate instructions for use or include inadequate warnings concerning possible side effects or interactions with other substances. A product liability claim or regulatory action against the Company could result in increased costs, could adversely affect the Company’s reputation and goodwill with its patients and consumers generally, and could have a material adverse effect on the Company’s business, financial condition and results of operations. There can be no assurances that MedReleaf will be able to obtain or maintain product liability insurance on acceptable terms or with adequate coverage against potential liabilities. Such insurance is expensive and may not be available in the future on acceptable terms, or at all. The inability to obtain sufficient insurance coverage on reasonable terms or to otherwise protect against potential product liability claims could prevent or inhibit the commercialization of products.

The Company’s medical cannabis products may be subject to recalls for a variety of reasons

Manufacturers and distributors of products are sometimes subject to the recall or return of their products for a variety of reasons, including product defects, such as contamination, unintended harmful side effects or interactions with other substances, packaging safety and inadequate or inaccurate labeling disclosure. If any of the products produced by the Company are recalled due to an alleged product defect or for any other reason, the Company could be required to incur the unexpected expense of the recall and any legal proceedings that might arise in connection with the recall. The Company may lose a significant amount of sales and may not be able to replace those sales at an acceptable margin or at all. In addition, a product recall may require significant management attention. Although MedReleaf has detailed procedures in place for testing finished products, there can be no assurance that any quality, potency or contamination problems will be detected in time to avoid unforeseen product recalls, regulatory action or lawsuits, whether frivolous or otherwise. Additionally, if any of the products produced by MedReleaf were subject to recall, the reputation and goodwill of that product and/or the Company could be harmed. A recall for any of the foregoing reasons could lead to decreased demand for products produced by MedReleaf and could have a material adverse effect on the Company’s business, financial condition and results of operations. Additionally, product recalls may lead to increased scrutiny of the operations of MedReleaf by Health Canada or other regulatory agencies, requiring further management attention, increased compliance costs and potential legal fees, fines, penalties and other expenses. Furthermore, any product recall affecting the medical cannabis industry more broadly could lead consumers to lose confidence in the safety and security of the products sold by Licensed Producers generally, which could have a material adverse effect on the Company’s business, financial condition and results of operations.

MedReleaf may not be able to successfully develop new products or find a market for their sale

The medical cannabis industry is, and the recreational cannabis industry (if implemented) will be, in its early stages of development and it is likely that the Company, and its competitors, will seek to introduce new products in the future. In attempting to keep pace with any new market developments, the Company may need to expend significant amounts of capital in order to successfully develop and generate revenues from new products introduced by the Company. As well, the Company may be required to obtain additional regulatory approvals from Health Canada and any other applicable regulatory authority, which may take significant amounts of time. The Company may not be successful in developing effective and safe new products, bringing such products to market in time to be effectively commercialized, or obtaining any required regulatory approvals, which, together with any capital expenditures made in the course of such product development and regulatory approval processes, may have a material adverse effect on the Company’s business, financial condition and results of operations.

The Company may experience breaches of security at its facilities or in respect of electronic documents and data storage and may face risks related to breaches of applicable privacy laws

Given the nature of the Company’s product and its lack of legal availability outside of channels approved by the Government of Canada, as well as the concentration of inventory in its facilities, despite meeting or exceeding Health Canada’s security requirements, there remains a risk of shrinkage as well as theft. A security breach at one of the Company’s facilities could expose the Company to additional liability and to potentially costly litigation, increase expenses relating to the resolution and future prevention of these breaches and may deter potential patients from choosing the Company’s products.

In addition, MedReleaf collects and stores personal information about its patients and is responsible for protecting that information from privacy breaches. A privacy breach may occur through procedural or process failure, information technology malfunction, or deliberate unauthorized intrusions. Theft of data for competitive purposes, particularly patient lists and preferences, is an ongoing risk whether perpetrated via employee collusion or negligence or through deliberate cyber-attack. Any such theft or privacy breach would have a material adverse effect on the Company’s business, financial condition and results of operations.

Furthermore, there are a number of federal and provincial laws protecting the confidentiality of certain patient health information, including patient records, and restricting the use and disclosure of that protected information. In particular, the privacy rules under the Personal Information Protection and Electronics Documents Act (Canada) ( “PIPEDA” ), protect medical records and other personal health information by limiting their use and disclosure of health information to the minimum level reasonably necessary to accomplish the intended purpose. If the Company was found to be in violation of the privacy or security rules under PIPEDA or other laws protecting the confidentiality of patient health information, it could be subject to sanctions and civil or criminal penalties, which could increase its liabilities, harm its reputation and have a material adverse effect on the business, results of operations and financial condition of the Company.

The Company may become subject to liability arising from any fraudulent or illegal activity by its employees, contractors and consultants

The Company is exposed to the risk that its employees, independent contractors and consultants may engage in fraudulent or other illegal activity. Misconduct by these parties could include intentional, reckless and/or negligent conduct or disclosure of unauthorized activities to the Company that violates: (i) government regulations; (ii) manufacturing standards; (iii) federal and provincial healthcare fraud and abuse laws and regulations; or (iv) laws that require the true, complete and accurate reporting of financial information or data. It is not always possible for the Company to identify and deter misconduct by its employees and other third parties, and the precautions taken by the Company to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting the Company from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. If any such actions are instituted against the Company, and it is not successful in defending itself or asserting its rights, those actions could have a significant impact on our business, including the imposition of civil, criminal and administrative penalties, damages, monetary fines, contractual damages, reputational harm, diminished profits and future earnings, and curtailment of the Company’s operations, any of which could have a material adverse effect on the Company’s business, financial condition and results of operations.

MedReleaf, or the medical cannabis industry more generally, may receive unfavourable publicity or become subject to negative consumer perception

The Company believes the medical cannabis industry is highly dependent upon consumer perception regarding the medical benefits, safety, efficacy and quality of the cannabis distributed for medical purposes to such consumers. Consumer perception of MedReleaf’s products can be significantly influenced by scientific research or findings, regulatory investigations, litigation, political statements both in Canada and in other countries, media attention and other publicity (whether or not accurate or with merit) regarding the consumption of cannabis products for medical purposes, including unexpected safety or efficacy concerns arising with respect to the products of the Company or its competitors. There can be no assurance that future scientific research, findings, regulatory proceedings, litigation, media attention or other research findings or publicity will be favourable to the medical cannabis market or any particular product, or consistent with earlier publicity. Future research reports, findings, regulatory proceedings, litigation, media attention or other publicity that are perceived as less favourable than, or that question, earlier research reports, findings or publicity could have a material adverse effect on the demand for the Company’s products and the business, results of operations and financial condition of the Company. The Company’s dependence upon consumer perceptions means that adverse scientific research reports, findings, regulatory proceedings, litigation, media attention or other publicity (whether or not accurate or with merit), could have an adverse effect on any demand for the Company’s products which could have a material adverse effect on the Company’s business, financial condition and results of operations. Further, adverse publicity reports or other media attention regarding the safety, efficacy and quality of cannabis for medical purposes in general, or the Company’s products specifically, or associating the consumption of cannabis with illness or other negative effects or events, could have such a material adverse effect. Such adverse publicity reports or other media attention could arise even if the adverse effects associated with such products resulted from consumers’ failure to consume such products legally, appropriately or as directed.

The Company may not be able to develop and maintain lasting consumer relationships with patients

MedReleaf’s success depends on its ability to attract and retain patients. There are many factors which could impact the Company’s ability to attract and retain patients, including but not limited to the Company’s brand awareness, its ability to continually produce desirable and effective cannabis products, the successful implementation of the Company’s patient-acquisition plan and the continued growth in the aggregate number of patients selecting cannabis for medical purposes as a treatment option. The Company’s failure to acquire and retain patients could have a material adverse effect on the Company’s business, financial condition and results of operations.

MedReleaf may be unable to expand its operations in accordance with patient demand or to manage its operations beyond their current scale

The Company’s revenue has grown in recent years. The Company’s ability to sustain its growth will depend on a number of factors, many of which are beyond the Company’s control, including, but not limited to, the availability of sufficient capital on suitable terms, changes in laws and regulations respecting the production of cannabis products and competition from other Licensed Producers and the black market, and the ability or authorization to produce sufficient volumes of the Company’s medical cannabis products to match patient demand. In addition, the Company is subject to a variety of business risks generally associated with growing companies. Future growth and expansion could place significant strain on the Company’s management personnel and likely will require the Company to recruit additional management personnel.

There can be no assurance that MedReleaf will be able to manage its expanding operations (including any acquisitions) effectively, that it will be able to sustain or accelerate its growth or that such growth, if achieved, will result in profitable operations, that it will be able to attract and retain sufficient management personnel necessary for continued growth, or that it will be able to successfully make strategic investments or acquisitions. The failure to accomplish any of the foregoing could have a material adverse effect on the Company’s business, financial condition and results of operations.

Demand for medical cannabis products is dependent on a number of social, political and economic factors that are beyond the Company’s control. While the Company believes that demand for such products will continue to grow, there is no assurance that such increase in demand will occur, that the Company will benefit from any demand increase, or that its business will be profitable. If the Company is unable to demonstrate sustained profitability, the value of the Common Shares may significantly decrease.

MedReleaf may not be able to secure adequate or reliable sources of funding required to operate its business and meet consumer demand for its products

There is no guarantee that the Company will be able to achieve its business objectives. The continued development of the Company may require additional financing. The failure to raise such capital could result in the delay or indefinite postponement of current business objectives or the Company ceasing to carry on business. There can be no assurance that additional capital or other types of financing will be available if needed or that, if available, the terms of such financing will be favourable to the Company. In addition, from time to time, the Company may enter into transactions to acquire assets or the shares of other corporations. These transactions may be financed wholly or partially with debt, which may increase the Company’s debt levels above industry standards. Any debt financing secured in the future could involve restrictive covenants relating to capital raising activities and other financial and operational matters, which may make it more difficult for the Company to obtain additional capital and to pursue business opportunities, including potential acquisitions. Debt financings may also contain provisions which, if breached, may entitle lenders or their agents to accelerate repayment of loans and/or realize upon security over the assets of the Company, and there is no assurance that the Company would be able to repay such loans in such an event or prevent the enforcement of security granted pursuant to such debt financing.

The Credit Facilities impose limitations on the types of transactions or financial arrangements that the Company may engage in

The Credit Agreement contains certain restrictive covenants including, subject to certain exceptions, restrictions on the Company’s ability to incur indebtedness, grant liens, make corporate changes, dispose of assets, make investments including acquisitions and pay dividends. There are also limitations on the scope of the Company’s business. In addition to the foregoing restrictions, the Company must maintain certain financial ratios. Events beyond the Company’s control, including changes in general economic and business conditions, may affect the Company’s ability to observe or satisfy these covenants, which could result in a default under the Credit Agreement. If an event of default under the Credit Agreement occurs, the agent could elect to declare all principal amounts outstanding under the Credit Facilities at such time, together with accrued interest, to be immediately due. In such an event, the Company may not have sufficient funds to repay amounts owing under the Credit Agreement.

Management has limited experience with the requirements and demands of managing a publicly-traded company

The individuals who constitute MedReleaf’s senior management team have had limited experience in managing a publicly-traded entity. The Company is required to have control systems and procedures required to operate as a public company, and these systems and procedures could place a significant strain on the Company’s management systems, infrastructure and other resources. The Company can provide no assurances that its management’s past experience will be sufficient to enable the Company to successfully operate as a public company. Although management has engaged a number of professional service providers to assist the Company with complying with its continuous disclosure, filing, and other requirements applicable to public entities, if management of the Company is unable to satisfactorily manage the Company as a public entity and ensure that it remains in compliance with all continuous disclosure and other requirements applicable to public entities, there could occur a material adverse effect on the Company’s business, financial condition and results of operations.

Management may not be able to successfully maintain adequate internal controls over financial reporting

Proper systems of internal controls over financial accounting and disclosure are critical to the operation of a public company. However, the Company does not expect that its disclosure controls and procedures and internal control over financial reporting will prevent all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Due to the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected in a timely manner or at all. If the Company cannot provide reliable financial reports or prevent fraud, its reputation and operating results could be materially adversely affected, which could cause investors to lose confidence in the Company’s reported financial information, which in turn could result in a reduction in the value of the Common Shares.

Requirements to comply with public company reporting obligations, as well as those of any stock exchange, may strain the Company’s systems and resources

As a public entity, the Company is subject to the reporting requirements and related rules and regulations of the Canadian provincial securities regulators, as well as the rules of any stock exchange on which the Company’s securities may be listed from time to time. These requirements may place a strain on the Company’s systems and resources. The applicable securities legislation requires that MedReleaf file annual, quarterly and event-driven reports with respect to its business and financial condition and operations, and requires that MedReleaf maintain effective disclosure controls and procedures and internal control over financial reporting. In order to maintain and improve the effectiveness of the Company’s disclosure controls and procedures, significant resources and management oversight are required. The Company can provide no assurance that the procedures and processes adopted by it will be sufficient to allow it to satisfy its obligations as a public company on a timely basis. In addition, sustaining MedReleaf’s growth also requires it to commit additional management, operational and financial resources to identify new professionals to join the Company and to maintain appropriate operational and financial systems to adequately support expansion. These activities may divert management’s attention from other business concerns, which could have a material adverse effect on the Company’s business, financial condition, financial performance and cash flows.

The Company may not be able to successfully identify and execute future acquisitions or dispositions, or to successfully manage the impacts of such transactions on its operations

Although there is no present intention to undertake any of the following transactions (other than the Arrangement), material acquisitions, dispositions and other strategic transactions involve a number of risks, including: (i) potential disruption of the Company’s ongoing business; (ii) distraction of management; (iii) the Company may become more financially leveraged; (iv) the anticipated benefits and cost savings of those transactions may not be realized fully or at all or may take longer to realize than expected; (v) increasing the scope and complexity of the Company’s operations, and (vi) loss or reduction of control over certain of the Company’s assets.

The presence of one or more material liabilities of an acquired company that are unknown to the Company at the time of acquisition could have a material adverse effect on the results of operations, business prospects and financial condition of the Company. A strategic transaction may result in a significant change in the nature of the Company’s business, operations and strategy. In addition, the Company may encounter unforeseen obstacles or costs in implementing a strategic transaction or integrating any acquired business into the Company’s operations.

Conflicts of interest may arise between MedReleaf and its directors and officers as a result of other business activities undertaken by such individuals

The Company may be subject to various potential conflicts of interest because of the fact that some of its directors and executive officers may be engaged in a range of business activities. In addition, the Company’s directors and executive officers may devote time to their outside business interests, so long as such activities do not materially or adversely interfere with their duties to the Company and subject to any contractual restrictions restricting such activities. In some cases, the Company’s executive officers and directors may have fiduciary obligations associated with business interests that interfere with their ability to devote time to the Company’s business and affairs, which could adversely affect the Company’s operations. These business interests could require significant time and attention of the Company’s executive officers and directors.

Conflicts of interest, if any, will be subject to the procedures and remedies provided under applicable laws and policies of the Company. For example, a director who has a material interest in a matter before the Board or any committee on which he or she serves is required to disclose such interest as soon as the director becomes aware of it and absent himself or herself from the meeting while discussions and voting with respect to the matter are taking place. In accordance with applicable laws, the directors of the Company are required to act honestly and in good faith with a view to the best interests of the Company.

The Company may become involved in regulatory or agency proceedings, investigations and audits

The Company’s business requires compliance with many laws and regulations. Failure to comply with these laws and regulations could subject the Company to regulatory or agency proceedings or investigations and could also lead to damage awards, fines and penalties. The Company may become involved in a number of government or agency proceedings, investigations and audits. The outcome of any regulatory or agency proceedings, investigations, audits, and other contingencies could harm the Company’s reputation, require the Company to take, or refrain from taking, actions that could harm its operations or require the Company to pay substantial amounts of money, harming its financial condition. There can be no assurance that any pending or future regulatory or agency proceedings, investigations and audits will not result in substantial costs or a diversion of management’s attention and resources or have a material adverse impact on the Company’s business, financial condition and results of operation.

The Company may be subject to litigation in the ordinary course of its business

The Company may become party to litigation from time to time in the ordinary course of business which could adversely affect its business. Should any litigation in which the Company becomes involved be determined against the Company, such a decision could adversely affect the Company’s ability to continue operating and the value of the Common Shares and could use significant resources. Even if the Company is involved in litigation and wins, litigation can redirect significant Company resources, including the time and attention of management and available working capital. Litigation may also create a negative perception of MedReleaf’s brand.

Certain events or developments in the medical cannabis industry more generally may impact MedReleaf’s reputation

Damage to the Company’s reputation can be the result of the actual or perceived occurrence of any number of events, and could include any negative publicity, whether true or not. As a producer and distributor of a controlled substance in Canada that has been commonly associated with various other narcotics, violence and criminal activities, there is a risk that our business might attract negative publicity. There is also risk that the action(s) of other Licensed Producers, or the action(s) of other companies and service providers in the cannabis industry, may negatively affect the reputation of the industry as a whole and thereby negatively impact the reputation of the Company. The increased usage of social media and other web-based tools used to generate, publish and discuss user-generated content and to connect with other users has made it increasingly easier for individuals and groups to communicate and share opinions and views in regards to the Company and its activities, whether true or not and the medical cannabis industry in general, whether true or not. Although the Company believes that it operates in a manner that is respectful to all stakeholders and that it takes care in protecting its image and reputation, the Company does not ultimately have direct control over how it or the medical cannabis industry is perceived by others. Reputation loss may result in decreased investor confidence, increased challenges in developing and maintaining community relations and an impediment to the Company’s overall ability to advance its business strategy and realize on its growth prospects, thereby having a material adverse impact on the Company’s business, financial condition and results of operations.

Third parties with whom the Company does business may perceive themselves as being exposed to reputational risk as a result of their relationship with the Company

The parties with which the Company does business may perceive that they are exposed to reputational risk as a result of the Company’s medical cannabis business activities. Failure to establish or maintain business relationships due to reputational risk arising in connection with the nature of the Company’s business could have a material adverse effect on the Company’s business, financial condition and results of operations.

The Company may be subject to risks related to the protection and enforcement of its intellectual property rights, and may become subject to allegations that the Company is in violation of intellectual property rights of third parties

The ownership and protection of our intellectual property rights is a significant aspect of the Company’s future success. Currently the Company relies on trade secrets, technical know-how and proprietary information to protect its intellectual property. The Company also attempts to protect its intellectual property by entering into confidentiality agreements with parties that have access to it, such as business partners, collaborators, employees and consultants. Any of these parties may breach these agreements and the Company may not have adequate remedies for any specific breach. In addition, the Company’s trade secrets and technical know-how, which are not protected by patents, may otherwise become known to or be independently developed by competitors, in which event the Company’s business, financial condition and results of operations could be materially adversely affected.

Unauthorized parties may attempt to replicate or otherwise obtain and use the Company’s products, trade secrets, technical know-how and proprietary information that are not protected by patents. Policing the unauthorized use of the Company’s current or future intellectual property rights could be difficult, expensive, time-consuming and unpredictable, as may be enforcing these rights against unauthorized use by others. Identifying unauthorized use of intellectual property rights is difficult as the Company may be unable to effectively monitor and evaluate the products being distributed by its competitors, including parties such as unlicensed dispensaries, and the processes used to produce such products. In addition, in any infringement proceeding, some or all of the Company’s current or future trademarks, patents or other intellectual property rights or other proprietary know-how, or arrangements or agreements seeking to protect the same for the benefit of the Company, may be found invalid, unenforceable, anti-competitive or not infringed. An adverse result in any litigation or defense proceedings could put one or more of the Company’s current or future trademarks, patents or other intellectual property rights at risk of being invalidated or interpreted narrowly and could put existing intellectual property applications at risk of not being issued. Any or all of these events could materially and adversely affect the business, financial condition and results of operations of the Company.

In addition, other parties may claim that the Company’s products infringe on their proprietary and perhaps patent protected rights. Such claims, whether or not meritorious, may result in the expenditure of significant financial and managerial resources, legal fees, result in injunctions, temporary restraining orders and/or require the payment of damages. As well, the Company may need to obtain licenses from third parties who allege that the Company has infringed on their lawful rights. However, such licenses may not be available on terms acceptable to the Company or at all. In addition, the Company may not be able to obtain or utilize on terms that are favorable to it, or at all, licenses or other rights with respect to intellectual property that it does not own.

MedReleaf may be subject to risks related to its information technology systems, including cyber-attacks

The Company has entered into agreements with third parties for hardware, software, telecommunications and other information technology ( “IT” ) services in connection with its operations. The Company’s operations depend, in part, on how well it and its suppliers protect networks, equipment, IT systems and software against damage from a number of threats, including, but not limited to, cable cuts, damage to physical plants, natural disasters, intentional damage and destruction, fire, power loss, hacking, computer viruses, vandalism and theft. The Company’s operations also depend on the timely maintenance, upgrade and replacement of networks, equipment, IT systems and software, as well as pre-emptive expenses to mitigate the risks of failures. Any of these and other events could result in information system failures, delays and/or increase in capital expenses. The failure of information systems or a component of information systems could, depending on the nature of any such failure, adversely impact the Company’s reputation and results of operations.

The Company has not experienced any material losses to date relating to cyber-attacks or other information security breaches, but there can be no assurance that the Company will not incur such losses in the future. The Company’s risk and exposure to these matters cannot be fully mitigated because of, among other things, the evolving nature of these threats. As a result, cyber security and the continued development and enhancement of controls, processes and practices designed to protect systems, computers, software, data and networks from attack, damage or unauthorized access is a priority. As cyber threats continue to evolve, the Company may be required to expend additional resources to continue to modify or enhance protective measures or to investigate and remediate any security vulnerabilities.

The Company may face disruption in connection with labour organization efforts

None of the Company’s employees are currently subject to a collective bargaining agreement. The Company is currently engaged in a dispute before the AFRAA Tribunal in connection with an unsuccessful unionization effort by UFCW Canada at the Company’s Markham Facility. See “ Legal Proceedings ”.

Should the Company be unsuccessful before the AFRAA Tribunal, the AFRAA Tribunal may award remedies to UFCW Canada and/or the employees named in the application, including a declaration that the Company violated its employees’ rights under the AEPA, reinstatement of terminated employees, damages suffered by terminated employees (including for loss of earnings and/or benefits) and an order that MedReleaf provide UFCW Canada a reasonable opportunity to make representations respecting the terms and conditions of employment of its members. The UFCW Canada has also challenged the constitutionality of the AEPA arguing that, among other things, it fails to provide a meaningful right for employees subject to the AEPA to bargain collectively.

No assurance can be given that the decision by the AFRAA Tribunal will be favourable to the Company or that the outcome of the application will not adversely impact the Company’s reputation and results of operations.

If the AFRAA Tribunal decides in favour of the Company, no assurance can be given that there will not occur any further attempts to organize all or part of the Company’s employees. Although the AEPA does not require an employer to enter into a collective agreement with any employees’ association, employers are required to give an employees’ association (which may be represented by a union) a reasonable opportunity to make representations respecting the terms and conditions of employment of one or more of its members.

Licensed Producers, including MedReleaf, are constrained by law in their ability to market their products

The development of the Company’s business and operating results may be hindered by applicable restrictions on sales and marketing activities imposed by Health Canada. The regulatory environment in Canada limits the Company’s ability to compete for market share in a manner similar to other industries. If the Company is unable to effectively market its products and compete for market share, or if the costs of compliance with government legislation and regulation cannot be absorbed through increased selling prices for its products, the Company’s sales and operating results could be adversely affected.

Tax and accounting requirements may change in ways that are unforeseen to the Company and the Company may face difficulty or be unable to implement and/or comply with any such changes

The Company is subject to numerous tax and accounting requirements, and changes in existing accounting or taxation rules or practices, or varying interpretations of current rules or practices, could have a significant adverse effect on the Company’s financial results, the manner in which it conducts its business or the marketability of any of its products. In the future, the geographic scope of the Company’s business may expand, and such expansion will require the Company to comply with the tax laws and regulations of multiple jurisdictions. Requirements as to taxation vary substantially among jurisdictions. Complying with the tax laws of these jurisdictions can be time consuming and expensive and could potentially subject the Company to penalties and fees in the future if the Company were to inadvertently fail to comply. In the event the Company was to inadvertently fail to comply with applicable tax laws, this could have a material adverse effect on the business, results of operations and financial condition of the Company.

On March 27, 2018, the Federal government of Canada introduced the Budget Implementation Bill, 2018, No. 1, (amendments to the Excise Act, 2001 cannabis taxation), which proposed to implement a new framework for the taxation of cannabis, the majority of which had been previously published for consultation on November 10, 2017, with some modifications. The proposed rules would effectively place cannabis producers within the existing rules that currently apply excise duties on tobacco, wine and spirits producers under the Excise Act, 2001 (Canada), with modifications as applicable. These rules include a new tax licensing regime for cannabis producers, stamping and marking rules, ongoing reporting requirements, and applicable excise duties payable by licensed cannabis producers on both recreational cannabis products, in additional to goods and services tax/harmonized sales tax. The cannabis excise duty framework is proposed to generally come into force on the date that legal cannabis for non-medical purposes becomes accessible for retail sale under the proposed Cannabis Act. The government has indicated that the implementation date may be postponed to the autumn of 2018. The rates of the excise duty for cannabis products delivered in each province and territory and relevant exemptions from the excise tax are still subject to some uncertainty, and will only become known with precision when the law and regulations come into force.

There can be no certainty that the Arrangement will be completed

As more particularly described under “ General Development of the Business – Developments Subsequent to the Financial Year-ended March 31, 2018”, the Company has entered into the Arrangement Agreement with Aurora, pursuant to which Aurora will acquire all of the outstanding Common Shares. Completion of the Arrangement is subject to certain conditions that may be outside the control of the Company, including without limitation, the requisite approvals of the Company’s and Aurora’s shareholders, the receipt of court and regulatory approvals, approval of the TSX and required third party approvals. There can be no assurance that these conditions will be satisfied or that the Arrangement will be completed as currently contemplated, or at all.

If the Arrangement is not completed, the market price of the Common Shares may decline and its business may suffer. In addition, MedReleaf will remain liable for significant consulting, accounting and legal costs relating to the Arrangement and will not realize anticipated synergies, growth opportunities and other benefits of the Arrangement. If the Arrangement is delayed, the achievement of synergies and the realization of growth opportunities could be delayed and may not be available to the same extent as anticipated. Additionally, if the Arrangement Agreement is terminated in certain circumstances, the Company would be required to pay a termination fee of $80,000,000 in addition to $15,000,000 as reimbursement of certain expenses of Aurora, which could have an adverse effect on the Company’s financial position. These potential payment obligations may also discourage other parties from attempting to acquire Common Shares, even if they might be willing to offer greater value than that offered under the Arrangement.

In addition, since the completion of the Arrangement is subject to uncertainty, officers and employees of the Company may experience uncertainty about their future roles with the Company. This may adversely affect the Company’s ability to attract or retain key management and personnel in the period until the Arrangement is completed or terminated.

If the Arrangement is completed, the integration of Aurora and the Company may not occur as planned

The Arrangement Agreement has been entered into with the expectation that its successful completion will result in enhanced production capacity, increased earnings and cost savings by taking advantage of operating and other synergies to be realized from the consolidation of Aurora and the Company and enhanced growth opportunities for the combined company. These anticipated benefits will depend in part on whether Aurora and the Company’s operations can be integrated in an efficient and effective manner. Most operational and strategic decisions and certain staffing decisions with respect to the combined company have not yet been made. These decisions and the integration of the two companies will present challenges to management, including the integration of systems and personnel of the two companies, and special risks, including possible unanticipated liabilities, unanticipated costs, and the loss of key employees. The performance of operations acquired from the Company in the Arrangement after completion of the Arrangement could be adversely affected if the combined company cannot retain key employees to assist in the integration and operation of the Company and Aurora. As a result of these factors, it is possible that the cost reductions and synergies expected from the combination of Aurora and the Company will not be realized.

Risks Related to Ownership of Common Shares

The price of the Common Shares in public markets may experience significant fluctuations

The market price for Common Shares may be volatile and subject to wide fluctuations in response to numerous factors, many of which are beyond the Company’s control, including the following: (i) actual or anticipated fluctuations in the Company’s quarterly results of operations; (ii) recommendations by securities research analysts; (iii) changes in the economic performance or market valuations of other issuers that investors deem comparable to the Company; (iv) addition or departure of the Company’s executive officers and other key personnel; (v) release or expiration of lock-up or other transfer restrictions on Common Shares; (vi) sales or perceived sales of Common Shares; (vii) significant acquisitions or business combinations, strategic partnerships, joint ventures or capital commitments by or involving the Company or its competitors; and (viii) news reports relating to trends, concerns, technological or competitive developments, regulatory changes and other related issues in the Company’s industry or target markets.

Financial markets have recently experienced significant price and volume fluctuations that have particularly affected the market prices of equity securities of public entities and that have, in many cases, been unrelated to the operating performance, underlying asset values or prospects of such entities. Accordingly, the market price of the Common Shares may decline even if the Company’s operating results or prospects have not changed. Additionally, these factors, as well as other related factors, may cause decreases in asset values that are deemed to be other than temporary, which may result in impairment losses. As well, certain institutional investors may base their investment decisions on consideration of the Company’s environmental, governance and social practices and performance against such institutions’ respective investment guidelines and criteria, and failure to satisfy such criteria may result in limited or no investment in the Common Shares by those institutions, which could materially adversely affect the trading price of the Common Shares. There can be no assurance that continuing fluctuations in price and volume will not occur. If such increased levels of volatility and market turmoil continue for a protracted period of time, there could be a material adverse effect on the Company’s business, financial condition and results of operations, as well as the trading price of the Common Shares.

Holders of Common Shares may be subject to dilution resulting from future offerings of Common Shares by the Company

If the Arrangement is not completed for any reason, MedReleaf may in the future raise additional funds by issuing equity securities. Holders of Common Shares will have no pre-emptive rights in connection with such further issues. The Board of Directors has the discretion to determine if an issuance of Common Shares is warranted, the price at which such issuance is effected and the other terms of issue of Common Shares. Such additional equity issuances could, depending on the price at which such securities are issued, substantially dilute the interests of the holders of Common Shares.

It is not anticipated that any dividend will be paid to holders of Common Shares for the foreseeable future

No dividends on the Common Shares have been paid to date. The Company anticipates that, for the foreseeable future, it will retain future earnings and other cash resources for the operation and development of its business. Payment of any future dividends will be at the discretion of the Board of Directors after taking into account many factors, including the Company’s earnings, operating results, financial condition, current and anticipated cash needs, and restrictions in financing agreements.

Significant holders of the Common Shares, may seek to sell all or a portion of their shareholdings in the future, which could reduce the market price of the Common Shares

Sales of a substantial number of Common Shares in the public market could occur at any time. These sales, or the market perception that the holders of a large number of Common Shares intend to sell Common Shares, could significantly reduce the market price of the Common Shares. The Company cannot predict the effect, if any, that future public sales of its outstanding securities or the availability of its outstanding securities for sale will have on the market price of the Common Shares. If the market price of the Common Shares were to drop as a result, this might impede the Company’s ability to raise additional capital and might cause remaining holders of Common Shares to lose all or part of their investments.

Holders of options to purchase Common Shares will have an immediate income inclusion for tax purposes when they exercise their options (that is, tax is not deferred until they sell the underlying Common Shares). As a result, these holders may need to sell Common Shares purchased on the exercise of options in the same year that they exercise their options. This might result in a greater number of Common Shares being sold in the public market, and fewer long-term holdings of Common Shares by management of the Company and other employees.

DIVIDENDS

MedReleaf has not paid dividends since the date of its incorporation and it does not expect to pay dividends in the near future. The Board of Directors will determine if and when dividends should be declared and paid in the future and any such determination will be based on the Company’s financial position, business environment, operating results, capital requirements, any contractual restrictions on the payment of dividends and any other factors that the Board may deem relevant at the time.

DESCRIPTION OF CAPITAL STRUCTURE

As of the date hereof, the authorized capital of the Company consists of: (i) an unlimited number of Common Shares of which 101,329,195 Common Shares are issued and outstanding; and (ii) 3,997.34 Class B Shares, all of which were issued and, on March 23, 2018, converted into 464,054 Common Shares in accordance with their terms. No additional Class B Shares may be issued.

The holders of the Common Shares are entitled to receive notice of, attend and vote, on the basis of one vote in respect of each Common Share held, at all meetings of holders of shares. The holders of the Common Shares are entitled to receive any dividends declared by the Board in respect of the Common Shares. The holders of the Common Shares are entitled to receive, on a pro rata basis, the Company’s remaining property and assets available for distribution upon the liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary.

The Company adopted an incentive stock option plan (the “ Stock Option Plan”) under which options may be granted to employees, officers, and consultants, enabling them to acquire Common Shares. In addition, prior to the completion of the IPO, the Company had granted options to purchase Common Shares to certain officers and employees pursuant to option agreements (the “ Legacy Option Agreements”) . The maximum number of Common Shares available for issuance under the Stock Option Plan and all other security-based compensation arrangements (including the Legacy Option Agreements) at any given time cannot exceed 10% of the issued and outstanding Common Shares. As of the date hereof, there are options outstanding under the Stock Option Plan and the Legacy Option Agreements to purchase, in aggregate, up to 5,918,871 Common Shares.

In addition, the Company has Warrants outstanding to purchase an aggregate of 2,875,000 Common Shares at an exercise price of $34.50 per Common Share.

MARKET FOR SECURITIES

The outstanding Common Shares are traded on the TSX under the trading symbol “LEAF” and began trading on June 7, 2017. Prior to June 7, 2017, no securities of the Company were traded or quoted on a Canadian marketplace. The following table sets out the price range (monthly high and low prices) and monthly trading volumes of the Common Shares on the TSX for the period beginning June 7, 2017 to the close of the financial year ended March 31, 2018.


Period	High		Low		Volume
March 2018	$	21.07	$	16.70		6,667,060
February 2018	$	22.50	$	14.75		13,240,560
January 2018	$	31.25	$	18.60		24,175,250
December 2017	$	22.79	$	14.81		11,296,320
November 2017	$	18.90	$	12.68		9,982,998
October 2017	$	13.30	$	9.08		3,789,578
September 2017	$	9.45	$	7.80		1,715,839
August 2017	$	8.30	$	7.45		1,081,604
July 2017	$	8.74	$	7.80		861,506
June (7-30)	$	9.65	$	6.81		6,448,849

PRIOR SALES

The following table summarizes issuances of securities that are not listed or quoted on a marketplace during the financial year ended March 31, 2018.


		Number of Securities			Issuance / Exercise
Date of Issuance	Type of Security	Issued			Price per Security
February 15. 2018	Options to acquire Common Shares		369,000		$	19.46
February 1, 2018	Warrants		375,000	⁽¹⁾	$	34.50
January 31, 2018	Warrants		2,500,000	⁽¹⁾	$	34.50
November 16, 2017	Options to acquire Common Shares		272,500		$	17.09
August 10, 2017	Options to acquire Common Shares		124,827		$	9,50
June 7, 2017	Options to acquire Common Shares		4,229,716	⁽²⁾	$	9.50

Notes:

(1)	Issued pursuant to the January 2018 Offering.

(2)	Represents options to purchase Common Shares granted on the closing of the IPO.

ESCROWED SECURITIES AND SECURITIES SUBJECT TO RESTRICTION ON TRANSFER

The following table sets out the number of securities of each class of securities of the Company that, to the knowledge of the Company, are held in escrow or subject to a contractual restriction on transfer, and the percentage that number represents of the outstanding securities of that class as of the date of this Annual Information Form.


	Number of Securities Held in Escrow
Designation of	or that are Subject to a Contractual			Percentage of
Class	Restriction on Transfer ⁽¹⁾			Class ⁽¹⁾
Common Shares		488,313	⁽²⁾		4.8	%
Common Shares		59,165,006	⁽³⁾		58.4	%

Notes:

(1)	Based on 101.329.195 Common Shares issued and outstanding as of the date hereof.

(2)

These shares were issued by the Company to a counterparty as partial consideration for the acquisition by the Company of certain assets and are subject to a contractual restriction on transfer, of which: (a) 244,157 Common Shares cannot be transferred until after December 8, 2018; and (b) the remaining 244,156 Common Shares cannot be transferred until after June 8, 2019.

(3)

In connection with the Arrangement Agreement, Aurora entered into voting agreements (the “ Voting Agreements”) with certain shareholders, directors and officers of the Company (the “ Locked-up Persons”) pursuant to which the Locked-up Persons agreed to vote in favour of the Arrangement. The Voting Agreements also, among other things, requires the Locked-up Persons to deliver proxies to MedReleaf in connection with the meeting of MedReleaf shareholders to approve the Arrangement, prohibits the Locked-up Persons from exercising dissent rights in connection with the Arrangement or contest the approval of the Arrangement, prohibits the Locked-up Persons from taking actions that could adversely affect the success of the Arrangement, prohibits the Locked-up Persons from taking actions regarding an alternative acquisition proposal to the Arrangement, and impose a contractual hold period on any securities of MedReleaf held by the Locked-up Persons other than pursuant to the Arrangement Agreement or the Voting Agreements, provided that any sales must be made in an orderly fashion as market conditions permit, such restriction expiring upon the earlier of the termination of the Voting Agreements and the obtaining of a final order from the Ontario Superior Court of Justice (Commercial List) in respect of the Arrangement.

DIRECTORS AND OFFICERS

The following table sets out information regarding our directors and executive officers as at the date hereof. The Company’s directors are elected annually and all of them are expected to hold office until the earlier of the completion of the Arrangement (following which it is expected that MedReleaf directors Norma Beauchamp and Ronald Funk will be appointed to the board of directors of Aurora) and the next annual meeting of holders of Common Shares, at which time they may be re-elected or replaced.


Name and Place of		Date First	Principal Occupation(s)
Residence	Position(s)/Title	Became a Director	for the Past Five Years
*Board of Directors*

Norma Beauchamp ⁽¹⁾⁽²⁾ Ontario, Canada	Director	June 7, 2017	President and Chief Executive Officer of Cystic Fibrosis Canada; formerly Head of MS Patient-Centered Care at Sanofi Canada

Neil Closner ⁽³⁾ Ontario, Canada	Director and Chief Executive Officer	February 28, 2013	Chief Executive Officer of the Company; formerly a consultant

Ronald Funk ⁽¹⁾⁽³⁾	Director	June 7, 2017	Consultant
Ontario, Canada

Deborah Rosati ⁽¹⁾⁽²⁾	Director	June 7, 2017	Corporate Director and Consultant
Ontario, Canada

Lloyd M. Segal ⁽²⁾⁽³⁾ Quebec, Canada	Director and Chairman of the Board	June 7, 2017	President & CEO, Repare Therapeutics; Entrepreneur-in-residence at Versant Ventures; managing partner of Persistence Capital Partners; Corporate Director


Name and Place of		Date First	Principal Occupation(s)
Residence	Position(s)/Title	Became a Director	for the Past Five Years
*Executive Officers (excluding Neil Closner already listed above)*

Angelo Fefekos Ontario, Canada	Senior Vice- President, Clinical Affairs and Quality Compliance	N/A	Senior Vice-President, Clinical Affairs and Quality Control of the Company, formerly Vice-President, Clinical Affairs and Quality Control of the Company. Prior to joining the Company, Mr. Fefekos was a Manager at Mount Sinai Hospital

Igor Gimelshtein Ontario, Canada	Chief Financial Officer and Corporate Secretary	N/A	Chief Financial Officer and Corporate Secretary of the Company; formerly Vice- President at Birch Hill Equity Partners Management Inc.

Darren Karasiuk Ontario, Canada	Senior Vice President/General Manager, Recreational	N/A	Senior Vice President/General Manager, Recreational of the Company; formerly Vice-President, Strategy of the Company. Prior to working with the Company, Mr. Karasiuk was Vice-President, Insight & Advisory at Deloitte and prior to that Vice-President, Strategy, Corporate and Public Affairs at Environics Research

Ivan Latysh Ontario, Canada	Vice-President, Information Technology	N/A	Vice-President, Information Technology of the Company; formerly Director of Technology at Sapient Canada and prior to that Principal Software Engineer at Infor Canada

Notes:

(1)	Member of the Audit Committee.

(2)	Member of the Corporate Governance and Compensation Committee. (3) Member of the Quality, Safety, Health and Public Policy Committee.

The directors and executive officers (as a group) beneficially own, or exercise control or direction over, a total of 4,767,767 Common Shares, representing approximately 4.71% of the total outstanding Common Shares on the date hereof.

Applicable corporate law permits the Board of Directors to appoint directors to fill any casual vacancies that may occur. The Board of Directors is permitted to add additional directors between successive annual meetings of holders of Common Shares so long as the number appointed does not exceed more than one-third of the number of directors appointed at the previous annual meeting. Individuals appointed as directors to fill casual vacancies on the Board of Directors or added as additional directors hold office like any other director until the next annual meeting at which time they may be re-elected or replaced.

Biographies

The following is a brief biography of each of the individuals who comprise our directors and executive officers:

Non-Executive Directors

Norma Beauchamp, Director

Norma Beauchamp is the President and Chief Executive Officer of Cystic Fibrosis Canada, as well as director of Acerus Pharmaceuticals Corporation, where she is a member of both the audit and corporate governance and nominating committees. Ms. Beauchamp brings over three decades of experience in the corporate and non-profit sectors to her role with the Company, having held senior leadership positions in Canada and Germany, including executive positions at Bayer, Sanofi, and the Canadian Foundation for Women’s Health. Ms. Beauchamp has served on the boards of St. Joseph’s Health Centre Foundation, Providence Healthcare Foundation and the Breast Cancer Society of Canada. Throughout her career she has been a patient advocate, working with patient and healthcare organizations to enhance access to care. Ms. Beauchamp has completed the University of Toronto’s Rotman School of Management Directors Education Program (ICD.D), and holds a Bachelor of Business Administration in Marketing from Bishop’s University.

Ronald Funk, Director

Ronald Funk brings over 30 years of experience in business and consulting to his role with the Company. Since 2009, he has managed his own consulting practice, working with clients on acquisitions, restructurings, strategy development and government relations. Mr. Funk has worked on projects in various locations around the world, with clients engaged in a range of industries, including heavily regulated consumer products such as tobacco, alcohol, and food products. Other industries in which he has consulted include retail, advanced data analytics, gaming, and real estate development. Before opening his consulting practice, Mr. Funk was employed for approximately 30 years by Rothmans, Benson & Hedges Inc., serving in various roles and capacities, including Vice President of Sales, Human Resources, Corporate Affairs and Competitive Improvement. In these senior roles, he developed and executed a number of strategies that resulted in material growth in both market share and profitability. Mr. Funk currently serves as an independent director of Carey Management Inc., a privately held business that owns Canada’s largest independent wholesale distributor. Mr. Funk has also served as the Chairman of the Ontario Convenience Stores Association and Treasurer of the Canadian Convenience Stores Association. Mr. Funk holds a Kellogg-Schulich MBA from the Kellogg School of Management and the Schulich School of Business.

Deborah Rosati, Director

Deborah Rosati brings over 30 years of experience in technology, consumer, retail, private equity, and venture capital spaces to her role with the Company. Ms. Rosati has extensive knowledge and experience as a corporate director, particularly in the areas of financial and enterprise risk management, corporate strategy, transformational changes, mergers and acquisitions, corporate governance, and CEO and board succession planning. Currently, Ms. Rosati serves as a director and chair of the nominating and corporate governance committee for Sears Canada Inc. (TSX:SCC), and director and chair of the audit committee for NexJ Systems Inc. (TSX: NXJ). She is also a co-founder and CEO of Women Get On Board, a leading member-based company that connects, promotes, and empowers women to corporate boards. She has been recognized as a Diversity 50 candidate in 2014, and as one of WXN’s Top 100 Canada’s Most Powerful Women in the corporate director award category in 2012. Ms. Rosati’s community engagements include serving as a member of the Adrenalys Advisory Council and the Advisory Council at the Goodman School of Business at Brock University, from which she holds an HBA in business administration. Ms. Rosati became a Certified Director in 2008 (ICD.D) and has been a Chartered Professional Accountant (CPA) for over 30 years. In 2009, she was named as a Fellow Chartered Professional Accountant (FCPA).

Lloyd M. Segal, Director, Chairman

Lloyd M. Segal is President & CEO of Repare Therapeutics, a cancer drug development company, and also serves as an Entrepreneur-in-residence at Versant Ventures, a leading global healthcare venture capital firm. Previously, Mr. Segal was a managing partner of Persistence Capital Partners and a director of Biovail Inc. and, subsequently, Valeant Pharmaceuticals International from 2007-2014. In 2013, Mr. Segal was honored by the Financial Times as Outstanding Director of the Year. Mr. Segal also serves on the board of The GBC American Growth Fund Inc. He has previously served as a director of several public and private corporations in the U.S. and Canada, and has served as CEO of public and private healthcare companies. He served as CEO of Thallion Pharmaceuticals, sold to Bellus Health in 2013; as founding CEO of Caprion Pharmaceuticals (now Caprion Biosciences), a leading healthcare CRO; and CEO of Advanced Bioconcept, an early innovator in the development and sale of novel discovery tools for life science research, which was sold to NEN Life Sciences Products (now PerkinElmer Inc.) in 1998. Mr. Segal holds a BA from Brandeis University and an MBA from Harvard Business School.

Executive Director

Neil Closner , Chief Executive Officer and Director

Neil Closner has been a key driver of the Company’s growth and vision. His responsibilities include oversight of all general management for the organization, strategic leadership on growth opportunities and fostering an entrepreneurial spirit throughout the Company. Mr. Closner brings two decades of start-up, technology and health care experience to the MedReleaf team. Previously, he was a member of the senior leadership team at Toronto’s Mount Sinai Hospital where he served as Vice-President of Business Development. Mr. Closner began his career as a health-care focused investment banker with Salomon Smith Barney (now Citigroup) and has also served as the founder, Chief Executive Officer or on the board of directors for more than half a dozen technology and health-care related start-up companies. Mr. Closner is the former Chairman of the Board of the Cannabis Canada Association (now Cannabis Canada Council), the national trade association of Canada’s Licensed Producers and was a Finalist for the 2017 Ernst & Young Entrepreneur of the Year. He also sits on the board of directors of Technion Canada. Mr. Closner studied economics at the London School of Economics and Political Science in London, England, and holds a BA from McGill University and an MBA from The Wharton School at the University of Pennsylvania.

Executive Officers

Angelo Fefekos , Senior Vice-President, Clinical Affairs and Quality Compliance

Angelo Fefekos is responsible for the development, implementation and oversight of the Company’s quality assurance and control systems and processes, regulatory compliance, as well as the development and design of new cannabis products. Mr. Fefekos also oversees the design and management of clinical trials, which meet standards of excellence for ethics, scientific merit and regulatory compliance. Mr. Fefekos brings over a decade of healthcare experience in quality assurance, laboratory technology and clinical management skills to the Company. Prior to joining MedReleaf, Mr. Fefekos managed a team of 40 scientific staff in the Division of Diagnostic Medical Genetics at Mount Sinai Hospital in Toronto. In this role, he was responsible for all aspects of the division’s diagnostic operations. While at Mount Sinai, Mr. Fefekos also managed Allograft Technologies, one of Canada’s largest tissue banks, and was responsible for the redesign and implementation of protocols related to the recovery, processing, distribution, sterility assurance and post-market surveillance activities of transplanted human tissues. Throughout Mr. Fefeko’s career, he has developed and implemented standardized workflow processes designed to increase patient safety. Mr. Fefekos has extensive knowledge and experience with accreditation and regulatory requirements in the production of health products, medical laboratory testing and health services. Mr. Fefekos is a member of the College of Medical Laboratory Technologists of Ontario and holds an MBA from Athabasca University.

Igor Gimelshtein , Chief Financial Officer and Corporate Secretary

Igor Gimelshtein provides leadership on financial matters, including capital structure, forecasting, budgeting and reporting, as well as corporate development and data-driven business optimization. Previously, he was a Vice-President at Birch Hill Equity Partners, a Canadian mid-market private equity firm. While at Birch Hill, Mr. Gimelshtein worked on the development and management of a number of the portfolio companies and potential investments across a wide range of industries, each of which was aimed at generating significant growth and value-creation. Mr. Gimelshtein played a key role in Birch Hill’s investments in companies such as Softchoice, Shred-it, DHX Media (formerly Cookie Jar Entertainment), Carmanah Design and Manufacturing, and Mastermind Toys. Prior to joining Birch Hill, Mr. Gimelshtein worked in San Francisco and New York for Union Square Advisors as an investment banker focused on the technology sector. At Union Square he evaluated and executed mergers and acquisitions and financing transactions across the software, internet and digital media, and hardware sectors. Mr. Gimelshtein is an active philanthropist, spending the majority of his volunteer time working with the executive team and board of directors of the Toronto Foundation on various initiatives. Mr. Gimelshtein holds an HBA (Ivey Scholar) from the Richard Ivey School of Business at Western University.

Darren Karasiuk, Senior Vice-President/General Manager, Recreational

Darren Karasiuk is responsible for business development and preparing the Company for the potential introduction of a recreational cannabis market in Canada, while ensuring that MedReleaf’s business strategy and growth plan is founded in industry-leading analytics and data-driven insights. Mr. Karasiuk brings over 15 years of insight generation, marketing strategy and public affairs experience to his role. Prior to joining MedReleaf, Mr. Karasiuk was Vice-President, Insights and Advisory at Deloitte where he was a leader in the firm’s cannabis practice, co-authoring the firm’s seminal study, “ Recreational Marijuana: Insights and Opportunities”. Previously, Mr. Karasiuk was Vice-President, Strategy, Corporate and Public Affairs at Environics Research, where he conducted many of Canada’s earliest studies on pharmacist and physician perceptions of medical cannabis. He has also been the Canadian associate for the Marijuana Policy Group, a leading Denver-based economic and policy consulting firm specializing in helping to shape regulated medical and recreational cannabis markets. Mr. Karasiuk’s advisory experience has focused largely on the integration of consumer and marketplace data, financial modeling, corporate strategy and behavioural science, with a view to uncovering drivers of consumer behaviour and uncovering hidden market segments, as well as informing price, brand, product portfolio, communications and public affairs strategies. Mr. Karasiuk is also experienced working within highly regulated industries including private and public healthcare, pharma, tobacco, consumer packaged goods, and energy, as well as all three levels of government. Mr. Karasiuk holds an MA from Western University and an MBA from Kellogg-Schulich.

Ivan Latysh, Vice-President, Information Technology

Ivan Latysh has over 30 years of experience in information technology across multiple verticals and provides leadership for the continued development of an innovative, robust and secure information technology environment at MedReleaf. Prior to joining the Company, Mr. Latysh held a number of senior positions within the marketing and professional services industries. Most recently, he was Director of Technology at Sapient Nitro, a leading technology, marketing and insights consultancy. At Sapient-Nitro, Mr. Latysh acted as a delivery lead for e-commerce implementations for some of North America’s most well-known retail brands. Previously, Mr. Latysh was Principal Software Engineer at Infor and Chief Technology Officer at RefineData Solutions Inc. This experience has provided Mr. Latysh with a deep understanding of various technical environments, information security and software development methodologies. Throughout his career, Mr. Latysh has also effectively managed and led software development initiatives. Mr. Latysh holds an MA in Electronics Engineering and Computer Programming from Dnepropetrovsk State University, Ukraine.

Corporate Cease Trade Orders

To the Company’s knowledge, no director or executive officer (nor any personal holding company of any of such individuals) is, as at the date of the Annual Information Form, or was within 10 years before the date of the Annual Information Form, a director, chief executive officer or chief financial officer of any company (including the Company) that:

(a)	was subject to a cease trade order or similar order or an order that denied the company access to any statutory exemptions, that was in effect for a period of more than 30 consecutive days; or

(b)

was subject to a cease trade order or similar order or an order that denied the company access to any statutory exemptions, that was in effect for a period of more than 30 consecutive days, that was issued after the director or executive officer ceased to be a director, chief executive officer or chief financial officer and which resulted from an event that occurred while that person was acting in the capacity as director, chief executive officer or chief financial officer.

Bankruptcies

To the Company’s knowledge, other than as set out below, no director or executive officer (nor any personal holding company of any of such individuals) or shareholder holding a sufficient number of securities of the Company to affect materially the control of the Company:

(a)

is, as at the date of the Annual Information Form, or has been within the 10 years before the date of the Annual Information Form, a director or executive officer of any company (including the Company) that, while that person was acting in that capacity, or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets; or

(b)

has, within the 10 years before the date of the Annual Information Form, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold assets of the director, executive officer or shareholder.

Deborah Rosati is a director of Sears Canada Inc. which applied for and, on June 22, 2017, obtained an initial order from the Ontario Superior Court of Justice (Commercial List) under the Companies’ Creditors Arrangement Act (Canada) (the “ CCAA ” ) providing for, among other things, a stay of proceedings in favour of Sears Canada Inc. and certain of its subsidiaries, for an initial period of 30-days, and appointing FTI Consulting Canada Inc. as monitor. FTI Consulting Canada Inc.’s responsibilities are prescribed by the CCAA and the court’s order, and include monitoring Sears Canada Inc.’s restructuring initiatives and reporting to the court on the progress of the CCAA proceedings. The CCAA proceedings of Sears Canada Inc. are ongoing and the stay of proceedings was most recently extended until July 31, 2018.

Penalties or Sanctions

To the Company’s knowledge, no director or executive officer or a shareholder holding a sufficient number of securities of the Company to affect materially the control of the Company (nor any personal holding company of any of such individuals), has been subject to:

(a)	any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with a securities regulatory authority; or

(b)	any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable investor making an investment decision.

Conflicts of Interest

The members of the Board of Directors are required by law to act honestly and in good faith with a view to the best interests of the Company and to disclose any interests, which they may have in any project or opportunity of the Company. If a conflict of interest arises at a meeting of the Board of Directors, any director in a conflict is required to disclose his or her interest and abstain from voting on such matter.

Other than disclosed herein, there are no known existing or potential conflicts of interest among the Company, its directors and officers or other members of management of the Company as a result of their outside business interests except that certain of the directors and officers serve as directors and officers of other companies, and therefore it is possible that a conflict may arise between their duties to the Company and their duties as a director or officer of such other companies. See “ Risk Factors”.

LEGAL PROCEEDINGS AND REGULATORY ACTIONS

Except as described below, the Company is not aware of: (a) any legal proceedings to which the Company is a party, or by which any of the Company’s property is subject, which would be material to the Company and the Company is not aware of any such proceedings being contemplated; (b) any penalties or sanctions imposed by a court relating to securities legislation, or other penalties or sanctions imposed by a court or regulatory body against the Company during the most recently completed financial year or that would otherwise likely be considered important to a reasonable investor making an investment decision; and (c) any settlement agreements that the Company has entered into before a court relating to securities legislation or with a securities regulatory authority.

The Company is, from time to time, involved in legal proceedings of a nature considered normal to its business. In addition, the Company is currently engaged in a dispute before the AFRAA Tribunal in connection with an unsuccessful unionization effort by UFCW Canada at the Markham Facility. In 2015, UFCW Canada filed applications for union certification before the Ontario Labour Relations Board (the “OLRB” ) and the Canada Industrial Relations Board (the “CIRB” ). The OLRB ordered that a vote of employees be held, which received a majority of votes against unionization. The OLRB also found that it lacked jurisdiction to consider the UFCW Canada’s application for certification because the Company is not governed by the Labour Relations Act (Ontario) and is instead governed by the AEPA. UFCW Canada’s application for certification to the CIRB was similarly dismissed on the basis that the CIRB lacked jurisdiction. UFCW Canada subsequently initiated the current complaint before the AFRAA Tribunal, which includes a challenge of the constitutionality of the AEPA.

MedReleaf believes that the ultimate amount of liability, if any, for any pending claims of any type (either alone or combined, and including the application before the AFRAA Tribunal) will not materially affect its financial position or results of operations. However, the ultimate outcome of any litigation is uncertain and, regardless of outcome, litigation can have an adverse impact on the Company’s business because of defence costs, negative publicity, diversion of management resources and other factors. See “ Risk Factors ”.

INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS

Other than as disclosed in this Annual Information Form or in the financial statements of the Company for the financial year ended March 31, 2018, none of the directors or executive officers of the Company, nor any person or company that beneficially owns, or controls or directs, directly or indirectly, more than 10% of any class or series of the Company’s outstanding voting securities, nor any associate or affiliate of the foregoing persons, has or has had any material interest, direct or indirect, in any transaction within the three years prior to the date of this Annual Information Form that has materially affected or is reasonably expected to materially affect the Company or its subsidiaries.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Shares and the Warrants is TSX Trust Company of Canada at its offices in Toronto, Ontario.

MATERIAL CONTRACTS

Except for contracts made in the ordinary course of business, the following are the only material contracts entered into by the Company to the date hereof which are currently in effect and considered to be currently material:

1.	the MedReleaf Licences;

2.	the Credit Agreement;

3.	the Markham Lease;

4.	the Warrant Indenture; and

5.	the Arrangement Agreement.

The material contracts described above are available on the Company’s SEDAR profile at www.sedar.com . Any summaries of such material contracts in this Annual Information Form are qualified in their entirety by reference to the express terms of the material contract.

AUDIT COMMITTEE INFORMATION

The Audit Committee is currently comprised of Deborah Rosati (Chair), Norma Beauchamp, and Ronald Funk, each of whom are “independent” and “financially literate” within the meaning of National Instrument 52-110— Audit Committees (“ NI 52-110”) . Each member of the Audit Committee has an understanding of the accounting principles used to prepare MedReleaf’s financial statements, experience preparing, auditing, analyzing or evaluating comparable financial statements and experience as to the general application of relevant accounting principles, as well as an understanding of the internal controls and procedures necessary for financial reporting. For more information about the relevant education and experience of each member of the Audit Committee, see “ Directors and Officers – Biographies”.

During the most recently completed financial year but prior to the completion of the IPO, Neil Closner was a member of the Audit Committee. Neil Closner was not “independent” within the meaning of NI 52-110, however the Company relied on the exemption set forth in Section 3.2 of NI 52-110 in respect of the membership of Neil Closner on the Audit Committee. The current Audit Committee was constituted upon completion of the IPO.

The role of the Audit Committee is to assist the Board in fulfilling its financial oversight obligations, including the responsibility: (i) to assist the Board in fulfilling its responsibility to oversee the Company’s accounting and financial reporting processes and audits of the Company’s financial statements; (ii) to review the Company’s financial reports and other financial information, disclosure controls and procedures and internal accounting and financial controls; (iii) to oversee the work of the external auditor in preparing or issuing an audit report or related work, monitor the independence of the external auditor and pre-approve all auditing services and permitted non-audit services provided by the external auditor; and (iv) to serve as an independent and objective party to monitor the Company’s financial reporting processes and internal control systems. A copy of the charter of the Audit Committee is attached as Appendix “A” to this Annual Information Form.

Pre-Approval Policies and Procedures

The Audit Committee charter includes responsibilities regarding the provision of non-audit services by MedReleaf’s external auditors. This policy encourages consideration of whether the provision of services other than audit services is compatible with maintaining the auditor’s independence and requires Audit Committee pre approval of permitted audit and audit-related services.

External Auditor Service Fees

Fees billed by KPMG LLP in the years ended March 31, 2018 and 2017 were approximately $467,500 and $195,000 respectively, as detailed below. “Audit fees” refers to the aggregate fees billed by the external auditor for audit services. “Audit related fees” refers to aggregate fees billed for assurance and related services by the Company’s external auditor that are reasonably related to the performance of the audit or review of the Financial Statements and not reported under Audit Fees including the review of interim filings and travel related expenses for the annual audit. “Tax fees” includes fees for professional services rendered by the external auditor for tax compliance, tax advice, and tax planning. “All other fees” includes all fees billed by the external auditors for services not covered in the other three categories.


	Year		Year
	ended		ended
	March 31,		March 31,
	2018		2017
Audit fees		316,000	$	180,000
Audit-related fees		132,000		—
Tax fees		19,500	$	15,000
All other fees		—		—

Total	$	467,500	$	195,000

INTERESTS OF EXPERTS

KPMG LLP are the external auditors of the Company and have confirmed that they are independent of the Company within the meaning of the Rules of Professional Conduct of the Chartered Professional Accountants of Ontario (registered name of the Institute of Chartered Accountants of Ontario).

ADDITIONAL INFORMATION

Additional information relating to the Company may be found on SEDAR at www.sedar.com . Additional information, including directors’ and officers’ remuneration and indebtedness, principal holders of the Company’s securities and securities authorized for issuance under equity compensation plans, will be contained in the Company’s management information circular in connection with its next annual meeting of shareholders at which directors are to be elected. Additional financial information is also provided in the Company’s financial statements and related management’s discussion and analysis for the financial year ended March 31, 2018.

GLOSSARY

This glossary defines certain business, industry, technical and legal terms used in this Annual Information Form for the convenience of the reader. It is not a comprehensive list of all defined terms used in this Annual Information Form.

“ AEPA ” means the Agricultural Employees Protection Act , 2002 (Ontario).

“ AFRAA Tribunal ” means the Agricultural, Food and Rural Affairs Appeal Tribunal of Ontario.

“ Arrangement ” has the meaning given to such term under “ General Development of the Business – Developments Subsequent to the Financial Year ended March 31, 2018 ”.

“ Arrangement Agreement ” has the meaning given to such term under “ General Development of the Business – Developments Subsequent to the Financial Year ended March 31, 2018 ”.

“ Aurora ” has the meaning given to such term under “ General Development of the Business – Developments Subsequent to the Financial Year ended March 31, 2018 ”.

“ Board of Directors ” or “ Board ” means the board of directors of the Company.

“ Bradford Facility ” has the meaning given to such term under “ General Development of the Business – Developments during the Financial Year ended March 31, 2017 ”.

“ Bradford Licence ” has the meaning given to such term under “ General Development of the Business – Developments during the Financial Year ended March 31, 2018” .

“ cannabis ” means cannabis, its preparations and derivatives, as set out in item 1 of Schedule II to the Controlled Drugs and Substances Act (Canada).

“ Cannabis Act ” means An Act respecting cannabis and to amend the Controlled Drugs and Substances Act, the Criminal Code and other Acts .

“ cannabis oil ” means an oil, in liquid form at room temperature of 22 ±2°C, that contains cannabis in its natural form.

“ Capital Reorganization ” has the meaning given to such term under “ Corporate Structure ”.

“ Class B Shares ” has the meaning given to such term under “ Corporate Structure ”.

“ Common Shares ” has the meaning given to such term under “ Corporate Structure ”.

“ Credit Agreement ” has the meaning given to such term under “ General Development of the Business – Developments during the Financial Year ended March 31, 2018 ”.

“ Credit Facilities ” has the meaning given to such term under “ General Development of the Business – Developments during the Financial Year ended March 31, 2018 ”.

“ December 2017 Offering ” has the meaning given to such term under “ General Development of the Business – Developments during the Financial Year ended March 31, 2018 ”.

“ dried cannabis ” means harvested cannabis that has been subjected to any drying process, but does not include seeds.

“Exeter Property” has the meaning given to such term under “ General Development of the Business – Developments Subsequent to the Financial Year ended March 31, 2018”.

“fresh cannabis” means freshly harvested cannabis buds and leaves, but does not include plant material that can be used to propagate cannabis.

“Indica” has the meaning given to such term under “ General Development of the Business – Developments during the Financial Year ended March 31, 2017”.

“IPO” has the meaning given to such term under “ Corporate Structure”.

“ISO” means the International Organization for Standardization.

“January 2018 Offering” has the meaning given to such term under “ General Development of the Business – Developments during the Financial Year ended March 31, 2018”.

“Licensed Producer” means the holder of a licence issued under Section 35 of the ACMPR or any similar licence issued under predecessor legislation.

“Locked-up Persons” has the meaning given to such term under “ Escrowed Securities And Securities Subject To Restriction On Transfer”.

“Markham Facility” has the meaning given to such term under “ General Development of the Business – Early Developments”.

“Markham Lease” has the meaning given to such term under “ Description of the Business – MedReleaf’s Facilities – Markham Facility”.

“Markham Licence” has the meaning given to such term under “ Description of the Business – Developments during the Financial Year ended March 31, 2017”.

“medical cannabis product” means any fresh cannabis or dried cannabis and/or cannabis oil that a Licensed Producer is licensed to sell or provide to patients pursuant to, and in accordance with, the ACMPR or any similar predecessor regulations.

“MedReleaf Facilities” has the meaning given to such term under “ Description of the Business – Overview”.

“MedReleaf Licences” has the meaning given to such term under “ General Development of the Business – Developments during the Financial Year ended March 31, 2018”.

“MMPR” has the meaning given to such term under “ General Development of the Business – Early Developments”.

“MMPR Licence” has the meaning given to such term under “ General Development of the Business – Early Developments”.

“OBCA” has the meaning given to such term under “ Corporate Structure”.

“patient” means a person registered as a “client” with a Licensed Producer under the ACMPR.

“SAQ” has the meaning given to such term under “ General Development of the Business – Developments Subsequent to the Financial Year ended March 31, 2018”.

“Security Directive” has the meaning given to such term under “ Description of the Business – MedReleaf’s Facilities”.

“Supplemental Licence” has the meaning given to such term under “ General Development of the Business – Developments during the Financial Year ended March 31, 2016”.

“Tikun Olam” has the meaning given to such term under “ General Development of the Business – Early Developments”.

“TSX” means the Toronto Stock Exchange.

“UFCW Canada” means the United Food and Commercial Workers Union.

“Warrant” has the meaning given to such term under “ General Development of the Business Developments during the Financial Year ended March 31, 2018”.

“Warrant Indenture” has the meaning given to such term under “ General Development of the Business Developments during the Financial Year ended March 31, 2018”.

Schedule A

AUDIT COMMITTEE CHARTER

1	PURPOSE

The purpose of the Audit Committee (the “Committee” ) of the Board of Directors (the “Board” ) of MedReleaf Corp. (the “Corporation” ) is to:

(a)

assist the Board in fulfilling its responsibility to oversee the Corporation’s accounting and financial reporting processes and audits of the Corporation’s financial statements;

(b)

review the Corporation’s financial reports and other financial information, disclosure controls and procedures and internal accounting and financial controls;

(c)

review the Corporation’s financial statements, management’s discussion and analysis and annual and interim profit or loss press releases before public release;

(d)

serve as an independent and objective party to monitor the Corporation’s financial reporting processes and internal control systems;

(e)

recommend to the Board of Directors the appointment of the external auditors, to be approved by the shareholders, compensation, and retention (and where appropriate, replacement) of the external auditors;

(f)

oversee the work of the external auditor in preparing or issuing an audit report or related work, monitor the independence of the external auditor and pre-approve all auditing services and permitted non-audit services provided by the external auditor;

(g)

receive direct reports from the external auditor and resolve any disagreements between management and the external auditor regarding financial reporting;

(h)

review the Corporation’s hiring policies regarding partners, employees and former partners and employees of the present and former external auditor of the Corporation; and

(i)

carry out the specific responsibilities set forth below in furtherance of this stated purpose.

2	COMPOSITION AND TERM

Committee members shall be appointed by the Board, and shall serve at the pleasure of the Board. Any member of the Committee may be removed or replaced at any time by the Board and shall, in any event, cease to be a member of the Committee upon ceasing to be a member of the Board. The Board shall designate one member as chair of the Committee (the “Chair” ).

The Committee shall be comprised of three or more directors, each of whom shall be “independent” and “financially literate”, as required by and defined in National Instrument 52-110 Audit Committees ( “NI 52-110”), subject to any exceptions permitted under NI 52-110.

3	MANDATE AND RESPONSIBILITIES

The Committee’s role is one of oversight of the integrity of the Corporation’s accounting and financial reporting process, including financial reporting processes, internal controls over financial reporting and disclosure controls procedures. It is recognized that the Corporation’s management is responsible for preparing the financial statements and notes thereto and that the Corporation’s external auditor is ultimately accountable to the Board and the Committee, as representatives of the shareholders and other stakeholders, for providing an audit opinion on the financial statements and notes.

A-1

The mandate and responsibilities of the Committee are as follows:

(a)

Appointment of External auditor. The Committee shall have direct responsibility for recommending the appointment, compensation, retention (and where appropriate, replacement), and oversight of the work of any accounting firm selected to be the Corporation’s external auditor for the purpose of preparing or issuing an audit report or performing other audit, review or attestation services for the Corporation, and to review the performance of the external auditors.

(b)

Appointment of Chief Financial Officer and Internal Auditor. The Committee shall participate in the identification of candidates for the positions of Chief Financial Officer and the manager of the Corporation’s internal auditing function, if any, and shall advise management with respect to the decision to hire a particular candidate.

(c)

Disclosure Controls and Procedures. The Committee shall review periodically with management the Corporation’s disclosure controls and procedures.

(d)

Internal Controls. The Committee shall discuss periodically with management and the external auditor the quality and adequacy of the Corporation’s internal controls and internal auditing procedures, if any, including any significant deficiencies in the design or operation of those controls which could adversely affect the Corporation’s ability to record, process, summarize and report financial data and any fraud, whether or not material, that involves management or other employees who have a significant role in the Corporation’s internal controls. The Committee shall also discuss with the external auditor how the Corporation’s financial systems and controls compare with industry practices.

(e)

Accounting Policies. The Committee shall review periodically with management and the external auditor the quality, as well as acceptability, of the Corporation’s accounting policies, and discuss with the external auditor how the Corporation’s accounting policies compare with those in the industry. The Committee shall discuss with the external auditors the quality and not just the acceptability of the Corporation’s accounting principles, including all critical accounting policies and estimates used, any alternate treatment of financial information that have been discussed with management, the ramifications of use of such alternative classifications, recognitions, derecognitions, measurements, presentations and disclosures and treatments and the auditor’s preferred treatment, as well as any other material communications with management.

(f)

Pre-approval of All Audit Services and Permitted Non-Audit Services. The Committee shall approve, in advance, all audit services and all permitted non-audit services to be provided to the Corporation by the external auditor; provided that any non-audit services performed pursuant to an exception to the pre-approval requirement permitted by applicable securities regulators shall not be deemed unauthorized and as permitted under the rules of professional conduct of the Chartered Professional Accountants of Ontario.

(g)

Annual Audit. In connection with the annual audit of the Corporation’s financial statements, the Committee shall:

(i)

request from the external auditor a formal written statement delineating all relationships between the external auditor and the Corporation;

A-2

(ii)

discuss with the external auditor any disclosed relationships and their impact on the external auditor’s objectivity and independence, and take appropriate action to oversee the independence of the external auditor;

(iii)

approve the selection, and the terms of the engagement, of the external auditor;

(iv)

review with management and the external auditor the audited financial statements to be filed on the System for Electronic Document Analysis and Retrieval ( “SEDAR” ) and review and consider with the external auditor the matters required to be discussed under applicable statements of auditing standards;

(v)

perform the procedures set forth under the heading “ Financial Reporting Procedures” below with respect to the annual financial statements;

(vi)

review with the Corporation’s counsel, external auditors and management any legal or regulatory matter that could have a significant impact on the Corporation’s financial statements;

(vii)

review and make recommendations with respect to any litigation, claim or contingency that could have a material effect upon the financial position of the Corporation and the appropriateness of the disclosure thereof in the documents reviewed by the Committee; and

(viii)

review with management and the external auditor the Corporation’s critical accounting policies and estimates.

(h)

Financial Reporting Procedures. In connection with the Committee’s review of each reporting of the Corporation’s annual financial information, the Committee shall:

(i)

discuss with the external auditor whether all material correcting adjustments identified (if any) by the external auditor in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board of London, England and adopted by the Canadian Accounting Standards Board, Generally Accepted Auditing Standards of Canada and the rules of the applicable securities regulators, as may be amended from time to time, are reflected in the Corporation’s financial statements;

(ii)

review with the external auditor all material communications between the external auditor and management, such as any management letter or schedule of unadjusted differences (if any);

(iii)

review with management and the external auditor any significant financial or other arrangements of the Corporation which do not appear on the Corporation’s financial statements and any transactions or courses of dealing with third parties that are significant in size or involve terms or other aspects that differ from those that would likely be negotiated with independent parties, and which arrangements or transactions are relevant to an understanding of the Corporation’s financial statements; and

(iv)

resolve any disagreements, if any, between management and the external auditor regarding financial reporting.

(i)

Insurance Coverage. Review and make recommendation regarding insurance coverage (annually or as may be otherwise appropriate).

A-3

(j)

Audit Committee Charter. The Committee shall review and reassess at least annually the adequacy of this Audit Committee Charter and recommend any proposed changes to the Board for approval.

The foregoing responsibilities are set forth as a guide and may be varied and supplemented from time to time as appropriate under the circumstances.

4	MEETINGS AND PROCEDURES

4.1

Meetings

The time at which and the place where the meetings of the Committee shall be held, the calling of meetings and the procedure at such meetings shall be determined by the Chair. The Committee shall meet as many times as it considers necessary to carry out its responsibilities effectively and shall, in any event, meet at least once per quarter.

4.2

Quorum

Unless otherwise determined by the Committee, two or more members of the Committee shall constitute a quorum.

4.3

Attendance

The Committee may invite such officers, directors or employees of the Corporation, external auditors, insurance agents and brokers, financial, technical or legal advisors, or other persons as it sees fit, from time to time, to attend at meetings of the Committee and to assist in the discussion of matters being considered by the Committee.

4.4

Chair

The Chair shall preside at all meetings of the Committee. In the Chair’s absence, or if the position is vacant, the Committee may select another member as Chair. The Chair will have the right to exercise all powers of the Committee between meetings but will attempt to involve all other members as appropriate prior to the exercise of any powers and will, in any event, advise all other members of any decisions made or powers exercised. In case of an equality of votes on any matter voted on by the Committee, the Chair shall have a second casting vote.

4.5

Decisions

Decisions of the Committee shall be evidenced by resolutions passed at meetings of the Committee and recorded in the minutes of such meetings or by an instrument in writing signed by all of the members of the Committee.

4.6

Secretary and Minutes

The Chair shall appoint a secretary for each meeting to keep minutes of such meeting. The minutes of the Committee will be in writing and duly entered into the books of the Corporation. The minutes of the Committee will be circulated to all members of the Board, redacted as may be determined necessary by the Chair to remove any sensitive personnel information not otherwise material to the Board.

4.7

Authority to Engage Advisors

The Committee shall have the authority to engage, at the expense of the Corporation, such outside advisors as it determines necessary or advisable to carry out its duties, including legal, financial, tax, technical and accounting advisors, and establish the compensation of such advisors.

A-4

4.8

Reporting to the Board

The Committee shall report to the Board on such matters and questions relating to the mandate and activities of the Committee as the Committee may deem appropriate or as the Board may from time to time request or refer to the Committee.

4.9

Complaints

Any issue of significant financial misconduct shall be brought to the attention of the Committee for its consideration. In this regard, the Committee shall establish and maintain procedures for (i) the receipt, retention and treatment of complaints received by the Corporation regarding accounting, internal accounting controls or auditing matters and (ii) the confidential, anonymous submission by employees of the Corporation of concerns regarding questionable accounting or auditing matters.

5	RESOURCES AND AUTHORITY

The Committee is granted all authority required by NI 52-110, including without limitation the authority to:

(a)

investigate any matter brought to its attention with full access to all books, records, facilities and personnel of the Corporation;

(b)

engage independent legal, tax, accounting or other advisors to obtain such advice and assistance as the Committee determines necessary to carry out its duties and set and pay the compensation for any advisors so engaged; and

(c)

communicate directly with the external auditors (and internal auditors, if any).

The Committee may request any officer or employee of the Corporation or the Corporation’s counsel or other advisors to attend a meeting of the Committee or to meet with any member of, or consultants to, the Committee.

The Corporation shall provide the Committee all appropriate funding, as determined by the Committee, for payment of compensation to any such advisors and any external auditor, as well as for any ordinary administrative expenses of the Committee that it determines are necessary or appropriate in carrying out its responsibilities.

This Charter is not intended to give rise to civil liability on the part of the Corporation or its directors or officers to shareholders, other security holders, customers, suppliers, competitors, employees or other persons or to any other liability whatsoever on their part.

Effective Date: May 30, 2017

A-5

Exhibit 4.19

Consolidated Financial Statements

(In Canadian dollars)

MEDRELEAF CORP.

Years ended March 31, 2018 and 2017

LOGO

INDEPENDENT AUDITORS’ REPORT

Management’s Responsibility for the To the Shareholders of MedReleaf Corp.

We have audited the accompanying consolidated financial statements of MedReleaf Corp., which comprise the consolidated statements of financial position as at March 31, 2018 and 2017, the consolidated statements of comprehensive (loss) income, shareholders’ equity and cash flows for the years then ended, and notes, comprising a summary of significant accounting policies and other explanatory information.

Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of MedReleaf Corp. as at March 31, 2018 and 2017, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with International Financial Reporting Standards.

LOGO

/s/ KPMG LLP

Chartered Professional Accountants, Licensed Public Accountants

Toronto, Canada

June 18, 2018

MEDRELEAF CORP.

Consolidated Statements of Financial Position

(In thousands of Canadian dollars)


	Note		2018			2017
Assets
Current assets:
Cash and cash equivalents			$	215,868		$	12,899
Accounts receivable		4		10,750			9,953
Inventories		9		32,856			9,511
Biological assets		10		3,202			2,809
Advances to shareholder				341			211
Prepaid expenses				2,336			730
Letter of credit		5		845			—
Income taxes receivable		8		8,074			—
Other current assets		7		300			—
Convertible note receivable		6		—			132
Loan receivable		6		—			307

				274,572			36,552
Non-current assets:
Property, plant and equipment		11		73,770			37,780
Intangible assets		12		9,143			13
Security deposit				241			239
Prepaid expenses				264			301

			$	357,990		$	74,885

Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable and accrued liabilities		18	$	16,989		$	7,235
Taxes payable		20		—			1,798
Revolving line of credit		16		845			—
Term credit facility		16		1,000			—
Collateralized credit facility		16		—			625
Shareholder loans payable		14		—			2,189

				18,834			11,847
Non-current liabilities:
Deferred tax liability		20		2,477			3,726
Asset retirement obligation		15		214			204
Term credit facility		16		8,421			—
Collateralized credit facility		16		—			6,788

				29,946			22,565
Shareholders’ equity:
Share capital		13		299,078			38,700
Contributed surplus		17		12,052			1,408
Warrants		13		12,240			—
Retained earnings				4,681			12,212
Accumulated other comprehensive income				(7	)		—

				328,044			52,320

			$	357,990		$	74,885

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


On behalf of the Board:
(signed) “Lloyd Segal”	Director	(signed) “Neil Closner”	Director

MEDRELEAF CORP.

Consolidated Statements of Comprehensive (Loss) Income

(In thousands of Canadian dollars, except share and per share amounts, unless otherwise noted)


	Note		2018			2017
Sales			$	43,646		$	40,339
Production costs		9		13,212			9,436

Gross profit before fair value adjustments on biological assets				30,434			30,903
Fair value adjustments:
On biological assets		10		44,098			31,252
On inventory sold		9		(26,553	)		(24,216	)
On carrying amount of inventory		9		(1,309	)		—

Gross profit				46,670			37,939
Expenses:
Selling and marketing				11,438			7,181
General and administrative		17 , 22		34,482			13,700
Research and development				1,128			875
Amortization of property, plant and equipment		11		1,983			495
Amortization of intangible assets		12		632			—
Initial public offering related costs		13		2,611			—
Fair value loss on shareholder loans		14		192			—
Fair value loss on deferred share units		18		428			—
Interest income		7		(1,271	)		(75	)
Finance costs		16		694			121

				52,317			22,297

(Loss) income before income taxes				(5,647	)		15,642
Income tax (recovery) expense:
Current		20		(1,246	)		1,798
Deferred		20		3,130			2,886

				1,884			4,684

Net (loss) income				(7,531	)		10,958
Other comprehensive loss
Items that may subsequently be reclassified to earnings:
Foreign currency translation differences for foreign operations				(7	)		—

Total comprehensive (loss) income			$	(7,538	)	$	10,958

Weighted average number of shares—basic ¹		13		91,119,745			77,789,726
Weighted average number of shares—diluted		13		93,676,996			81,701,757

(Loss) earnings per share—basic		13	$	(0.08	)	$	0.14
(Loss) earnings per share—diluted		13		(0.08	)		0.13

¹	Weighted average number of shares, basic and diluted, for the year ended March 31, 2017 are presented on a converted basis of 116.0909:1 to reflect the capital reorganization (note 13).

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

MEDRELEAF CORP.

Consolidated Statements of Shareholders’ Equity

(In thousands of Canadian dollars)


															Accumulated other
Year ended March 31, 2017	Note		Share capital			Contributed surplus			Warrants			Retained earnings			comprehensive income			Total
Balances, March 31, 2016			$	11,595		$	765		$	—		$	1,254		$	—		$	13,614
Net income				—			—			—			10,958			—			10,958
Other comprehensive income				—			—			—			—			—			—
Exercise of stock options		17		2,411			(2,410	)		—			—			—			1
Stock-based compensation		17		—			3,053			—			—			—			3,053
Issuance of Class A common shares		13		24,694			—			—			—			—			24,694

Balances, March 31, 2017			$	38,700		$	1,408		$	—		$	12,212		$	—		$	52,320


															Accumulated other
Year ended March 31, 2018	Note		Share capital			Contributed surplus			Warrants			Retained earnings			comprehensive income			Total
Balances, March 31, 2017			$	38,700		$	1,408		$	—		$	12,212		$	—		$	52,320
Net loss				—			—			—			(7,531	)		—			(7,531	)
Other comprehensive income				—			—			—			—			(7	)		(7	)
Shareholder loans converted to equity		13		2,400			—			—			—			—			2,400
Issuance of common shares		13		260,702			—			—			—			—			260,702
Issuance of warrants		13		—			—			12,838			—			—			12,838
Shares issued for intangible assets		12		7,862			—			—			—			—			7,862
Shares issued for Woodstock licence		13		350			—			—			—			—			350
Share issuance costs		13		(16,753	)		—			(782	)		—			—			(17,535	)
Exercise of stock options		17		1,405			(556	)		—			—			—			849
Class C conversion to Class B ¹		13		218			(218	)		—			—			—			—
Stock-based compensation		17		—			11,418			—			—			—			11,418
Tax effect of share issuance costs		13		4,194			—			184			—			—			4,378

Balances, March 31, 2018			$	299,078		$	12,052		$	12,240		$	4,681		$	(7	)	$	328,044

¹	Prior to the closing of the Company’s initial public offering on June 7, 2017 (note 13), the outstanding Class C shares were converted to Class B and any remaining contributed surplus attributable to the deemed conversion option on Class C shares was reallocated to Class B share capital.

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

MEDRELEAF CORP.

Consolidated Statements of Cash Flows

(In thousands of Canadian dollars, except share and per share amounts, unless otherwise noted)


	2018			2017
Cash provided by (used in):
Operating activities:
Net (loss) income	$	(7,531	)	$	10,958
Items not involving cash:
Fair value adjustment on biological assets		(44,098	)		(31,252	)
Fair value adjustment on inventory sold		26,553			24,216
Depreciation and amortization		5,592			1,706
Stock-based compensation		11,418			3,053
Unrealized foreign exchange loss		6			—
Finance costs expensed		694			121
Finance costs paid		(527	)		(2	)
Interest income earned		(1,271	)		(75	)
Interest income received		900			34
Fair value loss on shareholder loans		192			—
Fair value adjustment on carrying amount of inventory		1,309			—
Convertible note impairment		143			—
Common shares issued for licensing royalties		350			—
Current income taxes recoverable		(1,246	)		1,798
Deferred income taxes		3,130			2,886
Changes in non-cash operating working capital:
Accounts receivable		(788	)		(3,390	)
Inventories		(7,502	)		(1,825	)
Prepaid expenses		(1,606	)		(308	)
Income tax receivable		(6,828	)		—
Security deposit		(2	)		(130	)
Accounts payable and other		9,754			4,398
Taxes payable		(1,798	)		—

		(13,156	)		12,188
Financing activities
Shareholder loans repaid		—			(120	)
Deferred finance costs paid		(364	)		(101	)
Interest paid		62			(259	)
Term credit facility		10,000			—
Revolving line of credit		845			—
Repayment of term credit facility		(250	)		—
Collateralized credit facility		(7,500	)		7,500
Exercise of stock options		849			—
Issuance of share capital		260,702			24,694
Share issuance costs		(16,753	)		—
Issuance of warrants		12,838			—
Warrant issuance costs		(782	)		—

		259,647			31,714
Investing activities
Loan receivable		250			—
Convertible note receivable		—			(132	)
Advances to shareholder		(130	)		(184	)
Additions to intangible assets		(1,900	)		—
Prepaid expenses		—			(298	)
Letter of credit issuance		(845	)		—
Additions to property, plant and equipment		(40,897	)		(31,306	)

		(43,522	)		(31,920	)

Increase in cash and cash equivalents		202,969			11,982
Cash and cash equivalents, beginning of period		12,899			917

Cash and cash equivalents, end of period	$	215,868		$	12,899

Supplemental Information:
Royalties applied to share purchase loan	$	—		$	280
Capitalized property, plant and equipment interest paid		—			212
Intangible assets acquired in exchange for common shares		7,862			—
Shareholder loans contributed to common share capital		2,400			—
Income taxes paid:
Income taxes paid related to year ended March 31, 2017		2,082			—
HST refunds transferred to income tax account related to year ended March 31, 2017		2,397			—
Income taxes installments paid related to year ended March 31, 2018		4,147			—

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

MEDRELEAF CORP.

Notes to Consolidated Financial Statements

(In thousands of Canadian dollars, except share and per share amounts, unless otherwise noted)

Years ended March 31, 2018 and 2017

1.	NATURE OF OPERATIONS

MedReleaf Corp. (the “Company”) is a publicly listed company on the Toronto Stock Exchange (“TSX”) under the symbol “LEAF” and was incorporated on February 28, 2013 under the Ontario Business Corporations Act (“OBCA”). The principal activities of the Company are the production and sale of medical cannabis as regulated by the Access to Cannabis for Medical Purposes Regulations (Canada) (the “ACMPR”), pursuant to: (i) a licence authorizing the sale of substances listed in the licence, issued by Health Canada to the Company on February 14, 2014, pursuant to the ACMPR in respect of the Company’s facility located in Markham, Ontario (the “Markham Facility”, and such licence is referred to as the “Markham Licence”); and (ii) a licence authorizing the sale of substances listed in the licence, issued by Health Canada to the Company on April 12, 2017, pursuant to the ACMPR in respect of the Company’s facility located in Bradford, Ontario (the “Bradford Facility”, and such licence is referred to as the “Bradford Licence” and, together with the Markham Licence, the “Licences”). Prior to the expiry of the term of each of the Licences, the Company must apply for renewal to Health Canada which contains information prescribed by the ACMPR. The Company has renewed the Markham Licence and its current term will expire on February 14, 2020. The current term of the Bradford Licence expires on April 10, 2020. The Company’s head office is located at Markham Industrial Park, Markham, Ontario L3R 6G4 and its registered and records office is located at Suite 3800, Royal Bank Plaza, South Tower, 200 Bay Street, Toronto, Ontario M5J 2Z4.

MedReleaf Holdings (Australia) Ltd. (“Holdings Australia”), a wholly owned subsidiary of the Company, was incorporated on January 23, 2017 under the OBCA. Holdings Australia has the same head office and registered office as the Company.

In February 2017, the Company licensed certain of its intellectual property to an Australian corporation in order to support an application for Australian cannabis cultivation and manufacturing licences by such corporation (the “licence agreements”). Under the terms of the licence agreements, the Company, through its subsidiary, Holdings Australia, acquired a 10% equity interest in the Australian corporation, for a nominal amount, which will operate as “MedReleaf Australia”. As well, subject to the execution of additional documentation, it is contemplated that the Company would become entitled to receive certain royalties on the gross revenue of MedReleaf Australia, as well as Holdings Australia receiving potential additional equity in MedReleaf Australia. The Company’s interest in MedReleaf Australia is recorded at cost which is equivalent to its fair value. On November 14, 2017 the Company’s Australian partners received a license from the Australian Government Office of Drug Control for the cultivation and production of medical cannabis. The license to undertake authorized cannabis activities commences on November 10, 2018 in order to allow time to complete infrastructure development of the facility.

MedReleaf Germany GmbH, registered at Prinzenpark, 3rd and 5th Floor, Prinzenallee 7, 40549 Dusseldorf, Germany, a wholly owned subsidiary of the Company, was incorporated on June 2, 2017 in Germany with the main objective of cultivation, harvesting, marketing and distribution of cannabis and cannabis products for medical purposes. On June 6, 2017, MedReleaf Germany GmbH, submitted an application for Phase 1 of the domestic cultivation licensing process to the German Federal Institute for Drugs and Medical Devices (“BfArM”).

MEDRELEAF CORP.

Notes to Consolidated Financial Statements (continued)

(In thousands of Canadian dollars, except share and per share amounts, unless otherwise noted)

Years ended March 31, 2018 and 2017

On June 13, 2017, 2582394 Ontario Inc. (“Holdco”), registered at 5 Hazelton Avenue Suite 200, Toronto, Ontario M5R 2E1, a wholly owned subsidiary of the Company, was incorporated under the OBCA, for the purpose of owning property to be used by the Company in the production and sale of medical cannabis.

2.	BASIS OF PRESENTATION

(a)

Statement of compliance

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

These consolidated financial statements were authorized for issuance by the Company’s Board of Directors (the “Board”) on June 18, 2018.

(b)

Basis of measurement

The consolidated financial statements were prepared on a historical cost basis, except for biological assets and certain financial instruments, which are measured at fair value as explained in the accounting policies below. Other measurement bases are described in the applicable notes.

(c)

Basis of consolidation

Subsidiaries for the purpose of preparing these consolidated financial statements are entities controlled by the Company. Control exists when the Company has power over a subsidiary that exposes or gives rights to variable returns that are related to its involvement in the subsidiary and can use its power to affect, either directly or indirectly, the amount of those returns. On the date that control commences, the financial statements of the subsidiary are included in the consolidated financial statements of the Company until the date that control ceases.


Subsidiary		Jurisdiction of incorporation
MedReleaf Holdings (Australia) Ltd.		Ontario
MedReleaf Germany GmbH		Germany
2582394 Ontario Inc.		Ontario

MEDRELEAF CORP.

Notes to Consolidated Financial Statements (continued)

(In thousands of Canadian dollars, except share and per share amounts, unless otherwise noted)

Years ended March 31, 2018 and 2017

(d)

Use of judgments and estimates

The preparation of the consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, sales and expenses, and the related disclosures of contingent liabilities. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the year in which the estimates are revised and in any future periods affected. Significant estimates used in the preparation of these consolidated financial statements include, but are not limited to the following:

Valuation of biological assets:

Biological assets, consisting of cannabis plants, are measured at fair value less costs to sell up to the point of harvest.

Determination of the fair values of the biological assets requires the Company to make assumptions about how market participants assign fair values to these assets. These assumptions primarily relate to the level of effort required to bring the cannabis up to the point of harvest, sales price, and expected remaining future yields for the cannabis plants.

ii.

Valuation of inventory:

Inventory, consists of harvested goods, cannabis oil extracts and accessories and is measured at the lower of cost and net realizable value, which includes the deemed costs arising from the fair value measurement gains on the transformation of biological assets. These deemed costs are estimated using assumptions that include, but are not limited to, average selling prices, remaining costs to complete, the allocation rate and method of production costs, the stage of plant growth and cycles, and expected yields. Any change in these assumptions could negatively impact operational results, the actual realizable value of inventory and future expected gains.

Cannabis is measured and weighed at various stages throughout its life and production cycle. Due to its biological nature, cannabis loses moisture, and therefore weight over time. The Company, in measuring inventory, must make assumptions as to the amount of loss attributable to moisture loss or evaporation, which may result in an actual finished product weight less than was estimated.

Extracts are a by-product that are derived from dried cannabis. Extracts are added to oils and sold as cannabis oil in vials or capsules and are priced based on the total combined amount of tetrahydrocannabinol (“THC”) and cannabidiol (“CBD”) content. The Company estimates the amount of THC and CBD expected to be derived from each gram of dried cannabis. The Company assumes that product mix is consistent throughout the period and so the estimate is obtained by applying the average selling price on an aggregate basis.

MEDRELEAF CORP.

Notes to Consolidated Financial Statements (continued)

(In thousands of Canadian dollars, except share and per share amounts, unless otherwise noted)

Years ended March 31, 2018 and 2017

iii.

Estimated useful lives and amortization of property, plant and equipment:

Amortization of property, plant and equipment is dependent upon estimates of useful lives, which are determined through the exercise of judgment. The assessment of any impairment of these assets is dependent upon estimates of recoverable amounts that consider factors such as economic and market conditions and the useful lives of assets.

iv.

Estimated useful lives of finite intangible assets:

Amortization of intangible assets with finite lives is dependent upon estimates of useful lives, which are determined through the exercise of judgment. The assessment of any impairment of these assets is dependent upon estimates of recoverable amounts that consider factors such as economic and market conditions, future cash flows and the useful lives of the assets.

Share-based compensation:

In calculating the share-based compensation expense, key estimates such as the value of the common shares, the rate of forfeiture of options granted, the expected life of the option, the volatility of the value of the Company’s common shares and the risk-free interest rate are used.

vi.

Non-interest bearing shareholder loans:

Non-interest bearing shareholder loans are recorded at amortized cost, using estimates of rates that would be charged for similar instruments. The determination of a market interest rate considers, loans with similar maturities, cash flow patterns, currency, credit risk and interest rates. If there are no specified repayment dates on the shareholder loans, estimates of maturity and repayment are taken into consideration.

vii.

Asset retirement obligations:

Asset retirement obligations (“AROs”) represent the estimated future costs required to remediate the Company’s leased building upon termination of the lease agreement. The estimated costs are recorded at fair value, using estimates of historical borrowing rates charged to the Company. The estimated valuation of the Company’s ARO are based on management’s best judgment, and where available third-party estimates of the expected abandonment costs to be incurred in the future. The valuation of the ARO requires the Company to make assumptions including the existence and extent of any legal obligations, the likelihood that an obligation will be incurred, the settlement amounts and timing.

MEDRELEAF CORP.

Notes to Consolidated Financial Statements (continued)

(In thousands of Canadian dollars, except share and per share amounts, unless otherwise noted)

Years ended March 31, 2018 and 2017

viii.

Investment tax credits:

The Company claims investment tax credits as a result of incurring scientific research and experimental development expenditures. Investment tax credits are recognized when the related expenditures are incurred, and there is reasonable assurance of their realization. Management has made a number of estimates and assumptions in determining the expenditures eligible for the investment tax credit claim. It is possible that the allowed amount of the investment tax credit could be materially different from the recorded amount upon assessment by the Canada Revenue Agency.

ix.

Income taxes:

The Company estimates the amount of current and deferred income tax expenses, liabilities and assets, each reporting period. In estimating tax expense, management must use judgment in making estimates and assumptions including but not limited to, the timing of when future liabilities or benefits will be realized, the tax rates expected to be in effect and applicable to temporary differences when they reverse, taxable income, and the utilization of tax loss carry forwards and credits available, if any.

Costs relating to the issuance of new common shares:

In connection with the Company’s Offering and listing of the Company’s existing shares on the TSX (the “Listing”) (note 13), the Company incurred underwriters’ fees, legal costs, consulting fees, initial listing fees, travel and other professional fees. All costs that were incremental and directly attributable to the issuance of new common shares were recorded as a reduction to share capital. All other costs incurred in relation to the Company’s listing of existing shares and preparing the Company to operate and report as a publicly listed Company were expensed to initial public offering costs. The Company’s management applied judgment in determining which costs to attribute to the Offering and which to attribute to the Listing, where costs were incurred jointly, the Company allocated the costs based on the percentage (9%) of common shares applicable to the Offering (8,494,742 common shares) and the percentage (91%) applicable to the Listing (81,880,206 common shares).

xi.

Assessing control over investees:

Control exists when the Company has power over a subsidiary that exposes or gives rights to variable returns that are related to its involvement in the subsidiary and can use its power to affect, either directly or indirectly, the amount of those returns. The Company has applied judgement in determining whether control exists with regards to its subsidiaries by assessing its involvement and its ability to influence the subsidiaries’ operations.

MEDRELEAF CORP.

Notes to Consolidated Financial Statements (continued)

(In thousands of Canadian dollars, except share and per share amounts, unless otherwise noted)

Years ended March 31, 2018 and 2017

3.	SIGNIFICANT ACCOUNTING POLICIES:

The accounting policies described below have been applied consistently to all years presented in these consolidated financial statements.

(a)

Biological assets

The Company measures biological assets consisting of cannabis plants at fair value less costs to sell up to the point of harvest. Production costs related to the transformation of biological assets to the point of harvest are capitalized and included in the fair value measurement of biological assets. Agricultural produce consisting of cannabis is measured at fair value less costs to sell at the point of harvest, which becomes the basis for the cost of harvested goods inventories after harvest.

Gains or losses arising from changes in fair value less costs to sell during the years, exclusive of capitalized production costs, are included in gross profit under fair value adjustments within the results of operations of the related year. Upon harvest, capitalized production costs are transferred to finished harvest and are included in the fair value adjustments on inventory sold within the results of operations during the year in which the harvested cannabis is sold and revenue recognized. Fair value adjustments relating to the net recoverable value of inventory at the end of the year is included in the fair value adjustments on carrying amount of inventory within the results of operations during the year.

The Company determines the fair value of biological assets using a model-based approach that incorporates interdependent estimates and assumptions including the most recent three-month average selling price, expected yields, the stage of growth, the average cultivation time to the point of harvest, the rate of consumption, the expected remaining costs to sell, and is then risk adjusted at each stage of growth to determine the weighted average fair value “deemed cost” per gram.

(b)

Inventories

Inventories, consisting of harvested goods and accessories are measured at the lower of cost and net realizable value. Inventories of harvested cannabis are transferred from biological assets at their fair value less costs to sell at harvest, which becomes deemed cost. Cost is determined using the weighted average method. Any subsequent post harvest costs are capitalized to inventories to the extent that cost is less than net realizable value. Net realizable value is the estimated average selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

MEDRELEAF CORP.

Notes to Consolidated Financial Statements (continued)

(In thousands of Canadian dollars, except share and per share amounts, unless otherwise noted)

Years ended March 31, 2018 and 2017

Production costs relating to inventory sold represent all cost of inventories recognized as expense in the years, except deemed costs of inventory that arise from the fair value measurement of biological assets transferred to finished harvest inventory. Fair value adjustments on inventory sold represents the deemed costs of inventory sold that arises from the fair value measurement of biological assets, exclusive of any capitalized costs.

(c)

Property, plant and equipment

Property, plant and equipment are recorded at cost less accumulated amortization and accumulated impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset, including any related capitalized borrowing costs. When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

Amortization is recognized on a straight-line basis, over the estimated useful lives of each component of an item of property, plant and equipment from the date that they are available for use. Land is not amortized as its useful life is deemed to be indefinite. Amortization methods, useful lives and residual values are reviewed at each annual reporting date and adjusted, prospectively, if appropriate.

The estimated useful lives for the current and comparative years are as follows:


Computer hardware			3 years
Computer software			3 years
Furniture and equipment			5 years
Motor Vehicles			5 years
Leasehold improvements			Term of lease
Production rooms			10 years
Building improvements			20 years
Building			20 years
Land			Indefinite

Gains and losses on disposal of an item of equipment are determined by comparing the proceeds from disposal with the carrying amount of the equipment and are recognized in the consolidated statements of comprehensive income.

(d)

Intangible assets

Intangible assets are comprised of trademarks, patents, and other intangible assets. Trademarks and patents are considered to have an indefinite useful life. Other intangible assets are considered to have a useful life of 5 years. Trademarks and patents are measured at cost and no amortization is recognized for these indefinite useful life intangible assets. Other intangible assets are measure at cost less accumulated amortization. Amortization on other intangible assets is recognized on a straight-line basis over its useful life.

MEDRELEAF CORP.

Notes to Consolidated Financial Statements (continued)

(In thousands of Canadian dollars, except share and per share amounts, unless otherwise noted)

Years ended March 31, 2018 and 2017

(e)

Impairment of assets

Long-lived assets and intangible assets with infinite lives are tested for impairment annually or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Long-lived assets with finite lives are tested for impairment whenever events or changes in circumstances indicate the carrying amount may not be recoverable. Events or changes in circumstances which may indicate impairment include: a significant change to the Company’s operations, a significant decline in performance or a change in market conditions which adversely affects the Company. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount.

For purposes of measuring recoverable amounts, assets are grouped at the lowest levels for which there are separately identifiable cash flows (“cash-generating units” or “CGU”). The recoverable amount is the greater of an asset’s fair value less costs to sell and value in use (being the present value of the expected future cash flows of the relevant asset or CGU). Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the lesser of the revised estimate of recoverable amount, and the carrying amount that would have been recorded had no impairment loss been recognized previously.

(f)

Revenue recognition

Revenue from the sale of cannabis is recognized when the Company has transferred the significant risks and rewards of ownership to the patient and it is probable that the Company will receive the previously agreed upon payment. Significant risks and rewards are generally considered to be transferred when the Company has delivered the product to the patient. Revenue is recognized at the fair value of consideration received or receivable.

At each reporting period, the Company assess accounts receivable for impairment by grouping its receivables based on the nature of the receivable and their respective expected credit losses incorporating historical default rates, aging of receivables and other forecasted factors. Bad debt allowance is calculated by multiplying the provision rates against the aged accounts receivable for each grouping and is recorded through profit and loss in general and administrative (“G&A”) expense.

Based on historical sales return information, the Company has determined that a refund liability equivalent to 1% of the most recent two months delivered sales will be recognized at each reporting date and offset against accounts receivable. Per Health Canada’s ACMPR guidelines, returned product must be destroyed and therefore, the Company does not recognize an asset for its right to recover products from patients. Sales allowances are included in profit and loss as a reduction in revenue.

MEDRELEAF CORP.

Notes to Consolidated Financial Statements (continued)

(In thousands of Canadian dollars, except share and per share amounts, unless otherwise noted)

Years ended March 31, 2018 and 2017

(g)

Research and development

Research costs are expensed as incurred. Development costs are capitalized only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Company intends to and has sufficient resources to complete development to use or sell the asset. Other development expenditures are recognized in the consolidated statements of comprehensive income as incurred. To date, no development costs have been capitalized.

The Company claims investment tax credits as a result of incurring scientific research and experimental development expenditures. Investment tax credits are recognized and offset against the related expenditures when they are incurred, and there is reasonable assurance of their realization. Management has made a number of estimates and assumptions in determining the expenditures eligible for the investment tax credit claim. It is possible that the allowed amount of the investment tax credit could be materially different from the recorded amount upon assessment by the Canada Revenue Agency.

(h)

Income taxes

Income tax expense comprises current and deferred taxes. Current tax and deferred tax are recognized in the consolidated statements of comprehensive income except to the extent that it relates to a business combination, or items recognized directly in equity or in other comprehensive income. Current tax is the expected tax payable or receivable on the taxable income or loss for the years, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.

Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.

A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

MEDRELEAF CORP.

Notes to Consolidated Financial Statements (continued)

(In thousands of Canadian dollars, except share and per share amounts, unless otherwise noted)

Years ended March 31, 2018 and 2017

(i)

Share-based payment transactions

Certain members of the Company’s personnel participate in share-based compensation plans. The share-based compensation costs are expensed by the Company and included in G&A expense in profit or loss. The grant date fair value of share-based payment awards granted to the Company’s employees is recognized as compensation cost, with a corresponding increase in contributed surplus within shareholders’ equity, over the years that the employees unconditionally become entitled to the awards. The amount recognized as compensation cost is adjusted to reflect the number of awards for which the related service vesting conditions are expected to be met, such that the amount ultimately recognized as compensation cost is based on the number of awards that vest.

(j)

Deferred share units (“DSU”)

Certain Non-Employee Directors (“NED”) can elect to receive up to 100% of their annual compensation in Deferred Share Units (“DSU”). Each DSU grant price is determined using the Company’s five-day volume weighted average trading price (“VWAP”). NEDs can elect to receive settlement of their DSUs by way of a lump sum cash payment on any date the NED ceases to be a director of the Company or any of its subsidiaries (the “Settlement Date”). The settlement amount is equal to the market value on the Settlement Date of one share for each DSU credited to the director’s account on the Settlement Date.

Upon initial recognition on the date of grant, the Company records a DSU liability for DSUs that have vested, in Accounts payable and accrued liabilities. Costs that arise from the initial recognition of DSUs are recorded in G&A expense over the vesting period of the DSU. The DSU liability is remeasured at its fair value at the end of each reporting period and on the settlement date, with changes in fair value recognized through net (loss) income.

(k)

Provisions

A provision is recognized if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognized as finance cost.

MEDRELEAF CORP.

Notes to Consolidated Financial Statements (continued)

(In thousands of Canadian dollars, except share and per share amounts, unless otherwise noted)

Years ended March 31, 2018 and 2017

(l)

Asset retirement obligation

The Company recognizes its best estimate of an asset retirement obligation as a liability in the year in which it incurs a legal or constructive obligation associated with the retirement of long-lived assets that result from the acquisition, construction, development and/or normal use of the assets. The Company concurrently recognizes a corresponding increase in the carrying amount of the related long-lived asset that is amortized on a straight-line basis over the life of the asset. The best estimate of the asset retirement obligation is estimated using the expected cash flow approach that reflects a range of possible outcomes discounted at a current market-based pre-tax discount rate. Subsequent to the initial measurement, the asset retirement obligation is adjusted at the end of each year for changes in the timing or amount of cash flows, changes in the discount rate and the unwinding of the discount. Changes in the obligation due to the passage of time are recognized in finance costs. Changes in the obligation due to the changes in estimated cash flows are recognized as an adjustment of the carrying amount of the related long-lived asset that is amortized over the remaining life of the asset. Actual costs incurred upon the settlement of the asset retirement obligation are charged against the liability.

(m)

Foreign currency

The consolidated financial statements are presented in Canadian dollars, the Company’s functional currency.

Monetary assets and liabilities denominated in foreign currencies at the reporting dates are translated into the functional currency at the exchange rate at that date. Other consolidated statements of financial position items reported in foreign currencies are translated into Canadian dollars at the exchange rates prevailing at the respective transaction dates. Revenue and expenses denominated in foreign currencies are translated into Canadian dollars at average rates of exchange prevailing during the years. The resulting gains or losses on translation are included in the determination of net income.

For international subsidiaries whose functional currencies are their local currencies, their assets and liabilities are translated from the respective local currency to Canadian dollars using exchange rates at the balance sheet date. The Company’s consolidated statements of income of all international subsidiaries are translated from the respective local currencies to Canadian dollars using average exchange rates for the period covered by the income statements. The resulting foreign exchange gain or loss is recognized in other comprehensive income.

(n)

Financial assets

All financial assets are initially recorded at fair value and designated upon initial recognition into one of the following four categories: held-to-maturity, available-for-sale, loans and receivables, or at fair value through profit or loss (“FVTPL”).

Financial assets classified as held-to-maturity are subsequently measured at amortized cost using the effective interest method less any allowance for impairment. The effective interest method is a method of calculating the amortized cost of a financial asset and of allocating interest income over its life. As at March 31, 2018 and 2017, the Company did not have any assets classified as held-to-maturity.

MEDRELEAF CORP.

Notes to Consolidated Financial Statements (continued)

(In thousands of Canadian dollars, except share and per share amounts, unless otherwise noted)

Years ended March 31, 2018 and 2017

Financial assets classified as available-for-sale are subsequently measured at fair value with unrealized gains and losses recognized in other comprehensive income (loss), except for losses in value that are considered other than temporary or a significant or prolonged decline. As at March 31, 2018 and 2017, the Company did not have any financial assets classified as available-for-sale.

Financial assets classified as loans and receivables are subsequently measured at amortized cost. Financial assets classified as loans and receivables consist of accounts receivable. The Company records an allowance for doubtful accounts against accounts receivable that management believes are impaired. The Company records specific allowances against patient receivables based on their past experiences with the patients and knowledge of the patients’ financial conditions. The Company also considers cash flow cycles of patients.

Financial assets classified as FVTPL are subsequently measured at fair value through the consolidated statements of comprehensive income. Financial assets classified as FVTPL consist of cash and cash equivalents.

Financial assets are derecognized when the rights to receive cash flows from the asset have expired or the Company has transferred its rights to receive cash flows from an asset.

(o)

Impairment of financial assets

Financial assets that are measured at amortized cost are assessed for impairment at the end of each reporting year. A financial asset or group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset and the event has a negative impact on the estimated cash flows of the financial asset and the loss can be reliably estimated.

The amount of the impairment loss recognized is the difference between the carrying amount of the financial asset and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of accounts receivable, where the carrying amount is reduced through the use of an allowance account. When an account receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognized in the consolidated statements of comprehensive income.

MEDRELEAF CORP.

Notes to Consolidated Financial Statements (continued)

(In thousands of Canadian dollars, except share and per share amounts, unless otherwise noted)

Years ended March 31, 2018 and 2017

If, in a subsequent year, the amount of the impairment loss of a financial asset other than the accounts receivable decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed through the consolidated statements of comprehensive income to the extent that the carrying amount of the financial asset at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized.

(p)

Financial liabilities

All financial liabilities are initially recorded at fair value and designated upon initial recognition as FVTPL or other financial liabilities.

Financial liabilities classified as FVTPL include financial liabilities held-for-trading and financial liabilities designated upon initial recognition as FVTPL. Derivatives are also classified as FVTPL unless they are designated as effective hedging instruments. Transaction costs on financial liabilities classified as FVTPL are expensed as incurred. Fair value changes on financial liabilities classified as FVTPL are recognized through the consolidated statements of comprehensive income. There were no financial liabilities designated at FVTPL upon initial recognition.

Financial liabilities classified as other financial liabilities are initially recognized at fair value less directly attributable transaction costs. After initial recognition, other financial liabilities are subsequently measured at amortized cost using the effective interest method.

The Company derecognizes a financial liability when its contractual obligations are discharged or cancelled or expire.

(q)

New standards and interpretations not yet adopted

IFRS 9

In July 2014, the IASB issued the final publication of the IFRS 9 Financial Instruments (“IFRS 9”) standard. The new standard is effective for annual periods beginning on or after January 1, 2018. IFRS 9 includes revised guidance on the classification and measurement of financial instruments, new guidance for measuring impairment on financial assets, and new hedge accounting guidance.

While there is no material impact on the classification and measurement of the Company’s financial assets and financial liabilities under IFRS 9, the introduction of the “expected credit loss” model for impairment will impact the Company’s impairment of accounts receivable. Under IFRS 9, the model will be based on the Company’s grouping of the allowance, determined by the nature of the receivable. The new model incorporates current and forecasted factors that are specific to the borrowers and general economic conditions at the reporting date. A provision matrix, based on the Company’s historical observed default rates over the expected life of the accounts receivable, will also be applied. Bad debt allowance will be calculated by multiplying the provision rates against the aged accounts receivable for each grouping.

MEDRELEAF CORP.

Notes to Consolidated Financial Statements (continued)

(In thousands of Canadian dollars, except share and per share amounts, unless otherwise noted)

Years ended March 31, 2018 and 2017

The Company assessed the impact of adopting IFRS 9 retrospectively and determined that the impact was not material. Commencing April 1, 2018, the Company will adopt IFRS 9 on a cumulative effective basis, with no restatement of the comparative period.

ii.

IFRS 15

In May 2014, the IASB issued IFRS 15 Revenue from Contracts with Customers (“IFRS 15”). The new standard is effective for annual periods beginning on or after January 1, 2018. IFRS 15 introduces a single model for recognizing revenue from contracts with customers. The standard requires revenue to be recognized in a manner that depicts the transfer of promised goods or services to a customer and at an amount that reflects the consideration expected to be received in exchange for transferring those goods or services.

The Company assessed the impact of adopting IFRS 15 retrospectively and determined that the impact was not material. Commencing April 1, 2018, the Company will adopt IFRS 15 on a cumulative effective basis, with no restatement of the comparative period.

iii.

IFRS 16

In 2016, the IASB issued IFRS 16, Leases (“IFRS 16”), replacing International Accounting Standards (“IAS 17”), Leases, and related interpretations. The standard introduces a single on-balance sheet recognition and measurement model for lessees, eliminating the distinction between operating and finance leases. Lessors continue to classify leases as finance and operating leases. IFRS 16 becomes effective for annual periods beginning on or after January 1, 2019, and is to be applied retrospectively. Early adoption is permitted if IFRS 15 has been adopted. The Company is currently assessing the impact of the new standard on its consolidated financial statements.

4.	ACCOUNTS RECEIVABLE

Accounts receivable represents amounts due from patients, insurance providers, and third-party e-commerce payment processing facilitators. As at March 31, 2018, the Company had accounts receivable of $10,750 (2017—$9,953), net of an allowance of $1,349 (2017—$530) and inclusive of $3,036 sales tax refunds receivable (2017—$872). During the year ended March 31, 2018, $759 of bad debt expense was included in general and administrative expenses (2017—$546) and $94 of sales returns and allowances were offset against revenue (2017 – nil).

MEDRELEAF CORP.

Notes to Consolidated Financial Statements (continued)

(In thousands of Canadian dollars, except share and per share amounts, unless otherwise noted)

Years ended March 31, 2018 and 2017

The table below summarizes the aged accounts receivable as at March 31, 2018 and March 31, 2017:


	Notes		2018			2017
Current			$	3,577		$	3,452
30 days				3,164			2,741
60 days				407			1,832
90+ days				1,915			1,586

Trade accounts receivable				9,063			9,611
Sales tax refunds receivable		24		3,036			872
Allowance for sales returns liability				(79	)		—
Allowance for impairment of accounts receivable				(1,270	)		(530	)

Accounts receivable			$	10,750		$	9,953

The movement in the allowance for doubtful accounts in respect of trade accounts receivable during the years ended March 31, 2018 and 2017 were as follows:


	2018			2017
Balance, beginning of period	$	530		$	31
Additions		853			499
Writeoffs		(34	)		—

Balance, end of period	$	1,349		$	530

5.	LETTER OF CREDIT:

On February 7, 2018, the Company issued an irrevocable standby letter of credit (“LOC”) in favour of a local utilities distributor (the “Beneficiary”) for $845. The LOC can be drawn upon from time to time upon written demand for payment to be honoured by the Company’s main banking partner. The LOC expires on January 30, 2019 and can be used by the Beneficiary as security or reimbursement for utility infrastructure upgrade costs.

MEDRELEAF CORP.

Notes to Consolidated Financial Statements (continued)

(In thousands of Canadian dollars, except share and per share amounts, unless otherwise noted)

Years ended March 31, 2018 and 2017

6.	LOAN RECEIVABLE AND CONVERTIBLE NOTE RECEIVABLE:

The Company entered into a loan agreement on March 25, 2015 with MMMG, LLC (the “Borrower”), a Nevada limited liability company for $250 bearing interest at 15% per annum and maturing in March 2017. On May 26, 2017, the Borrower repaid the full outstanding principal and accrued interest of $312.

On November 14, 2016, the Company entered into a strategic alliance agreement (the “Alliance”) with Ehave, Inc. (“Ehave”) to develop software and a branded application. On February 22, 2017, the Company purchased an unsecured convertible promissory note from Ehave with a principal amount denominated in $100 United States dollars. Interest accrues on the note at the rate of 10% per annum and will be due with principal at the earlier of February 22, 2018 or upon the closing of a registered direct offering of Equity Securities of Ehave that meet minimum gross proceed requirements as defined in the Alliance agreement (“Qualifying Offer”). At the option of the Company, upon closing of a Qualifying Offer, the outstanding note receivable plus unpaid accrued interest can be converted to Equity Securities of Ehave.

As at February 22, 2018 the note was not settled or converted and the Company recorded an impairment related to the note. The note impairment of $143 (2017 – nil) was included in general and administrative costs for the year ended March 31, 2018. As at March 31, 2018 the balance of the convertible note receivable was nil (2017 – $132).

7.	OTHER CURRENT ASSETS

Other current assets consist of interest income receivable on cash and cash equivalents invested in interest bearing accounts held with Canadian financial institutions. As at March 31, 2018, $300 (2017 – nil) of interest income was receivable on outstanding cash balances.

8.	INCOME TAXES RECEIVABLE

Income taxes receivable consists of income tax installments paid in excess of estimated income taxes payable and HST sales tax refunds receivable transferred and applied to the Company’s tax account. During the year ended March 31, 2018, $2,397 of HST sales tax refunds due to the Company were transferred to the Company’s tax account and applied to the Company’s tax years ended March 31, 2017 and 2016. The Company intends to appeal the additional assessed tax which it believes arose through the misapplication of prior year tax loss carry forwards and pending amendments required to be filed. As at March 31, 2018 the Company had $8,074 in income taxes receivable. The table below summarizes income taxes receivables as at March 31, 2018 and 2017:

MEDRELEAF CORP.

Notes to Consolidated Financial Statements (continued)

(In thousands of Canadian dollars, except share and per share amounts, unless otherwise noted)

Years ended March 31, 2018 and 2017


	2018		2017
Installments paid for year ended March 31, 2018	$	4,147	$	—
Estimated income tax refund for year ended March 31, 2018		1,530		—
Sales tax refunds applied to tax account for year ended March 31, 2017		2,397		—

Income taxes receivable	$	8,074	$	—

9.	INVENTORIES:


			Biological asset
	Capitalized		fair value		Carrying
	cost		adjustment		Amount
Accessories, supplies and consumables	$	320	$	—	$	320
Work-in-process, dried cannabis and extracts		822		3,006		3,828
Finished goods, dried cannabis and extracts		1,191		4,172		5,363

Carrying amount, March 31, 2017	$	2,333	$	7,178	$	9,511

Accessories, supplies and consumables	$	892	$	—	$	892
Work-in-process, dried cannabis and extracts		3,739		10,043		13,782
Finished goods, dried cannabis and extracts		5,047		13,135		18,182

Carrying amount, March 31, 2018	$	9,678	$	23,178	$	32,856

Inventories consist of, accessories available for resale; supplies and consumables for use in the production of inventories and the transformation of biological assets; capitalized inventory costs; and deemed costs of inventories arising from fair value gains on the transformation of biological assets. The capitalized cost component of inventories represents the amount of cost before any fair value adjustments transferred to inventory through fair value gains recognized on the transformation of biological assets. The biological asset fair value adjustment is exclusive of any cash outlay of cost and represents the non-cash fair value incremental adjustment arising from the transformation of biological assets transferred to inventory as deemed cost. Together the capitalized cost and the incremental biological asset fair value adjustments comprise the total carrying amount of inventory.

During the year ended March 31, 2018 the Company recorded a $1,309 fair value loss arising from the write-down of inventory related to the fair value biological asset adjustment component of its inventory. The write-down was required to adjust inventory to its net realizable value less remaining costs to sell.

Inventories recognized as an expense during the year ended March 31, 2018 was $41,074 (2017—$33,652), summarized as follows:

MEDRELEAF CORP.

Notes to Consolidated Financial Statements (continued)

(In thousands of Canadian dollars, except share and per share amounts, unless otherwise noted)

Years ended March 31, 2018 and 2017


	2018		2017
Production costs	$	13,212	$	9,436
Fair value adjustment on inventory sold		26,553		24,216
Fair value adjustment on carrying amount of inventory		1,309		—

Inventory expense	$	41,074	$	33,652

10.

BIOLOGICAL ASSETS:

Biological assets consist of cannabis on plants. The changes in the carrying value of biological assets are as follows:


				Biological asset
	Capitalized			fair value			Cannabis on
	cost			adjustment			on plants
Carrying amount, March 31, 2016	$	363		$	1,453		$	1,816
Changes in fair value less costs to sell due to biological transformation		—			31,252			31,252
Production costs capitalized		5,024			—			5,024
Transferred to inventories upon harvest		(5,012	)		(30,271	)		(35,283	)

Carrying amount, March 31, 2017	$	375		$	2,434		$	2,809
Changes in fair value less costs to sell due to biological transformation		—			44,098			44,098
Production costs capitalized		8,550			—			8,550
Transferred to inventories upon harvest		(8,400	)		(43,855	)		(52,255	)

Carrying amount, March 31, 2018	$	525		$	2,677		$	3,202

Biological assets consist of cannabis plants measured at fair value less cost to sell up to the point of harvest. The Company’s estimates, by their nature, are subject to changes that could result from volatility of market prices, unanticipated regulatory changes, harvest yields, loss of crops, changes in estimates and other uncontrollable factors that could significantly affect the future fair value of biological assets.

These estimates include the following assumptions and are based on historical information:

Selling prices were determined by estimating the Company’s average selling price and mix of product strains applicable to each three-month ending reporting period. The Company’s average selling price for the year ended March 31, 2018 was $8.91 (2017—$11.00) per gram and equivalent gram of cannabis sold. A change in the Company’s average selling price of $1 per gram would result in a 21% change in the carrying amount of biological assets.

MEDRELEAF CORP.

Notes to Consolidated Financial Statements (continued)

(In thousands of Canadian dollars, except share and per share amounts, unless otherwise noted)

Years ended March 31, 2018 and 2017

ii.

Equivalent grams on extracts were determined by estimating the expected yields of extracted plants and are dependant on the efficiency and output of the Company’s extraction processes. On January 1, 2018, the Company changed its estimated conversion rate for extracts from 10 grams per 1,250 mg of THC/CBD to 10 grams per 960 mg of THC/CBD.

iii.

Costs incurred and remaining costs to complete were estimated by calculating the average production costs up to the point of harvest over the total production period;

iv.

The percentage of costs incurred for each stage of plant growth;

The stage of plant growth at which point of harvest is determined;

vi.

Costs to sell and other fulfillment costs were determined by estimating the Company’s average cost per gram; and

vii.

Expected yields of harvested plants are estimated and risk adjusted at each stage of growth.

11.

PROPERTY, PLANT AND EQUIPMENT

On July 22, 2016, the Company completed the purchase of a 210,596 square foot production facility on approximately 11 acres of land, located in an industrialized zone in Bradford, Ontario. The purchase price of the property was $8,750, excluding legal and transfer tax costs, and was primarily funded through a collateralized credit facility. The facility will be used for the production and sale of medical cannabis.

As at March 31, 2017, total construction costs of $17,550 related to the Bradford Facility were classified as construction in process. During the year ended March 31, 2018 additional construction costs of $29,752 were incurred and $27,352 of construction costs related to the first sub-phase of phase two were classified from construction in process as production rooms ($10,524) and building improvements ($16,572) and depreciation commenced.

As of March 31, 2018, $19,950 in construction costs related to the latter part of the second phase of the Bradford Facility project were classified as construction in process and were not depreciated.

Included in production costs for the year ended March 31, 2018 is depreciation in the amount of $2,924 (2017—$1,197).

MEDRELEAF CORP.

Notes to Consolidated Financial Statements (continued)

(In thousands of Canadian dollars, except share and per share amounts, unless otherwise noted)

Years ended March 31, 2018 and 2017


	Computer		Furniture
	hardware/		and		Motor		Leasehold		Production		Construction					Building
	software		equipment		Vehicles		improvements		rooms		in process			Building		improvements		Land		Total
Cost
Balance, March 31, 2016		298		2,145		—		2,260		4,588		—			—		—		—		9,291
Additions		591		3,226		—		797		441		17,550			4,296		—		4,604		31,505

Balance, March 31, 2017		889		5,371		—		3,057		5,029		17,550			4,296		—		4,604		40,796
Additions		2,080		4,528		10		601		1,660		29,752			—		2,266		—		40,897
Asset reclassification		63		193		—		—		10,524		(27,352	)		—		16,572		—		—

Balance, March 31, 2018		3,032		10,092		10		3,658		17,213		19,950			4,296		18,838		4,604		81,693

Accumulated amortization
Balance, March 31, 2016		126		481		—		355		362		—			—		—		—		1,324
Amortization		168		750		—		290		463		—			—		—		—		1,671
Asset retirement		—		—		—		21		—		—			—		—		—		21

Balance, March 31, 2017		294		1,231		—		666		825		—			—		—		—		3,016
Amortization		587		1,544		—		395		1,365		—			215		779		—		4,885
Asset retirement		—		—		—		22		—		—			—		—		—		22

Balance, March 31, 2018		881		2,775		—		1,083		2,190		—			215		779		—		7,923

Carrying amounts
March 31, 2017		595		4,140		—		2,391		4,204		17,550			4,296		—		4,604		37,780
March 31, 2018		2,151		7,317		10		2,575		15,023		19,950			4,081		18,059		4,604		73,770

MEDRELEAF CORP.

Notes to Consolidated Financial Statements (continued)

(In thousands of Canadian dollars, except share and per share amounts, unless otherwise noted)

Years ended March 31, 2018 and 2017

12.

INTANGIBLE ASSETS

During the year ended March 31, 2018, the Company completed the purchase of intangible assets for a purchase price of $9,762, of which $1,900 was paid for in cash and the remainder ($7,862) paid through the issuance of Common Shares (note 13).

The Company has an obligation to purchase additional intangible assets by way of issuance of Common Shares contingent on the seller meeting specified targets. The agreed upon purchase price of each intangible asset is $3,750, $3,250, and $3,000, respectively.

Intangible assets consist of trademarks, patents, and other intangible assets.


	Trademarks		Patents		Other		Total
Cost
Balance, March 31, 2016	$	—	$	—	$	—	$	—
Additions		13		—		—		13

Balance, March 31, 2017		13		—		—		13
Additions		124		111		9,527		9,762
Balance, March 31, 2018	$	137	$	111	$	9,527	$	9,775

Accumulated amortization
Balance, March 31, 2016	$	—	$	—	$	—	$	—
Amortization		—		—		—		—

Balance, March 31, 2017		—		—		—		—
Amortization		—		—		632		632

Balance, March 31, 2018	$	—	$	—	$	632	$	632

Carrying amounts
March 31, 2017	$	13	$	—	$	—	$	13
March 31, 2018		137		111		8,895		9,143

MEDRELEAF CORP.

Notes to Consolidated Financial Statements (continued)

(In thousands of Canadian dollars, except share and per share amounts, unless otherwise noted)

Years ended March 31, 2018 and 2017

13.

SHARE CAPITAL

Authorized:

•

Unlimited common shares Initial public offering:

On May 30, 2017, the Company filed its final prospectus with the securities regulatory authorities in each of the provinces and territories of Canada in connection with the initial public offering and secondary offering (together, the “Offering”) of an aggregate of 10,600,000 common shares (the “Offered Shares”) of the Company at a price of $9.50 per Offered Share (the “Offering Price”) for aggregate gross proceeds of $100,700, with certain selling shareholders receiving $20,000 of the gross proceeds as part of a secondary offering.

The Offering closed on June 7, 2017, and the Offered Shares commenced trading on the TSX under the symbol “LEAF”.

Issued:


						Class A						Class B					Class C
	Common shares					Common shares						Common shares					Common shares
	Number of		Share			Number of			Share			Number of			Share		Number of			Share
	shares		capital			shares			capital			shares			capital		shares			capital
Balance, March 31, 2016		—	$	—			363,544		$	11,595			226,416		$	—		8,175		$	—
Issuance of Class A common shares		—		—			71,964			24,694			—			—		—			—
Conversion of Class C shares to Class A common shares		—		—			4,177			74			—			—		(4,177	)		—
Exercise of stock options		—		—			39,214			2,337			—			—		—			—

Balance, March 31, 2017		—	$	—			478,899		$	38,700			226,416		$	—		3,998		$	—
Conversion of Class A shares to common shares at 116.0909:1		55,595,369		38,700			(478,899	)		(38,700	)		—			—		—			—
Conversion of Class B shares to common shares		464,054		—			—			—			(3,998	)		—		—			—
Conversion of Class B shares to common shares at 116.0909:1		26,284,837		2,400			—			—			(226,416	)		—		—			—
Conversion of Class C shares to Class B shares at 116.0909:1		—		218			—			—			3,998			—		(3,998	)		—
Initial public offering		8,494,742		80,700			—			—			—			—		—			—
Bought deal financing		3,625,470		60,002			—			—			—			—		—			—
Second bought deal financing		5,000,000		120,000			—			—			—			—		—			—
Share issuance costs		—		(16,753	)		—			—			—			—		—			—
Shares issued for intangible assets		488,313		7,862			—			—			—			—		—			—
Shares issued for Woodstock licence		18,416		350			—			—			—			—		—			—
Exercise of stock options		808,590		1,405			—			—			—			—		—			—
Tax effect of share issuance costs		—		4,194			—			—			—			—		—			—

Balance, March 31, 2018		100,779,791	$	299,078			—		$	—			—		$	—		—		$	—

Class A common shares

Class A common shares were voting and participating and were entitled to dividends as and when declared by the Board, subject to the prior rights of other share classes. The Class A common shareholders were entitled to receive the remaining property of the Company upon liquidation, dissolution or winding up. Prior to the Offering, Class A shares were subdivided at a ratio of 116.0909:1 and re-designated as “common shares”.

MEDRELEAF CORP.

Notes to Consolidated Financial Statements (continued)

(In thousands of Canadian dollars, except share and per share amounts, unless otherwise noted)

Years ended March 31, 2018 and 2017

Common shares

Common shares are voting and participating and are entitled to dividends as and when declared by the Board. The holders of common shares will be entitled to receive, on a pro rata basis, the remaining property and assets available for distribution upon the Company’s liquidation, dissolution or winding-up, whether voluntary or involuntary, subject to the rights of the Class B shares.

Class B shares

Prior to the Offering on June 7, 2017, Class B shares were voting, non-participating, convertible shares, redeemable by the Company. Each Class B share was issued at $0.001 and carried an entitlement of one vote. Immediately prior to the Offering, on June 7, 2017, the Class B shares were converted on a 1:1 basis into Class A common shares and were subdivided at a ratio of 116.0909:1 and re-designated as “common shares”.

Subsequent to the Offering, Class B shares, are restricted and can only be held by Igor Gimelshtein, Chief Financial Officer of the Company, pursuant to the terms of his employment agreement with the Company. The holder of Class B shares is not entitled to notice of, to attend at, nor to vote at any meeting of the shareholders of the Company, and is not entitled to any dividends. In the event of the liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, the holder of the Class B shares shall be entitled to receive, in respect of each such share, before any distribution of any part of the assets of the Company among the holders of the common shares and any other class of shares of the Company ranking junior to the Class B shares, an amount equal to the Redemption Price (defined below) per Class B share held.

All of the Class B shares outstanding on the date (the “Redemption Date”) on which the holder of the Class B shares delivers a notice of resignation or the date on which employment is terminated for just cause, shall be automatically redeemed by the Company on the Redemption Date at a price per Class B Share equal to $0.001 (the “Redemption Price”).

Subject to the foregoing, on March 23, 2018 the 3,998 Class B shares were converted into 464,054 common shares.

As at March 31, 2018 there were no Class B shares issued or outstanding.

MEDRELEAF CORP.

Notes to Consolidated Financial Statements (continued)

(In thousands of Canadian dollars, except share and per share amounts, unless otherwise noted)

Years ended March 31, 2018 and 2017

Class C Shares

Class C shares were non-voting, convertible, redeemable by the Company and issued pursuant to the terms of an employment agreement dated March 2, 2015. Each Class C share is issued at $0.001 per share. On each of the first, second and third anniversary of March 23, 2015, 4,177 Class C shares would automatically convert on a 1:1 basis into Class A common shares. In the event of a change of control, all outstanding unconverted shares would have been converted on a 1:1 basis into Class A common shares. Immediately prior to the Offering, on June 7, 2017, the Class C shares were converted on a 1:1 basis into Class B shares (as described above).

Period transactions

During year ended March 31, 2017, the following series of transactions occurred:

(a)

On August 31, 2016, the Board of directors and the requisite number of shareholders of record, approved a private placement offering of Class A common shares. The offering authorized the Company to raise up to $25,000 of capital through the issuance of up to 72,791 Class A common shares (the “Offering”). During the year ended March 31, 2017, the Company issued 71,964 Class A common shares for a stated share capital value of $24,694 related to the Offering.

(b)

The holders of Class A common stock options exercised 39,214 options for a stated share capital value of $2,336, plus proceeds of $1.

(c)

The holder of the Class C shares converted 4,177 shares to Class A common shares in accordance with the terms of an employment agreement.

(d)

During the year ended March 31, 2017, 22,490 stock options were forfeited with a stated value of $12.

During the year ended March 31, 2018, the following series of transactions occurred:

(a)

Immediately prior to the Offering, 478,899 Class A common shares converted on a basis of 1:1 into common shares and were subdivided into 55,595,369 shares at a ratio of 116.0909:1 (subject to rounding provisions).

(b)

Immediately prior to the Offering, the Class B shares were converted on a 1:1 basis into Class A common shares and were subdivided at a ratio of 116.0909:1 and re-designated as 26,284,837 “common shares”. The non-interest bearing shareholder loans (held by Class B shareholders) with a face value of $2,400 were eliminated and contributed as common share capital (note 13).

MEDRELEAF CORP.

Notes to Consolidated Financial Statements (continued)

(In thousands of Canadian dollars, except share and per share amounts, unless otherwise noted)

Years ended March 31, 2018 and 2017

(c)

Immediately prior to the Offering, on June 7, 2017, the Class C shares were converted on a 1:1 basis into Class B shares (as described above). Contributed surplus of $218 attributable to the Class C shares was reallocated to Class B share capital.

(d)

On June 7, 2017, the Company completed its initial public offering and issued 8,494,742 common shares (excluding shares issued through the secondary offering) at price of $9.50 per Offered Share.

(e)

The Company incurred various legal, consulting, professional, regulatory and underwriter fees in connection with its Offering. Underwriter fees and other legal professional and consulting fees associated with the Company’s Offering of $5,361 were dispersed from gross proceeds and offset against common share capital, net of estimated incomes taxes of $1,437. In addition, the Company expensed and included in initial public company related costs for the year ended March 31, 2018, $2,611 in other fees incurred in connection with the Listing of the Company’s existing shares on the TSX.

(f)

On December 4, 2017, the Company closed a short form prospectus offering on a “bought deal basis”, pursuant to which the Company issued an aggregate of 3,625,470 Common Shares at a price of $16.55 per Common Share (the “Bought Deal”), for aggregate gross proceeds to the Company of $60,002. Issuance costs in relation to the equity offering amounted to $4,063 and are reflected in shareholders’ equity, net of estimated incomes taxes of $1,038.

(g)

On December 8, 2017, the Company issued 488,313 Common Shares at a price of $16.10 as consideration for the purchase of intangible assets (note 12).

(h)

On January 31, 2018 the Company closed a short form prospectus offering on a “bought deal basis”, pursuant to which the Company issued an aggregate of 5,000,000 Common Shares each with a one-half of one common share purchase warrant (each full common share warrant, a “warrant”) at a price of $26.50 per Common Share (the “Second Bought Deal”), for aggregate gross proceeds to the Company of $132,500. Issuance costs in relation to the equity offering amounted to $8,092 and are reflected in shareholders’ equity, net of estimated incomes taxes of $1,904.

(i)

On February 1, 2018 in connection with the Second Bought Deal, 375,000 overallotment warrants were issued for aggregate gross proceeds of $338.

(j)

On March 1, 2018, the Company executed a license trademark agreement in exchange for $150 cash proceeds and 18,416 common shares valued at $350.

MEDRELEAF CORP.

Notes to Consolidated Financial Statements (continued)

(In thousands of Canadian dollars, except share and per share amounts, unless otherwise noted)

Years ended March 31, 2018 and 2017

(k)

On March 23, 2018 3,998 Class B shares converted to 464,054 common shares.

(l)

The holders of common stock options exercised 808,590 options for a stated share capital value of $1,405 inclusive of total proceeds to the Company of $849.

(m)

The holders of 196,844 common stock options were terminated resulting in forfeiture of unvested options at the time of termination.

(n)

Earnings per share (“EPS”) has been calculated using the weighted average number of shares outstanding during the period on a total outstanding and fully dilutive basis. The potential conversion of options into common shares as determined using the treasury stock method, has a dilutive effect on EPS.

EPS amounts for the years ended March 31, 2018 and 2017 are presented in the table below:


Years ended March 31,	2018			2017
Numerator:
Total comprehensive (loss) income	$	(7,531	)	$	10,958

Denominator—basic earnings per share:
Weighted average number of shares – basic ¹		91,119,745			77,789,726

Denominator—diluted earnings per share:
Total dilutive effect of outstanding stock options ²		2,557,251			3,912,031

Weighted average number of shares—diluted		93,676,996			81,701,757

Earnings per share—basic	$	(0.08	)	$	0.14
Earnings per share—diluted		(0.08	)		0.13

¹	Weighted average number of shares, basic and diluted, for the year ended March 31, 2017 are presented on a converted basis of 116.0909:1 to reflect the capital reorganization (note 13).

²	Calculated using the treasury stock method which reduces the dilutive effect of outstanding stock options by the number of shares assumed to be repurchased with proceeds. Warrants were not included in the calculation of diluted earnings per share as they were anti-dilutive

Warrants

On January 31, 2018 and February 1, 2018 the Company issued 2,500,000 and 375,000 warrants, respectively, convertible to common shares of the Company at an exercise price of $34.50. The changes in issued and outstanding warrants during the year ended March 31, 2018, are presented in the table below. No warrants were issued during the year ended March 31, 2017.

MEDRELEAF CORP.

Notes to Consolidated Financial Statements (continued)

(In thousands of Canadian dollars, except share and per share amounts, unless otherwise noted)

Years ended March 31, 2018 and 2017


			Number of		Exercise		Initial fair		Amount
	Expiry date		warrants		price		value price		March 31, 2018
Second bought deal		January 31, 2020		2,500,000	$	34.50	$	5.00	$	12,500
Second bought deal overallotment		February 1, 2020		375,000	$	34.50	$	0.90		338
Issuance fees net of tax										(598	)

Balance as at March 31, 2018				2,875,000					$	12,240

The Company used an algorithm based on the Black-Scholes option pricing model to determine the fair value of the warrants granted using the following assumptions:

•

risk-free rate of 1.68% on the date of grant;

•

expected life of 2 years;

•

volatility of 70%;

•

Spot price on valuation date;

•

Strike price range lower limit of $34.50 and upper limit of $51.75;

•

dividend yield of nil; and

•

the exercise price of the respective warrant.

14.

SHAREHOLDER LOANS PAYABLE

As at March 31, 2018, there were no shareholder loans comprising of non-interest bearing promissory notes (2017—$2,189). These shareholder loans were unsecured and had no fixed terms of repayment. The non-interest bearing notes were recorded at fair value, representing an imputed interest of 4.7%, and had a face value of $2,400 as at March 31, 2017. Included in finance costs for the year ended March 31, 2018 are amortized interest charges of $19 (2017—$98) relating to these shareholder loans.

In connection with the Offering (note 13), the $2,400 non-interest bearing promissory notes, which were held by the holders of all of the issued Class B shares, were eliminated and contributed as common share capital upon conversion of the Class B shares. As a result, the Company recorded a fair value loss of $192, which was included in net and comprehensive loss for the year ended March 31, 2018.

15.

ASSET RETIREMENT OBLIGATION

The Company has recorded an asset retirement obligation for the estimated costs to remediate the Company’s building upon termination of the lease. The liability is $214 as at March 31, 2018 (2017—$204). The following is a reconciliation of the changes in the decommissioning liability:

MEDRELEAF CORP.

Notes to Consolidated Financial Statements (continued)

(In thousands of Canadian dollars, except share and per share amounts, unless otherwise noted)

Years ended March 31, 2018 and 2017


	Asset retirement obligation
Balance, March 31, 2016	$	195
Accretion		9

Balance, March 31, 2017		204
Balance		10

Balance, March 31, 2018	$	214

The provision for the asset retirement obligation is based on the following key assumptions:

•

the total undiscounted cash flows as at March 31, 2018 and March 31, 2017 is $275;

•

the expected settlement is in fiscal 2024;

•

the current market-based pre-tax discount rate is 3.45%; and

•

an inflation rate of 1.25%.

16.

COLLATERALIZED CREDIT FACILITY AND TERM CREDIT FACILITY

On July 22, 2016, the Company secured a real property loan, in the amount of $7,500 (the “Former Credit Facility”). The Former Credit Facility was collateralized and provided the lender with first ranked security against the new production facility as well as all personal property of the Company. The lender was ranked second behind registered landlord(s) for all improvements to leased properties. The Former Credit Facility was an open variable rate loan with a five-year term, ending August 1, 2021.

On April 17, 2017, the Company entered into a new $20,000 credit agreement with a major Canadian bank (the “Credit Agreement”). The Credit Agreement provides the Company with a $10,000 term credit facility (the “Term Facility”) and a $10,000 revolving credit facility (the “Revolving Facility” and together with the Term Facility, the “New Credit Facility”), subject to covenant requirements. The Former Credit Facility lender continues to hold 50% of the Company’s outstanding debt under the New Credit Facility, which is administered by and payable to the New Credit Facility lender (the “debt reorganization”). The Company utilized the proceeds of the Term Facility to repay all principal and interest outstanding of $7,500 on the Former Credit Facility, the balance was used to fund the build-out of the Bradford Facility.

MEDRELEAF CORP.

Notes to Consolidated Financial Statements (continued)

(In thousands of Canadian dollars, except share and per share amounts, unless otherwise noted)

Years ended March 31, 2018 and 2017

The balances that comprise the term credit facility are presented below:


As at March 31,	2018			2017
Term facility – short term portion	$	1,000		$	—
Term facility		8,750			—
Deferred financing fees		(364	)		—
Amortization of deferred financing fees		35			—

Term credit facility	$	9,421		$	—

The New Credit Facility can be issued as Bankers’ Acceptance (“BA”) rate based borrowing or Canadian Prime (“Prime”) rate based borrowing. Any portion of the New Credit Facility issued as a BA rate based borrowing incurs interest, payable monthly, at an annual variable interest rate of 3.25% plus a discount equal to the lessor of the annual Canadian Dollar Offered Rate plus 0.10% or the lenders offered discount rate. Any portion of the New Credit Facility issued as a Prime rate based borrowing incurs monthly interest at an annual variable interest rate equal to the Canadian Prime rate applicable on the issue date plus 2.25%.

As at March 31, 2018, the Term Facility was rolled into a 30-day BA rate based borrowing, maturing on April 2, 2018 at a rate of 3.25% per annum plus a discount rate of 1.58% per annum, payable monthly. The Term Facility requires quarterly principal repayments of $250 and monthly payments of accrued interest and fees. The Term Facility rolls into a 30-day BA rate for the purposes of determining the interest obligation.

The Credit Agreement restricts the use of proceeds of the New Credit Facility provided thereunder. Advances under the Term Facility may be used solely for the purpose of repaying the Former Credit Facility or other indebtedness of the Company and funding the build-out of the Bradford Facility. Advances under the Revolving Facility may fund working capital and other general corporate purposes of the Company. As at March 31, 2018 the Company advanced $845 from the Revolving Facility.

The Credit Agreement contains events of default customary for agreements of this nature as well as certain restrictive covenants including, subject to certain exceptions, restrictions on the Company’s ability to incur indebtedness, grant liens, make corporate changes, dispose of assets, make investments including acquisitions and pay dividends. The Company must maintain its Health Canada Licences and observe certain financial covenants including with respect to: (i) maintaining an interest coverage ratio of not less than 3.00 to 1.00; (ii) maintaining a total leverage ratio of not more than 2.50 to 1.00; (iii) maintaining a capitalization ratio of not more than 1.00 to 2.00; and (iv) not permitting any earnings before interest, taxes, depreciation and amortization decrease (as defined therein as “EBITDA”) to exceed 30.0% (the “EBITDA Decrease Covenant”), in each case as particularly provided in the Credit Agreement.

MEDRELEAF CORP.

Notes to Consolidated Financial Statements (continued)

(In thousands of Canadian dollars, except share and per share amounts, unless otherwise noted)

Years ended March 31, 2018 and 2017

On November 10, 2017, the Company amended the Credit Agreement (the “ November 2017 Amended Credit Agreement”). Under the November 2017 Amended Credit Agreement, the EBITDA Decrease Covenant was removed commencing March 31, 2017 until the remaining term of the Credit Agreement. The November 2017 Amended Credit Agreement also removed the election to defer principal payments, and as such, the quarterly principal repayments of $250 are required for each three-month period ended December 31, March 31, June 30, and September 30. The first payment was made on January 2, 2018.

On March 29, 2018, the Company further amended the Credit Agreement (the “March 2018 Amended Credit Agreement”). Under the March 2018 Amended Credit Agreement, the interest coverage ratio, the total leverage ratio and the capitalization ratio under the Credit Agreement were removed and replaced with the following financial covenants for periods July 1, 2019 an onwards: (i) maintaining a total leverage ratio of not more than 3.00 to 1.00; (ii) maintaining shareholders equity of not less than a shareholders’ equity floor as defined in the March 2018 Amended Credit Agreement; and (iii) maintaining a fixed charge coverage ratio of not less than 1.25 to 1.00. For periods prior to July 1, 2019, the Company must maintain a cash and cash equivalent balance of at least 150% of the aggregate outstanding principle balance of all borrowed under the Credit Agreement.

Effective for reporting periods on or after March 31, 2017, the EBITDA Decrease Covenant was removed under the Amended Credit Agreement and as at March 31, 2018, the Company was in compliance with all covenants contained in the March 2018 Amended Credit Agreement and no material breach of such agreement has occurred or been waived.

In securing the New Credit Facility, the Company incurred $364 of finance related costs during the year ended March 31, 2018. The unamortized finance fees of $87 related to the Former Credit Facility were expensed to finance costs during the year ended March 31, 2018. As at March 31, 2018, $329 of unamortized deferred finance fees were netted against the New Credit Facility. During the year ended March 31, 2018, $122 of deferred finance fees were amortized and included in finance costs for the period (2017 – $14).

17.

STOCK-BASED COMPENSATION

The Company has stock option plans to encourage ownership of the Company’s common shares by its officers, directors, employees and certain non-employees. Stock options for employees have a maximum term of six years. The options vesting period ranges between one and five years. Stock options for certain executives and non-employees, vest based on performance milestones and have an indefinite term.

MEDRELEAF CORP.

Notes to Consolidated Financial Statements (continued)

(In thousands of Canadian dollars, except share and per share amounts, unless otherwise noted)

Years ended March 31, 2018 and 2017

During the period and prior to the closing of the Offering, the Board established an employee incentive stock option plan (“ESOP”), under which options were granted to executive officers, employees and consultants of the Company and its subsidiaries. After giving effect to the Capital Reorganization (refer to note 13) and the Closing Option Grant, an aggregate of 4,354,543 common shares were reserved for issuance under options granted under the Stock Option Plan and an aggregate of 2,655,226 common shares were reserved for issuance under Legacy Option Agreements. Under the option plan the total amount of outstanding options is to not exceed 10% of the issued and outstanding shares of the Company. As at March 31, 2018 the Company had 6,645,835 outstanding stock options.

During the year ended March 31, 2018, the Company granted 359,000 performance-based options to certain third-party consultants as remuneration, contingent on the achievement of specified performance targets. As at March 31, 2018, the specified performance targets have not been met, and thus no outstanding performance-based options during the period became exercisable. As at March 31, 2017, there were no performance-based options outstanding.

A summary of the Company’s plans and changes during the respective periods is presented below:


									Weighted average
	Number of options			Exercise price ($)					exercise ($)
Outstanding options, March 31, 2016		79,429		$	0.01	-	$	98.05	$	8.01
Granted		13,322		$	0.01	-	$	343.45	$	131.28
Cancelled		(22,490	)				$	0.01	$	0.01
Exercised		(43,391	)	$	0.00	-	$	0.01	$	0.01

Outstanding options, March 31, 2017		26,870		$	0.00	-	$	343.45	$	88.75

Opening options converted at 116.0909:1		2,655,226		$	0.00	-	$	2.96	$	0.90
Granted—ESOP		4,637,043		$	9.50	-	$	19.46	$	10.02
Granted—Performance based options		359,000		$	17.09	-	$	19.46	$	18.79
Forfeited unvested		(196,844	)	$	9.50	-	$	19.46	$	11.77
Exercised		(808,590	)	$	0.00	-	$	9.50	$	1.05

Outstanding options, March 31, 2018		6,645,835		$	0.00	-	$	19.46	$	7.89

Options exercisable, March 31, 2017 ¹		574,766		$	0.00	-	$	2.96	$	1.24
Options exercisable, March 31, 2018		1,736,529		$	0.00	-	$	9.50	$	6.90

¹	Options outstanding and exercisable as at March 31, 2017 are presented on a converted basis of 116.0909:1.

MEDRELEAF CORP.

Notes to Consolidated Financial Statements (continued)

(In thousands of Canadian dollars, except share and per share amounts, unless otherwise noted)

Years ended March 31, 2018 and 2017

The following table summarizes the range of exercise prices and the weighted average of exercise prices as at March 31, 2018 and 2017:


			Weighted average
	Outstanding		remaining term		Options		Weighted average
Exercise Price	options		(years)		exercisable		exercise ($)
$0.00 - $0.01 converted at 116.0909 to $0.00		1,311,361		2.62		118,761	$	0.00
$98.05 converted at 116.0909 to $0.84		752,732		3.56		301,140	$	0.84
$343.45 converted at 116.0909 to $2.96		591,133		4.95		154,633	$	2.96

Outstanding options, March 31, 2017		2,655,226		3.40		574,534	$	1.24

$0.00		1,030,654		1.87		1,008,597	$	0.00
$0.84		300,674		2.56		—	$	0.84
$2.96		552,432		4.05		296,337	$	2.96
$9.50		4,171,334		4.20		431,595	$	9.50
$17.09		241,741		4.63		—	$	17.09
$19.46		349,000		4.88		—	$	19.46

Outstanding options, March 31, 2018		6,645,835		3.80		1,736,529	$	7.89

The estimated fair value of options granted was determined on the date of grant using the Black-Scholes option pricing model with the following assumptions:


	March 31, 2018		March 31, 2017
Fair value of options ¹	$	0.00 - $13.64	$	0.00 - $2.96
Exercise price ¹	$	0.00 - $19.46	$	0.00 - $2.96
Forfeiture rate		2% - 3%		0%
Risk-free interest rate		1% - 2%		0% - 1%
Volatility factor of the future expected market price of shares		55% - 75%		75%
Weighted average expected life of the options		2 - 5 years		2 - 5 years

¹	Fair value of options and exercise prices as at March 31, 2017 are presented on a converted basis of 116.0909:1 to reflect the capital reorganization (note 13).

During the year ended March 31, 2018, share-based compensation expense relating to stock options of $11,418 (2017—$3,053) was included as part of general and administrative expenses in the consolidated statements of comprehensive (loss) income.

18.

DEFERRED SHARE UNITS

The Company has a deferred share unit plan for non-executive directors to enhance the Company’s ability to attract and retain talented and experienced individuals to serve as members of its Board and to promote greater alignment of interest between such persons and the shareholders of the Company.

MEDRELEAF CORP.

Notes to Consolidated Financial Statements (continued)

(In thousands of Canadian dollars, except share and per share amounts, unless otherwise noted)

Years ended March 31, 2018 and 2017

Under the DSU plan, eligible directors may elect to receive up to 100% of their director compensation in the form of DSUs, subject to any requirements that may be imposed by the Board. The number of DSU grants is determined by dividing the cash amount of the director compensation to be converted to DSUs by the market value of the share as of the last business day of the three-month period ended for which the director compensation is paid (the “Valuation Date”). Each DSU awarded under the plan will vest immediately unless otherwise stated. DSUs granted to directors of the Company as part of their annual cash retainer shall vest as to 25% of the total number of DSUs granted per director, on each of June 30, 2017; September 30, 2017; March 31, 2017 and March 31, 2018.

During the year ended March 31, 2018, the Company initially recognized and included in G&A expense, $512 (2017 – nil) of board fees attributable to DSUs.

During the year ended March 31, 2018, due to an increase in share price, the fair value increase on the remeasurement of the DSU liability was $428 and was included in net loss (2017 – nil). Refer to note 3 for the account policy relating to DSUs.

If, and when dividends are paid on shares, unless the Board decides otherwise, additional DSUs shall be credited to each eligible director who holds DSUs on the record date for such dividend, equal to the number (rounded down to the nearest whole DSU) determined by dividing: (i) product of the amount of the dividend by the number of DSUs held by the Eligible Director on such record date by (ii) the market value of a share on the date on which the dividends were paid on the Shares. As at March 31, 2018 the Company did not pay any dividends on outstanding shares.

A summary of the Company’s DSU liability and changes during the respective periods is presented below:


	Number of DSU		Initial				Fair Value
	Units		Price		Amount		Price		Amount
As at March 31, 2017		—	$	—	$	—	$	—	$	—
Granted and vested		53,893	$	9.50	$	512	$	17.45	$	940

As at March 31, 2018		53,893	$	9.50	$	512	$	17.45	$	940

19.

FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, advances to shareholders, loan receivable, convertible note receivable, accounts payable and accrued liabilities, term and revolving credit facilities, and shareholder loans payable. As at March 31, 2018 and 2017, the carrying values of these instruments approximate their fair values based on the nature of these financial instruments.

MEDRELEAF CORP.

Notes to Consolidated Financial Statements (continued)

(In thousands of Canadian dollars, except share and per share amounts, unless otherwise noted)

Years ended March 31, 2018 and 2017

(a)

Fair value measurements of assets and liabilities recognized at fair value in the consolidated statements of financial position

Financial assets and liabilities are categorized using a fair value hierarchy as follows:

•

Level 1 - quoted prices in active markets for identical assets or liabilities;

•

Level 2 - inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

•

Level 3 - inputs for the asset or liability that are not based on observable market data.

The levels in the fair value hierarchy into which the Company’s assets and liabilities are measured and recognized in the consolidated statements of financial position at fair value are categorized as follows:


Cash and cash equivalents		Level 1
Biological assets (note 10)		Level 3

There were no transfers between levels during the periods ended March 31, 2018 or 2017. See note 10 for Level 3 measurements relating to non-financial assets.

(b)

Liquidity risk

Liquidity risk is the risk that the Company will be unable to fulfill its obligations on a timely basis or at a reasonable cost. The Company manages its liquidity risk by monitoring its operating requirements and capital structure. The Company prepares budget and cash forecasts to ensure it has sufficient funds to fulfill its obligations. See note 23 for the Company’s commitments as of March 31, 2018.

(c)

Credit risk

The Company is exposed to credit risk related to cash and cash equivalents invested in short-term securities, outstanding accounts receivable, and shareholder advances.

The Company manages credit risk from cash and cash equivalents by selecting high quality issuers and low risk investments which minimizes the potential to default by the issuer of the certificates. All cash and cash equivalents are held with major Canadian financial institutions.

Credit risk from accounts receivable is mitigated by regular monitoring of aged receivables and managing the underlying business relationships with insurance providers. A significant concentration of receivable, are held with insurance providers. Receivables due from non-insurance providers, require advance payment through third-party credit card processing agents, which minimizes credit risk.

MEDRELEAF CORP.

Notes to Consolidated Financial Statements (continued)

(In thousands of Canadian dollars, except share and per share amounts, unless otherwise noted)

Years ended March 31, 2018 and 2017

Credit risk from shareholder advances arises from the possibility that principal and/or interest due may become uncollectible. The Company mitigates this risk by managing and monitoring the underlying business relationships and transactions.

(d)

Interest rate risk

The Company is exposed to the risk of interest rate fluctuations on its term credit facility subject to variable Canadian Prime borrowing and Bankers’ Acceptance borrowing rates. If the variable interest rate were to increase 1%, the Company would incur additional finance costs of $100 per year which would reduce future cash flows and net income. Interest rate risk exposure on short-term investments is mitigated by selecting low risk, cashable, guaranteed income investments. As at March 31, 2018, the full outstanding Term Facility was in the form of a Bankers’ Acceptance rate based borrowing subject to a rate of 3.25% per year, with a 30-day rollover period.

(e)

Market risk

The Company operates in an industry regulated by ACMPR. Changes in legislation could have a significant impact on the Company’s operations.

(f)

Capital management

The Company’s managed capital as at March 31, 2018 was comprised of share capital in the amount of $299,078 (2017—$38,700), a term credit facility of $9,750 (2017—nil), a revolving credit facility of $10,000 (2017 – nil), and a former credit facility of nil (2017—$7,500). As of March 31, 2018, $845 (2017 – nil) was drawn against the revolving facility for the purpose of securing a letter of credit issued in connection with the upgrading of utilities infrastructure at the Company’s operational facilities.

The Company’s objectives in managing capital include: maintaining a capital structure that provides financing opportunities and options while maintaining compliance with debt facility covenants; maintaining its ability to meet capital and operating expenditure requirements; maintaining and, where necessary, raising sufficient capital to support future development of the business; maintaining the ability to meet short and long-term debt servicing and financing obligations; and providing the ability to continue as a going concern. The Company’s capital management strategy is designed to maintain a flexible capital structure consistent with its capital management objectives that optimizes the cost of capital within management’s assessed level of acceptable risk and positions the Company to respond to changes in economic conditions.

The Company reviews its approach to capital management and associated risks on an on-going basis.

MEDRELEAF CORP.

Notes to Consolidated Financial Statements (continued)

(In thousands of Canadian dollars, except share and per share amounts, unless otherwise noted)

Years ended March 31, 2018 and 2017

20.

INCOME TAXES

The Company is subject to income taxes at a combined federal and provincial statutory income tax rate of 25% (2017 - 25%).

The reconciliation of the annual income tax expense is set out below:


	March 31,			March 31,
	2018			2017
Income before income taxes	$	(5,647	)	$	15,462

Expected income tax expense at
Canadian statutory income tax rates		(1,412	)		3,911
International tax rate differentials		(53	)		—
Increase (decrease) in:
Non-deductible expenses		2,888			807
Non-recognition of deferred tax assets		317			—
Other		144			(34	)

Income tax expense	$	1,884		$	4,684

The components of the deferred tax liability are as follows:


	March 31,			March 31,
	2018			2017
Deferred tax assets:
Non-capital losses and SR&ED pools		315			174
Plant and equipment		88			88
Undeducted finance fees and other		4,214			—

		4,617			262
Deferred tax liabilities:
Effects of cash-basis taxation		(7,094	)		(3,935	)
Shareholder loans		—			(53	)

		(7,094	)		(3,988	)

Deferred tax liabilities	$	(2,477	)	$	(3,726	)

The Company has deductible SR&ED pools of $1,261 that do not expire.

MEDRELEAF CORP.

Notes to Consolidated Financial Statements (continued)

(In thousands of Canadian dollars, except share and per share amounts, unless otherwise noted)

Years ended March 31, 2018 and 2017

21.

RELATED PARTY TRANSACTIONS

No consulting fees were paid for the year ended March 31, 2018 to Two Plus Management Corp., a consulting company whose principal is Neil Closner, an executive officer and shareholder of the Company (2017—$122).

Included in G&A expenses for the year ended March 31, 2018 was $30 (2017—$57) in consulting fees paid to Vive Technologies Inc., whose principal is Jeremy Friedberg, a consultant and shareholder of the Company.

On July 17, 2013, the Company entered into a licence and distribution agreement (“Licence Agreement”) for a term of 12 years (renewable for a further five-year period) with Tikun Olam Ltd., a corporation incorporated under the laws of Israel and a shareholder of the Company. The Licence Agreement grants the Company exclusive licence to use Tikun Olam Ltd.‘s intellectual property, as defined in the Licence Agreement, for the cultivation, processing, marketing, sale and other commercialization of medical cannabis in Canada and New York State.

Under the Licence Agreement, the Company is subject to royalties on certain net revenue in connection with Tikun Olam Ltd.‘s intellectual property commencing in the third year of the term of the Licence Agreement (July 18, 2015). Total royalties included in selling and marketing expenses for the year ended March 31, 2018 was $272 (2017—$535). In accordance with the share purchase promissory note, these royalties, less applicable withholding taxes, have been offset against the share purchase loan outstanding. In consideration for certain licensing concessions, Tikun Olam Ltd. agreed to reduce future royalties owed by the Company under the terms of the original licence agreement by an amount equal to $250 (the “Royalty Rebate”), which is to be offset against future royalties owed by the Company commencing July 17, 2017. During the year ended March 31, 2018, $250 of royalty fees were applied against the $250 Royalty Rebate, reducing the Royalty Rebate to nil. As at March 31, 2018, the Company included in accrued liabilities $673 (2017—$249) of royalty fees and applicable withholding taxes payable to or on behalf of Tikun Olam Ltd..

22.

REMUNERATION OF DIRECTORS AND KEY MANAGEMENT OF THE COMPANY


	2018		2017
Wages and short-term benefits	$	2,380	$	1,617
Consulting fees		—		122
Board and committee fees		1,371		—
Share based payments		7,160		2,939

	$	10,911	$	4,678

MEDRELEAF CORP.

Notes to Consolidated Financial Statements (continued)

(In thousands of Canadian dollars, except share and per share amounts, unless otherwise noted)

Years ended March 31, 2018 and 2017

23.

COMMITMENTS

A summary of the approximate future minimum payments payable over the next five years are as follows:


	Notes		Less than 1 year		1-3 years		4-5 years		After 5 years		Total
Operating lease ¹				289		620		675		358		1,942
Term credit facility		16		1,000		2,000		2,000		4,750		9,750
Revolving credit facility		16		845		—		—		—		845
Capital projects ²				8,325		—		—		—		8,325

¹	Operating lease is exclusive of common area costs.

²	Relates to capital commitments that the Company has made to specific vendors for capital projects pertaining to on-going construction projects.

The Company is committed to payments under an operating lease for its Markham Facility. Under the terms of the lease agreement, the Company is required to pay a proportion of common area costs, such as, realty taxes, maintenance, and insurance, in addition to the minimum lease payments.

On March 1, 2018, the Company signed a waiver committing the Company to purchase a green house and land in Exeter, Ontario for the purchase price of $26.0 million. The Company is required to settle and close the transaction on April 11, 2018 (note 24).

The Company has an obligation to purchase additional intangible assets on each December 8, 2018, 2019, and 2020 by way of issuance of Common Shares contingent on the seller meeting specified targets. The agreed upon purchase price of each intangible asset is $3,750, $3,250, and $3,000, respectively.

24.

SUBSEQUENT EVENTS

(a)

Acquisition of Exeter greenhouse and land

On April 11, 2018, the Company acquired a 69-acre greenhouse in Exeter, Ontario (“Exeter Facility”) and 95 acres of adjacent land (“Exeter Land”) for a total purchase price of $26.0 million plus applicable taxes and closing costs (the “Exeter Transaction”) through cash proceeds of $21.5 million and the issuance of 225,083 common shares with a fair value of $4.5 million determined using the five-day volume weighted average price as at February 23, 2018 of $19.99 per common share.

The Exeter Facility is equipped with 1 million square feet of existing greenhouse infrastructure, providing estimated production capacity of up to 105,000 kilograms annually.

MEDRELEAF CORP.

Notes to Consolidated Financial Statements (continued)

(In thousands of Canadian dollars, except share and per share amounts, unless otherwise noted)

Years ended March 31, 2018 and 2017

(b)

Industrial building purchase in Bradford, Ontario

On June 1, 2018, the Company completed the purchase of a 37,714 square feet industrial building in Bradford, Ontario located adjacent to the Company’s existing Bradford facility. The Company will use this new facility to expand its processing operations at its Bradford location. The purchase price is expected to be settled with current working capital in the amount of $11,000 plus applicable taxes and closing costs.

(c)

Acquisition of MedReleaf by Aurora Cannabis Inc.

Under the terms of the Aurora Transaction, holders of the issued and outstanding common shares of the Company will receive 3.575 common shares of Aurora and $0.000001 per common share of the Company held at on the date of conversion. The Aurora transaction contains customary provisions that includes for reciprocal termination fees of $80 million and expense reimbursements fees of $15 million if the transaction is terminated in certain specified circumstances. The proposed transaction is subject to approval by the shareholders of MedReleaf.

Registered Shareholders as of June 14, 2018 (the “record date”), are entitled to vote on the Arrangement Agreement at a special meeting on July 18, 2018, at the offices of Stikeman Elliott LLP, 199 Bay Street, Commerce Court West, Suite 5300, Toronto, Ontario, Canada.

(d)

Sales tax refund received

During April 2018, the Company received an HST refund of $2,820 in settlement of sales tax refunds receivable included in Accounts Receivable as at March 31, 2018.

Exhibit 4.20

LOGO

Management’s Discussion and Analysis of the

Financial Condition and Results of Operations

(In thousands of Canadian dollars)

MEDRELEAF CORP.

For the Year Ended March 31, 2018

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

The following management’s discussion and analysis of the financial condition and results of operations (“MD&A”) should be read in conjunction with MedReleaf Corp.’s (“MedReleaf” or the “Company”) audited consolidated financial statements for the years ended March 31, 2018 and 2017 (the “Financial Statements”), including the notes thereto, and which have been prepared in accordance with International Financial Reporting Standards (“IFRS”).

This MD&A is dated June 18, 2018.

Other than per share and per gram amounts, all dollar amounts in this MD&A are in thousands of Canadian dollars unless otherwise stated. All percentages are calculated using the rounded numbers as they appear in the tables.

On June 7, 2017, the Company completed an initial public offering (the “IPO”) of common shares of the Company (“Common Shares”) and, prior to and in connection with the completion of the IPO, the Company also completed a capital reorganization (the “Capital Reorganization”) to simplify the Company’s capital structure. This MD&A represents a discussion of operations and financial condition after the completion of the IPO and the Capital Reorganization. All historically presented share and per share amounts are presented at their post-Capital Reorganization converted amounts for comparability.

On May 14, 2018, Aurora Cannabis Inc. (“Aurora”) and the Company entered into an arrangement agreement (the “Original Agreement” and, as amended by an amending agreement dated May 24, 2018, the “Arrangement Agreement”) pursuant to which Aurora will acquire all of the outstanding common shares of the Company and each shareholder of the Company will be entitled to receive 3.575 common shares of Aurora and $0.000001 in cash in exchange for each Common Share held.

F ORWARD -L OOKING I NFORMATION

This MD&A includes forward-looking information within the meaning of applicable Canadian securities legislation, which are statements other than statements of historical fact and which can be identified by the use of forward-looking terminology such as “expect”, “likely”, “may”, “will”, “should”, “intend”, “anticipate”, “potential”, “proposed”, “estimate” and other similar words, including negative and grammatical variations thereof, or statements that certain events or conditions “may”, “would”, “could” or “will” happen, or by discussions of strategy. Statements in this MD&A containing forward-looking information includes statements with respect to: the expected performance of the Company’s business and operations; the Company’s expectations regarding revenues, expenses and anticipated cash needs; the intention to grow the Company’s business and operations; the build-out of the Bradford Facility (as defined herein) and the respective costs and timing associated therewith; the renewal of the Licences (as defined herein); and the expected legalization of cannabis for recreational use in Canada and the timing thereof. Statements containing forward-looking information are based upon the expectations, estimates, projections, assumptions and views of future events of management at the date hereof and that management believes to be reasonable in the circumstances, including those relating to: general economic conditions, the expected timing and cost of expanding the Company’s production capacity, the expected timing of the implementation of the Canadian recreational cannabis market, future growth of the Company’s business and international opportunities, the development of new products and product formats, the Company’s ability to retain key personnel, the Company’s ability to continue investing in its infrastructure to support growth, the impact of competition, trends in the Canadian medical cannabis industry and changes in laws, rules and regulations. Statements containing forward-looking information should not be read as guarantees of future events, performance or results, and will not necessarily be accurate indications as to whether, or the times at which, such events, performance or results will occur or be achieved. The forward-looking information contained in this MD&A is subject to known and unknown risks and uncertainties, including but not limited to those risks and uncertainties described in this MD&A under the heading “Risk and Uncertainties” as well as those discussed under the heading “Risk Factors” in the Company’s annual information form dated June 18, 2018 in respect of the financial year completed March 31, 2018 (the “AIF”), any of which could cause actual results to differ materially from those expressed or implied by the forward-looking information disclosed herein. Accordingly, readers are cautioned not to place undue reliance on such forward-looking information. Statements in this MD&A containing forward-looking information speak only as of the date on which they are made and MedReleaf does not undertake any obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by applicable securities laws.

NON-IFRS MEASURES

This MD&A refers to certain non-IFRS financial measures. These measures are not recognized measures under IFRS, do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing additional information regarding the Company’s results of operations from management’s perspective. Accordingly, non-IFRS measures should not be considered in isolation nor as a substitute for analysis of the Company’s financial information reported under IFRS. All non-IFRS measures presented in this MD&A are reconciled to their closest reported IFRS measure.

( A ) A DJUSTED E ARNINGS B EFORE I NTEREST , T AX , D EPRECIATION AND A MORTIZATION (“A DJUSTED E BITDA ”)

Adjusted EBITDA is used by management as a supplemental measure to review and assess operating performance and trends on a comparable basis. The Company defines Adjusted EBITDA as EBITDA adjusted for the impact of any unrealized expenses or gains, stock based compensation, fair value gains or costs arising from biological assets, expenses related to readying the Company for its initial public offering and other non-recurring costs the Company deems unrelated to current operations.

The Company believes that Adjusted EBITDA provides a useful tool for assessing the comparability between periods of its ability to generate cash from operations. Adjusted EBITDA is presented in order to provide supplemental information to the Financial Statements included elsewhere in this MD&A, and such information is not meant to replace or supersede IFRS measures.

( B ) E QUIVALENT G RAMS AND K ILOGRAMS

Equivalent grams or kilograms refers to the equivalent number of dried grams or kilograms of cannabis required to produce extracted cannabis in the form of cannabis oil. The Company estimates and converts its cannabis oil inventory to equivalent grams using the combined Tetrahydrocannabinol (“THC”) and Cannabidiol (“CBD”) content in extracted cannabis products. Any reference to (“total grams” or “grams” or “adjusted total grams” or “adjusted grams”) in this document includes both equivalent grams and dried grams, unless otherwise noted and identified as dried grams or equivalent grams for extracts.

On January 1, 2018, the Company changed its estimated conversion rate for extracts from 10 grams per 1,250 mg of THC/CBD to 10 grams per 960 mg of THC/CBD. Equivalent grams are estimated based on the expected yields of extracted plants and are dependent on the efficiency and output of the Company’s extraction processes.

The revised conversion factor resulted in a change to the calculation of equivalent grams sold during the year ended March 31, 2017, as well as the nine months ended December 31, 2017. Equivalent grams sold for the three months ended March 31, 2018 was calculated with the revised conversion rate and has been reflected in this MD&A. The revised conversion factor represents a change in the calculation method of equivalent grams sold relating to extract sales and does not represent a change in the physical sales volume.

( C ) C ASH C OST P ER G RAM S OLD

The cash cost per gram sold is used by management to measure the estimated amount of direct production costs, on a per gram sold basis, that are required to produce dried cannabis and cannabis oil extracts. Management uses this measure to track production cost trends and assess the sensitivity and tolerance for pricing changes. Management believes this measure provides useful information by removing non-cash and post production costs and provides a benchmark of the Company against its competitors. The metric is calculated by: removing from production costs incurred during the period, all non-cash based costs (including amortization and inventory write-downs or impairments) and all post production costs; and dividing such amount by the approximate number of grams of cannabis sold during the period. Post production costs include indirect overhead expenses such as: equipment rentals, payment processing fees, indirect labour expenses, shipping and packaging expenses, cost of accessories sold, quality control expenses, and other order fulfillment costs included in production costs.

( D ) A DJUSTED P RODUCT C ONTRIBUTION M ARGIN

Management makes use of an “Adjusted Product Contribution Margin” measure to provide a better representation of performance in the period by excluding non-cash fair value measurements as required by IFRS. Management believes this measure provides useful information as it represents the gross margin for management purposes based on the Company’s complete cost to produce inventory sold, exclusive of any fair value measurements as required by IFRS. The metric is calculated by removing all amounts related to biological asset fair value accounting under IFRS including gains on transformation of biological assets and the cost of finished harvest inventory sold, which represents the fair value measured portion of inventory cost (“fair value cost adjustment”) recognized as cost of goods sold.

COMPANY OVERVIEW

MedReleaf sets The Medical Grade Standard™ for cannabis in Canada and around the world with global recognized best-practice standards including ICH-GMP (Good Manufacturing Practices) and ISO 9001 (Quality Management System) certified producer of cannabis-based pharmaceutical products in North America. MedReleaf is a Research and Development driven company dedicated to patient care, scientific innovation, research and advancing the understanding of the therapeutic benefits of cannabis. Sourced from around the world and cultivated in two state of the art facilities in Ontario, MedReleaf delivers a variety of premium products to patients seeking safe, consistent and effective medical cannabis.

MedReleaf Corp. was incorporated February 28, 2013 under the Business Corporations Act (Ontario). The principal activities of the Company are the production and sale of cannabis for medical purposes as regulated by the Access to Cannabis for Medical Purposes Regulations (Canada) (the “ACMPR”), pursuant to: (i) a licence issued by Health Canada to the Company pursuant to the ACMPR in respect of the Company’s facility located in Markham, Ontario (the “Markham Facility”, and such licence is referred to as the “Markham Commercial Licence” or “Markham Licence”); and (ii) a licence issued by Health Canada to the Company pursuant to the ACMPR in respect of the Company’s facility located in Bradford, Ontario (the “Bradford Facility”, and such licence is referred to as the “Bradford Cultivation Licence” or “Bradford Licence” and, together with the Markham Commercial Licence, the “Licences”). Prior to the expiry of the term of each Licence, the Company must submit an application for renewal to Health Canada which contains information prescribed by the ACMPR. The Company has renewed the Markham Commercial Licence and its current term will expire on February 14, 2020. The current term of the Bradford Cultivation Licence expires on April 10, 2020.

MedReleaf cultivates and produces its cannabis-based pharmaceutical products for direct sale to its patients across Canada. The Company interacts with its patients via its e-commerce platform as well as by phone and email correspondence directed to its patient-care team. Currently, the Company sells dried cannabis, cannabis oils and cannabis oil capsules to its patients from its Markham Facility. MedReleaf’s sales are supported by a variety of initiatives, including health conference sponsorships, as well as through its cannabis education and outreach team of employees. The Company expects both its portfolio of products and the jurisdictions outside of Canada in which it operates to expand as local laws allow, resources permit, and where market research indicates opportunity.

MedReleaf uses quality management and environmental management systems that are certified to the internationally recognized standards of ICH-GMP, ISO 9001 and ISO 14001 (Environmental Management System) respectively, as well as an occupational health and safety management system certified to the internationally recognized standards of OHSAS 18001 (Occupational Health and Safety Assessment), which collectively cover research and development, production, processing, distribution, selling and destruction of cannabis for medical purposes. These certified systems provide the framework to optimize management control, reduce product risks, increase staff safety and reduce environmental impact. Moreover, the Company’s ISO 9001 certified quality management system has been designed to maintain the consistency and quality of the Company’s products. The Company’s systems mandate regular, in-process controls, testing and analysis to ensure the consistency of our cannabis-based pharmaceutical products and that our products meet stringent specifications during production and until delivery to our patients.

SELECTED QUARTERLY AND ANNUAL INFORMATION

The following table sets out a summary of results of operations for the financial periods specified below, as well as specific balance sheet data as at the end of each such period:


							Three months ended															Three months ended
	Year ended Mar. 31 2018			Mar. 31, 2018			Dec. 31, 2017			Sep. 30, 2017			Jun. 30, 2017			Year ended Mar. 31 2017			Mar. 31, 2017			Dec. 31, 2016			Sep. 30, 2016			Jun. 30, 2016
Sales		43,646			12,014			11,350			9,821			10,461			40,339			10,360			10,426			10,749			8,804
Gross profit ¹		46,670			13,309			9,985			11,747			11,629			37,939			10,316			9,714			9,634			8,275
Gross profit %		107	%		111	%		88	%		120	%		111	%		94	%		100	%		93	%		90	%		94	%
Expenses		52,317			16,481			13,243			11,694			10,899			22,297			7,425			7,187			4,197			3,488
Income (loss) before taxes		(5,647	)		(3,172	)		(3,258	)		53			730			15,642			2,891			2,527			5,437			4,787
Net and comprehensive income		(7,538	)		(819	)		(5,001	)		(2,126	)		408			10,958			2,187			1,738			3,740			3,293

Net (loss) income per share – basic		($0.08	)		($0.01)			($0.05)			($0.02)		$	0.00		$	0.14		$	0.03		$	0.02		$	0.05		$	0.05
Weighted average shares – basic ²		91,119,745			91,119,745			91,746,531			90,399,748			84,051,204			77,789,726			82,338,400			82,074,293			74,847,518			71,915,552
Net (loss) income per share – diluted		($0.08	)		($0.01)			($0.05)			($0.02)		$	0.00		$	0.13		$	0.03		$	0.02		$	0.05		$	0.04
Weighted average shares – diluted ²		93,676,996			93,676,996			98,982,218			93,492,818			91,100,349			81,701,757			85,708,983			85,440,116			79,119,895			76,359,362

Cash and cash equivalents		215,868			215,868			114,581			73,955			86,314			12,899			12,899			25,503			20,679			1,594
Inventories		32,856			32,856			24,862			21,647			12,765			9,511			9,511			6,002			4,567			3,317
Biological assets		3,202			3,202			3,797			2,916			4,742			2,809			2,809			3,024			2,338			2,178
Total assets		357,990			357,990			229,403			157,992			153,622			74,885			74,885			70,134			58,335			24,385
Total non-current financial liabilities		11,112			11,112			12,839			3,193			12,589			10,718			10,718			9,614			9,479			1,831
Shareholders’ equity		328,044			328,044			199,004			135,473			131,887			52,320			52,320			49,528			40,530			17,005

1	Gross profit includes fair value adjustments on biological assets, inventory sold, and carrying amount of inventory.

2	Weighted average number of shares, basic and diluted, for the year ended March 31, 2017 are presented on a converted basis of 116.0909:1 to reflect the capital reorganization.

The table below summarizes quarterly and annual non-financial and non-IFRS metrics for the years ended March 31, 2018 and 2017:


							Three months ended											Three months ended
	Year ended Mar. 31 2018			Mar. 31, 2018			Dec. 31, 2017			Sep. 30, 2017		Jun. 30, 2017		Year ended Mar. 31 2017		Mar. 31, 2017		Dec. 31, 2016		Sep. 30, 2016		Jun. 30, 2016
Adjusted EBITDA		(2,294	)		(4,685	)		(233	)		685		1,939		13,851		1,622		4,093		4,650		3,486
Total grams sold		4,896,213			1,424,643			1,263,490			1,051,151		1,156,929		3,668,104		1,167,325		993,259		852,245		655,275
Adjusted total grams sold ¹		5,034,406			1,424,643			1,323,488			1,089,200		1,197,075		3,697,736		1,196,957		993,259		852,245		655,275
Average selling price per total gram	$	8.91		$	8.43		$	8.98		$	9.34	$	9.04	$	11.00	$	8.87	$	10.50	$	12.61	$	13.44
Average selling price per adjusted total gram	$	8.67		$	8.43		$	8.58		$	9.02	$	8.74	$	10.91	$	8.66	$	10.50	$	12.61	$	13.44
Cash cost per total gram sold	$	1.55		$	1.40		$	1.83		$	1.46	$	1.49	$	1.73	$	1.53	$	1.55	$	1.49	$	2.67
Cash cost per adjusted total gram sold	$	1.51		$	1.40		$	1.75		$	1.42	$	1.44	$	1.72	$	1.49	$	1.55	$	1.49	$	2.67
Adjusted product contribution per total gram sold	$	6.22		$	5.94		$	5.80		$	6.75	$	6.53	$	8.42	$	6.34	$	8.65	$	9.82	$	9.98
Adjusted product contribution per adjusted total gram sold	$	6.05		$	5.94		$	5.54		$	6.51	$	6.31	$	8.36	$	6.18	$	8.65	$	9.82	$	9.98

¹	As defined. See “Non-IFRS Measures” section for discussion on how equivalent grams and kilograms are calculated.

BUSINESS HIGHLIGHTS

C ONTINUED S ALES G ROWTH

Increased Sales of Cannabis-Based Extract Products

MedReleaf began sales of its cannabis-based extract products, including both cannabis oil and cannabis oil capsules, in November 2016. Since that time, the proportion of revenue related to cannabis-based extract products has increased to 18% of total revenues in the year ended March 31, 2018, which represents increased extract revenues of 532%, compared to total revenues in the year ended March 31, 2017.

B RAND E XPANSION

Preparing for the Launch of the Recreational Market: San Rafael ’71TM

MedReleaf continues to make investments in preparation for the recreational market, which is expected to be implemented in early fall of 2018. The Company continues to augment its management team with a number of key marketing and strategy professionals focused on all elements of readying the organization for a recreational market that will be substantial in size, as estimates suggest. In February 2018, the Company introduced its first adult-use recreational brand, San Rafael ’71 ^TM , inspired by and designed to celebrate the spirit of classic cannabis culture.

San Rafael ’71TM has been designed with the classic consumer in mind, one of the largest segments of the Canadian cannabis market. San Rafael ’71TM is for adults who are discerning and knowledgeable about cannabis products and those who value quality and an authentic experience.

To mark the launch and to introduce Canada to the brand, the company has partnered with one of Canada’s most well-regarded brewers, Amsterdam Brewing, to develop and launch the first San Rafael ’71TM product, 4:20 Pale Ale. A full suite of San Rafael ‘71TM products and experiences will be introduced to the marketplace as regulations allow.

MedReleaf introduces iconic Woodstock brand

MedReleaf entered into an exclusive licencing agreement with Woodstock Cannabis Company for use of the iconic Woodstock brand in the Canadian cannabis market. Under the terms of the agreement, MedReleaf will grow and sell a variety of strains and formats under the Woodstock banner, expanding the offering of products as regulations allow.

P RODUCT E XPANSION

Launch of Soft Gel Capsules

Having officially received Health Canada approval, MedReleaf launched a softgel capsule in February 2018. The capsules will be the first colour-coded and strain-specific softgels in the market.

MedReleaf First Licenced Producer to Launch Topical Cream

On October 4, 2017, MedReleaf successfully launched a topical cream, becoming the first Licenced Producer to do so. The cream is specifically formulated to provide superior absorption with MedReleaf’s CBD strains and was developed in response to patient feedback for topical applications of CBD. The launch of this cream is expected to further contribute to the continued increase in extract oil sales experienced by the Company as topicals are seeing strong growth in parallel US markets, with a tripling of sales since 2014 and forecasts indicating a further tripling of sales by 2019, according to the Brightfield Group. The launch of this cream is further evidence of the Company’s continued leadership in setting the standard for product innovation.

Exp anding MedReleaf’s Plant Genetic Intellectual Property

Through our genetic breeding program, MedReleaf has again developed new proprietary cannabis cultivars, with five new cultivars being internally validated and progressing to commercialization, including new CBD-only genetics. The cultivar development program continues to focus on both the improvement of plant morphology as it pertains to cultivation automation, as well as the characterization of novel metabolite (cannabinoid and terpene) profiles and their connection to clinical symptom management outcomes.

In January 2018, MedReleaf introduced three proprietary varieties of premium medical cannabis, genetically crafted and rigorously tested to the highest standard of quality and consistency. For the first time, MedReleaf also provided terpene profiles for patients and health care providers, revealing the unique terpene compositions of each product. The three new products include Equiposa, Orellium and Trutiva. Eqipopsa features an equal balance of CBD to THC and has been bred to maximize the beneficial effects of both cannabinoids. Orellium has been carefully cultivated to the highest standard of quality, this proprietary 2:1 variety offers the benefits of both CBD and THC, enhanced by its unique terpene profile. Trutiva offers our highest level of CBD amongst the three new products and optimizes the therapeutic benefits of CBD while minimizing the psychoactive effects of THC.

L EADERSHIP IN THE I NDUSTRY

Company Receives Good Manufacturing Practices Certification

On May 30, 2017, the Company received the Good Manufacturing Practices (“GMP”) certification which recognizes the Company’s compliance with GMP regulations at all stages of the product lifecycle, including third party testing laboratories, as established by International Conference on Harmonization of Technical Requirements for Registration of Pharmaceuticals for Human Use (“ICH”). The technical requirements of GMP are established to promote practices to ensure that safe, effective and high-quality medicines are developed and registered in the most efficient and cost-effective manner and are the same standards and procedures that pharmaceutical companies must adhere to in manufacturing their products in North America, and exceed the Good Production Practices required by Health Canada for growing and cultivating medical cannabis. The Company’s GMP certification signifies that the Company’s quality processes can consistently control and produce cannabinoids and terpenes appropriate to its end use, and that MedReleaf’s production practices meet stringent pharmaceutical manufacturing requirements that are internationally harmonized in 17 countries including the United States, Canada, Singapore, Japan, Australia and European nations.

Leading Multi-Certified Quality Assurance Systems

MedReleaf is the world’s first cannabis company to hold four certifications across various quality systems. They include, ICH-GMP (Good Manufacturing Practices), ISO 9001 (Quality Management Systems), ISO 14001 (Environmental Management Systems) and, ISO 18001 (Occupational Health and Safety).

Clinical Research Developments

MedReleaf continues to advance clinical research and data collection, with a focus on patient outcomes and understanding how unique plant varieties can be used as targeted symptom management tools. During the year, the Company launched a new and increasingly comprehensive version of their patient outcomes survey, focused on better understanding, how different treatment regimens relate to changes in patients’ symptoms, conditions, and quality of life. The survey will help identify what specific cannabis varieties patients are using, and are reporting to be most efficacious. In addition, the Company launched a genomic study aimed at investigating correlations between human genomics and cannabis efficacy, with results expected in 2019.

Other clinical research initiatives include the completion of a phase 1 pharmacokinetic study analyzing the safety and behaviour of orally administered THC in healthy adult volunteers, where the resulting data will better help patients and physicians understand the safety and optimal administration of THC-containing oils and capsules; the publication of several peer-reviewed articles spanning multiple disease areas and therapeutic applications related to medical cannabis; and the formal collaboration with EpiLink (Ontario Brain Institute) in obtaining Health Canada approval for a phase III clinical trial investigating the efficacy of one of MedReleaf’s proprietary CBD oil capsules for reducing seizure frequency in epilepsy treatment-resistant adults.

C ONTINUOUS O PERATIONAL E XPANSION

Purchase of Exeter Facility

On March 1, 2018, the Company signed a final release and waiver to acquire a 69-acre greenhouse in Exeter, Ontario (“Exeter Facility”) and 95 acres of adjacent land (“Exeter Land”) for a total purchase price of $26,000 plus applicable taxes and closing costs (the “Exeter Transaction”). On April 11, 2018 the Company closed the Exeter Transaction of $26,000 through cash proceeds of $21,500 and the issuance of 225,083 common shares with a fair value of $4,500 determined using the five day volume weighted average price as at February 23, 2018 of $19.99 per common share.

The Exeter Facility is equipped with 1 million square feet of existing greenhouse infrastructure, providing estimated production capacity of up to 105,000 kilograms annually.

Bradford Facility Developments

In April 2017, the Company completed the first phase of its Bradford Facility construction project, which included drying, trimming, packaging, shipping, storage, and grow rooms with an estimated annual production capacity of 2,800 kilograms of cannabis products. The Company received its Bradford Licence issued under section 35 of the ACMPR for the production of dried cannabis in the completed grow rooms of the Bradford Facility, also in April 2017.

On October 11, 2017, MedReleaf received its amended licence for its Bradford Facility for the use of its Mother Room and Clone Room which will support the growing capacity at the Bradford Facility. On October 20, 2017, the Company received an amended licence for the use of two additional cultivation rooms, which effectively doubled annual production capacity to an estimated 5,600 kilograms at the Bradford Facility. On November 3, 2017, the Company received an additional amended licence which permits the activity of sale to clients from the Bradford Facility. The expiration of the amended licence is April 10, 2020.

As of February 2018, the Company has completed construction of additional cultivation capacity as part of the second phase in the Bradford Facility construction project. The use of the additional capacity is currently pending approval for licensing by Health Canada under section 35 of the ACMPR. Upon Health Canada’s approval, the additional cultivation space will increase total annual production capacity to an estimated 9,500 kilograms.

Since receipt of the licence, MedReleaf has successfully harvested multiple cycles with the product meeting both our rigorous quality assurance process and yield expectations. During the year, the new grow rooms in the Bradford Facility commenced their first grow cycles in the production of cannabis plants. With support of the municipal government, MedReleaf successfully filled the approximately 50 job vacancies that are required for cultivation, processing and general facility care, with a significant surplus of screened and trained resources available on stand-by in the event of an increase in staffing requirements.

Markham Facility Licence Amendment

On June 29, 2017, MedReleaf received its amended license for its Markham Facility. Health Canada is no longer applying production or sale quantities for Licensed Producers. Instead Licensed Producers, including MedReleaf, must manage their cannabis inventory according to the security level of the vault, which in the Markham Facility is Level 9, authorizing the storage of 3,125 kilograms, worth approximately $31,250, of finished goods inventory at any time. In addition, the expiration of the amended license was extended to February 14, 2020.

M ANAGEMENT T EAM

Board Renewal

At the time of the closing of the Company’s IPO, MedReleaf replaced its existing board of directors, other than Neil Closner, with four new board members who bring a diverse set of skills and expertise in the following sectors: biotechnology, healthcare, pharmaceuticals, retail and consumer, along with international business, in regulated industries, financial, executive leadership in private equity, public company and not-for-profit. Neil Closner, CEO of the Company, remains on the board and Norma Beauchamp, Ronald Funk, Deborah Rosati and Lloyd Segal were appointed to the board on June 7, 2017.

At the annual meeting of shareholders on September 25, 2017 all five nominees proposed by management were elected with a unanimous vote, and will continue to assist the Company strategically as they hold office until the close of the next annual meeting of shareholders or until the director’s successor is elected or appointed.

Augmentation of Senior Management Team

MedReleaf has significantly augmented its senior management team in the areas of operations, strategy, research and development, international expansion, pharmaceutical sales, logistics and supply chain, legal, and human resources in order to maintain its industry leadership and to position itself for future success. The Company will continue to add to the senior team based on skills and expertise deemed necessary as the industry evolves, both in Canada and internationally.

F INANCING AND C APITAL R ESOURCES

Secured New $20 Million Credit Facility

On April 17, 2017, the Company entered into a new $20,000 secured credit agreement (the “Credit Agreement”) with one of the five largest chartered Canadian banks. The Credit Agreement provides the Company with a $10,000 term credit facility and a $10,000 revolving credit facility, subject to covenant requirements and maintenance by the Company of Licences issued by Health Canada. The Company used $7,500 of the Credit Agreement proceeds to repay its former collateralized credit facility (the “Former Credit Facility”).

Initial Public Offering

On June 7, 2017, the Company completed the IPO, which to the knowledge of the Company was the largest of any cannabis company globally. The IPO consisted of an initial public offering and secondary offering of an aggregate of 10,600,000 Common Shares at a price of $9.50 per Common Share for aggregate gross proceeds of $100,700, with MedReleaf and certain selling shareholders receiving gross proceeds of $80,700 and $20,000, respectively. The Common Shares commenced trading on June 7, 2017 on the TSX under the trading symbol “LEAF”.

December 2017 Offering

On December 4, 2017, the Company announced the closing of the December 2017 Offering, which was a short form prospectus offering on a “bought deal basis”, pursuant to which the Company issued an aggregate of 3,625,470 Common Shares at a price of $16.55 per Common Share, for aggregate gross proceeds to the Company of approximately $60,002. Issuance costs in relation to the equity offering amounted to $4,063 and are reflected in shareholders’ equity. Proceeds from the offering will be used to finance the acquisition and/or construction of additional cannabis production and manufacturing facilities in Canada as well as in other jurisdictions with federal legal cannabis markets, where warranted by the opportunities available to the Company, and the expansion of the Company’s marketing and sales initiatives.

January 2018 Offering

On January 31, 2018, MedReleaf closed a short form prospectus offering on a “bought deal basis”, pursuant to which the Company issued an aggregate of 5,000,000 units (the “Units”) of the Company at a price of $26.50 per Unit for aggregate gross proceeds of $132,500.

Each Unit consisted of one common share (a “Common Share”) and one-half of one common share purchase warrant (each full common share purchase warrant, a “Warrant”) of the Company. Each Warrant will be exercisable to acquire one common share of the Company for a period of two years following the closing date of the January 2018 Offering at an exercise price of $34.50 per common share, subject to adjustment in certain events. In the event that the volume weighted average trading price of the Common Shares for ten (10) consecutive trading days exceeds $51.75, the Company shall have the right to accelerate the expiry date of the Warrants upon not less than fifteen (15) trading days’ notice.

On February 1, 2018, the Company granted the underwriters an over-allotment option which was exercised to purchase an additional 375,000 Additional Warrants at a price of $0.90 per Additional Warrant.

C ORPORATE I NITIATIVES

High employee engagement and satisfaction

MedReleaf prides itself on its high employee satisfaction and engagement. MedReleaf has focused on various employee initiatives such as building a recruitment team to acquire top class talent, creating onboarding programs to recruit and introduce prospective candidates to the new field of cannabis cultivation, working with insurance companies to advocate for worker rights to access cannabis through benefit providers, implementing MedReleaf’s internal medical cannabis reimbursement program for employees, as well as developing “Cannabis 101” training for in-house cannabis education.

MedReleaf Launches Corporate Social Responsibility Initiatives

MedReleaf prides itself in undertaking corporate social responsibility initiatives that benefit various stakeholders and communities across Canada, including i) entering into a partnership with Canada Company, a charitable, non-partisan organization that serves to build the bridge between business and community leaders and the Canadian Military; ii) obtaining Military Employment Transition (“MET”) Certification and MET Spouse Certification; iii) entering into a partnership in order to provide coaching to internationally-trained professionals to help them develop strategies for securing meaningful employment in Canada; iv) launching an internal program in which full- and part-time employees receive onsite English as a Second Language training at no cost in order to improve their professional skill sets and, ultimately, improve their long-term career prospects in Canada; v) providing education, training and advice to dozens of Canadian employers in order to help them improve their capabilities for managing medical cannabis in the workplace; and iv) participation and support for numerous Canadian charitable organizations, including Cystic Fibrosis Canada, Arthritis Society and Rescue 7.

MedReleaf has provided complimentary consulting and policy revision services for group benefit plans and workplace drug and alcohol policies to a number of organizations across the country. This is a critical element of the Company’s corporate social responsibility plan. The company will continue to help prepare Canadian employers manage cannabis in the workplace to ease the transition into legalization.

B USINESS I NITIATIVES

Signing of First Letter of Intent for Supply of 8 tons of Recreational Cannabis to Québec

In February 2018, MedReleaf signed a Letter of Intent (“LOI”) with Société des alcools du Québec (“SAQ”) to supply the Province of Quebec with a guaranteed volume of high quality adult-use cannabis through SAQ’s retail and online stores. Under the terms of the LOI, MedReleaf will supply SAQ with a minimum of 8,000 kilograms of cannabis products per year.

SAQ was not only focused on selecting producers that would provide a steady supply of safe, high quality cannabis, but they also wanted to be able to provide a broad assortment of products to consumers that cover a range of price points and experiences. The Company believes its reputation for premium award-winning cannabis helped in its selection as one of only 6 LPs to secure an LOI and are pleased to be making these products available to consumers early fall.

R&D Collaboration and Investment in Flora Fotonica Ltd.

On September 14, 2017, the Company entered into a binding agreement to invest and collaborate on the research and development of specialized grow lighting systems for cannabis cultivation with Flora Fotonica Ltd (“Flora Fotonica”). Flora Fotonica will provide the Company with exclusive access to its proprietary LED lighting technology and the Company will dedicate licenced cultivation space, laboratories, and research personnel. This collaboration will allow the Company to utilize the technology being developed to enable potential increases to crop yields and active cannabinoids, additionally it will contribute to the ongoing effort of the Company to reduce energy consumption and the production cost throughout the cultivation process.

MedReleaf Launches Pharmacogenetic-based Cannabis Compatibility Test

On November 8, 2017, MedReleaf announced the launch of ReleafDx ^TM , the first pharmacogenetics-based cannabis compatibility test to be available from a Canadian licensed producer. The patent pending test is administered by a simple cheek swab and analyzes biomarkers within known metabolic pathways to provide physicians with guidance on dose and product selection for individual patients.

MedReleaf Signs Supplier Agreement with Shoppers Drug Mart

On December 21, 2017, MedReleaf announced an agreement to become a medical cannabis supplier to Shoppers Drug Mart. Subject to Health Canada’s approval of Shoppers Drug Mart’s application to be a licensed producer, under the terms of the agreement the Company will supply Shoppers Drug Mart with premium cannabis-based pharmaceutical products. It is expected the products will be sold online, as Canadian regulations currently restrict the sale of medical cannabis in retail pharmacies.

I NTERNATIONAL G ROWTH

Completed First Commercial ICH-GMP Certified Cannabis-Based Pharmaceutical Export

MedReleaf successfully completed its’ first commercial ICH-GMP certified cannabis-based pharmaceutical export to a patient in Brazil. Working with the President of the Brazilian NGO, APEPI (translated as “Support for Research and Medical Cannabis Patients”), Margarette Santos De Brito, MedReleaf was able to obtain an import permit from ANVISA (translated as “National Health Surveillance Agency”), which management believes resulted in the first ever export of medical cannabis oil to Brazil. This export marks the beginning of what is expected to be significant international activities, representing a new area of growth for the Company.

International Cultivation Licence Applications

MedReleaf will only pursue international medical and/or recreational cannabis opportunities in accordance and compliance with all applicable laws. The timing of the Company’s activities in such international markets is entirely dependent on the pace of regulatory developments and, as such, it is not feasible for the Company to provide a timeline respecting those activities. While the Company intends to participate in these processes, there is no guarantee that it will do so or, if it does, that it will ultimately be awarded any licences.

Australia: On May 11, 2017, MedReleaf’s Australian partners submitted an application for cultivation of cannabis plants and manufacture of cannabis oils pursuant to medicinal cannabis guidelines by the Australian Office of Drug Control. The application is in active review by the Australian Office of Drug Control, and the Company through its partners have provided detailed responses to two additional requests for information, most recently on October 16, 2017 and is optimistic about being granted a licence.

On November 14, 2017, MedReleaf’s Australian joint venture partner, Indica Industries Pty Ltd. (t/a “MedReleaf Australia”) received a license from the Australian Government Office of Drug Control for the cultivation and production of medical cannabis. The license to undertake authorized cannabis activities commences on November 10, 2018 in order to allow time to complete infrastructure development of the facility.

MedReleaf, through its wholly-owned subsidiary, MedReleaf Holdings (Australia) Ltd., has a 10% equity interest in MedReleaf Australia and, subject to the execution of additional documentation, it is contemplated that the Company would become entitled to receive certain royalties on the gross revenues of MedReleaf Australia, as well as additional equity in the future.

Germany: In March 2018, MedReleaf has announced its agreement to become the largest supplier of medical cannabis products to Cannamedical Pharma GMBH (“Cannamedical”), a leading medical cannabis distributor to pharmacies in Germany. MedReleaf will provide Cannamedical with monthly exports of five of its premium strain varieties significantly improving the predictability and security of drug delivery to the German market.

FINANCIAL PERFORMANCE HIGHLIGHTS

•

Sales for the year ended March 31, 2018 reached a historic high of $43,646, an increase of $3,307 or 8%, compared to the prior year same period sales. The increase in sales was primarily due to sales growth for extract based products partially offset by veteran volume capacity and pricing limitations. Extract sales for the year ended March 31, 2018 were $7,980 and represented 18% of total sales, as compared to the year ended March 31, 2017 whereby extract sales were $1,263 and represented 3% of total sales.

•

Sales and gross profit during the year ended March 31, 2018 increased compared to the same period of fiscal 2017. This increase is primarily attributable to fair value adjustments on biological assets, as well as the increased production capacity at the Markham Facility and Bradford Facility (based on square footage) and patient demand.

•

In response to pricing changes introduced by the VAC Policy, (as defined and discussed below under “Recent Developments – Veteran Affairs Canada Reimbursement Policy”) which took effect on November 22, 2016, the Company offered price discounts to qualifying veterans resulting in a reduction in sales and gross profit from the effective date of such pricing changes through to the year ended March 31, 2018. The Company expects to continue to offer these discounts, effectively lowering the price of some products to qualifying veterans, for the foreseeable future. In addition to the pricing changes, VAC’s Policy also imposed volume restrictions which came into effect on May 21, 2017.

•

Sales volumes for the year ended March 31, 2018 increased to 5,034 adjusted total kilograms, representing a 36% increase from 3,698 total kilograms of cannabis product sold during the year ended March 31, 2017, driven by extract sales.

•

Working capital as at March 31, 2018 was $255,738 and increased $231,033 compared to March 31, 2017 working capital of $24,705. The increase in working capital was primarily due to proceeds related to the Company’s IPO, December 2017 Offering, and January 2018 Offering.

•

Adjusted Product Contribution Margin for the year ended March 31, 2018 was $30,434 or $6.05 per adjusted gram sold, representing a decrease of $469 or 2%, compared to $30,903 or $8.36 per adjusted gram for the year ended March 31, 2017, driven by the introduction of the VAC policy.

•

Cash cost per adjusted gram sold for the year ended March 31, 2018 was $1.51 per gram, a decrease of $0.21 per adjusted gram sold or 12%, when compared to $1.72 per adjusted gram for the year ended March 31, 2017. This was due to increased sales, which allowed for a lower allocation of production costs per adjusted gram.

•

Adjusted EBITDA decreased by $16,145 to a loss of $2,294 for the year ended March 31, 2018 compared to the prior year same period adjusted EBITDA of $13,851. The adjusted EBITDA decrease was primarily due to our investment in the recreational market and development for our international business initiatives, as well as continuous improvements in the Company’s research and development activities and increased operating and overhead expenses due to increased advertising and promotional expenses related to the preparation of the Company’s launch of its recreational brand.

RECENT DEVELOPMENTS (SUBSEQUENT TO MARCH 31, 2018)

Purchase of Industrial building in Bradford

In June 2018, MedReleaf completed the purchase of a 37,714 square feet industrial building in Bradford, Ontario located adjacent to the Company’s existing Bradford facility. The Company will use this new facility to expand its processing operations at its Bradford location.

MedReleaf launches AltaVie

In April 2018, the company announced the introduction of AltaVie by MedReleaf, the Company’s premium recreational cannabis brand designed for a premium consumer who is curious, discerning about life in general and searching for physical, mental and emotional enrichment. The AltaVie product line up will contain a robust assortment of premium offerings, putting an emphasis on strains and forms that will be equally popular with the premium consumer, those new to cannabis and those interested in the wellness category, helping each segment get more out of life.

MedReleaf adds PINs to its medical cannabis products

In April 2018, MedReleaf announced the introduction of Product Identification Numbers (“PINs”) for 57 of its unique medical cannabis products including dried flower, oils, and capsules. Similar to traditional Drug Identification Numbers, PINs are designed to make it easier for employers and payers to classify and incorporate pharmaceutical and health care products into benefits coverage plans. With the introduction of PINs, MedReleaf continues to demonstrate leadership among Canadian licensed producers to facilitate the coverage of medical cannabis on employer-sponsored benefits plans.

MedReleaf partners with Niagara College

In April 2018, MedReleaf announced that it has entered into a memorandum of understanding with Niagara College to foster the development of cannabis production expertise in Canada through its Graduate Certificate program in Commercial Cannabis Production, Canada’s first postsecondary credential in this emerging field. By partnering with Niagara College, MedReleaf is proud to be offering financial support for students and to be sharing its expertise to help develop the program’s structure and curriculum in order to advance the development of the Canadian cannabis industry.

Canadian and Israeli Tech Companies Join Forces to Compete in Global Markets

The joint R&D project between MedReleaf and Israel’s Flora Fotonica to create new LED lighting systems with a special focus on cannabis growing facilities, was selected by the Canada-Israel Industrial Research and Development Foundation (“CIIRDF”) as one of the eight new bilateral R&D projects in May 2018. Leveraging more than $4,700 from CIIRDF, these bilateral R&D teams will combine the strengths and expertise of 20 Canadian and Israeli technology and research companies to develop new technologies with application in the agriculture, energy, aerospace, and information and communications technologies sectors.

Reformulary Group signs MedReleaf as first Licensed Producer

Reformulary Group, Canada’s leading, independent drug plan management company, announced in May 2018 that it has signed MedReleaf as its first Licensed Producer of medical cannabis. The agreement will provide subscribers of Reformulary’s Cannabis Standard, the first cannabis formulary in Canada, with preferred pricing options. This partnership is a major step for Canadian employers looking to navigate the process of covering medical cannabis.

Collaboration with CFL Alumni Association

In May 2018, MedReleaf announced that it will collaborate with the Canadian Football League Alumni Association (“CFLAA”) in conducting an observational study on the benefits of medical cannabis in treating chronic pain and related ailments in retired professional athletes. The collaboration will bring greater awareness to the potential health benefits of using medical cannabis in the treatment of ailments that include chronic pain.

MedReleaf and BioPharma Services Inc. Announce Strategic Alliance

In May 2018, MedReleaf and BioPharma Services Inc. (“BioPharma”) announced that they have entered into an exclusive agreement to conduct clinical research for cannabis and cannabis derived products. BioPharma will provide medical, clinical, pharmacological, and lab expertise to expedite MedReleaf’s product strategy to support in-market products as well as products under development for registration in Canadian and international markets.

Aurora Acquisition

On May 14, 2018, it was announced that Aurora Cannabis Inc. (“Aurora”) and the Company entered into a definitive arrangement agreement (the “Arrangement Agreement”) whereby Aurora would acquire all of the issued and outstanding common shares of the Company for approximately $3.2 billion on a fully dilutive basis (the “Aurora Transaction”). The proposed transaction will bring together two premiere cannabis companies to create the scale the Company believes will be required for growth in Canada and globally.

Under the terms of the Aurora Transaction, holders of the issued and outstanding common shares of the Company will receive 3.575 common shares of Aurora and $0.000001 per common share of the Company held at on the date of conversion. The Aurora transaction contains customary provisions that includes for reciprocal termination fees of $80,000 and expense reimbursements fees of $15,000 if the transaction is terminated in certain specified circumstances. The proposed transaction is subject to approval by the shareholders of MedReleaf.

RESULTS OF OPERATIONS FOR THE THREE AND TWELVE MONTHS ENDED MARCH 31, 2018 AND 2017

S ALES

The table below summarizes the Company’s quarterly sales activities for 2018 and 2017:


					Three months ended										Three months ended
	Year ended Mar. 31 2018		Mar. 31, 2018		Dec. 31, 2017		Sep. 30, 2017		Jun. 30, 2017		Year ended Mar. 31 2017		Mar. 31, 2017		Dec. 31, 2016		Sep. 30, 2016		Jun. 30, 2016
Dried cannabis sales		34,061		9,222		8,573		7,693		8,573		37,950		9,062		9,831		10,475		8,582
Dried cannabis grams sold		4,150,315		1,136,215		1,064,873		925,197		1,024,030		3,521,553		1,069,233		944,800		852,245		655,275
Average selling price, dried cannabis	$	8.21	$	8.12	$	8.05	$	8.31	$	8.37	$	10.78	$	8.48	$	10.41	$	12.29	$	13.10
Extract sales		7,980		2,370		2,349		1,760		1,501		1,263		967		296		—		—
Equivalent grams sold		745,898		288,428		198,617		125,954		132,899		146,551		98,092		48,459		—		—
Adjusted equivalent grams sold ¹		884,091		288,428		258,615		164,003		173,045		176,183		127,724		48,459		—		—
Average selling price, extract cannabis	$	10.70	$	8.22	$	11.83	$	13.97	$	11.29	$	8.62	$	9.86	$	6.11	$	0.00	$	0.00
Adjusted average selling price, extract cannabis	$	9.03	$	8.22	$	9.08	$	10.73	$	8.67	$	7.17	$	7.57	$	6.11	$	0.00	$	0.00
Other revenue		1,605		422		428		368		387		1,126		331		299		274		222
Total sales		43,646		12,014		11,350		9,821		10,461		40,339		10,360		10,426		10,749		8,804
Total grams sold		4,896,213		1,424,643		1,263,490		1,051,151		1,156,929		3,668,104		1,167,325		993,259		852,245		655,275
Adjusted total grams sold ¹		5,034,406		1,424,643		1,323,488		1,089,200		1,197,075		3,697,736		1,196,957		993,259		852,245		655,275
Total average selling price	$	8.91	$	8.43	$	8.98	$	9.34	$	9.04	$	11.00	$	8.87	$	10.50	$	12.61	$	13.44
Adjusted total average selling price ¹	$	8.67	$	8.43	$	8.58	$	9.02	$	8.74	$	10.91	$	8.66	$	10.50	$	12.61	$	13.44

¹	As defined. See “Non-IFRS Measures” section for discussion on how equivalent grams and kilograms are calculated.

Sales for the three months ended March 31, 2018 were $12,014 and increased $1,654 or 16% compared to the three months ended March 31, 2017 of $10,360. Sales for the year ended March 31, 2018 were $43,646 and increased $3,307 or 8% compared to the year ended March 31, 2017 of $40,339.

Sales growth was primarily the result of increased production capacity, patient demand, yield improvements, and the continued growth of cannabis oil extracts for sale. Throughout the years ended March 31, 2018 and 2017, the Company’s Markham Facility was operating at full capacity (based on square footage). In November 2016, Health Canada approved the Company to produce and sell cannabis oil extracts.

During the three months ended March 31, 2018, 1,425 adjusted kilograms of cannabis products were sold at an adjusted average selling price of $8.43. This represents an increase in volume of 228 kilograms sold compared to an adjusted 1,197 kilograms sold during the three months ended March 31, 2017, at an adjusted total average selling price of $8.66.

During the year ended March 31, 2018, an adjusted 5,034 kilograms of cannabis products were sold at an adjusted average selling price of $8.67 per gram. This represents an increase of 1,337 kilograms or 36% compared to the adjusted 3,698 kilograms sold during the year ended March 31, 2017, at an adjusted average selling price of $10.91 per gram

The average selling price was calculated by taking net sales divided by number of adjusted grams sold during the period. Increased sales volumes during the three and twelve months ended March 31, 2018 were the result of increased production capacity, increased patient demand, yield improvements and the introduction of cannabis oil extracts for sale. As a result of the VAC Policy, the Company also began to offer discounts to qualifying Veterans to assist with the non-reimbursable portion of their medication. The price restrictions came into effect in November 2016 and resulted in a reduction in average selling price. Despite the discounts offered as part of the VAC policy, during the year ended March 31, 2018, the Company has continued to trend positively with modest gains due in part to successful product launches and increased demand for premium products.

C OST OF S ALES

Production costs consist of labour, materials, consumables, supplies, overhead, amortization on production equipment, shipping, packaging and other expenses required to produce cannabis products sold during the period. Production costs related to the transformation of biological assets to the point of harvest are capitalized and included in the fair value measurement of biological assets. Once goods are sold, the associated capitalized costs are recognized as production costs in the statement of operations in the related reporting period.

Biological assets consist of cannabis plants measured at fair value less cost to sell up to the point of harvest and is inclusive of capitalized production costs. Changes in fair value less cost to sell of the biological assets during the reporting period before harvest are recognized in the results of operations in the related reporting period.

Harvested cannabis is transferred from biological assets at their fair value less cost to sell at harvest, which becomes the deemed cost for inventory which, upon sale, the fair value cost adjustment portion is expensed to finished harvest inventory sold and the capitalized cost portion is expensed to production costs. Gross profit before gain on biological assets represents profit earned before the net impact of fair value gains and finished harvest inventory sold cost of sales that result from the transformation of biological assets.

The fair value changes of the biological assets, inventory expensed, fair value recovery and impairments, and production costs that make up the total cost of sales, for the three and twelve months ended March 31, 2018 and 2017, is presented in the table below:


							Three months ended															Three months ended
	Year ended Mar. 31 2018			Mar. 31, 2018			Dec. 31, 2017			Sep. 30, 2017			Jun. 30, 2017			Year ended Mar. 31 2017			Mar. 31, 2017			Dec. 31, 2016			Sep. 30, 2016			Jun. 30, 2016
Production costs		13,212			3,550			4,020			2,730			2,912			9,436			2,962			1,832			2,376			2,266
Fair value adjustment on inventory sold		26,553			6,107			8,232			5,621			6,593			24,216			7,652			5,110			6,644			4,810
Fair value adjustment on biological assets		(44,098	)		(12,261	)		(10,887	)		(10,277	)		(10,673	)		(31,252	)		(10,570	)		(6,230	)		(7,905	)		(6,547	)
Fair value adjustment on carrying inventory		1,309			1,309			—			—			—			—			—			—			—			—

Cost of sales		(3,024	)		(1,295	)		1,365			(1,926	)		(1,168	)		2,400			44			712			1,115			529

Cost of sales for the three months ended March 31, 2018 were ($1,295), representing a decrease of $1,339 compared to the prior year same period cost of sales of $44. This decrease in cost of sales is due primarily to an increase in fair value gains on changes in biological assets that resulted from increased production, yield improvements, and the valuation of extracts.

Production costs during the three months ended March 31, 2018 were $3,550, an increase of $588 or 20%, compared to the year ended March 31, 2017. Production costs increased due to an increase in production capacity in Bradford that resulted in higher yields and increased sales.

Cost of sales for the year ended March 31, 2018 were ($3,024), representing a decrease of $5,424, compared to the prior year same period cost of sales of $2,400. This decrease in cost of sales is due primarily to an increase in fair value gains on changes in biological assets that resulted from increased production, yield improvements and the valuation of extracts.

Production costs during the year ended March 31, 2018 were $13,212, representing an increase of $3,776 or 40%, compared to the year ended March 31, 2017. Production costs increased due to an increase in production capacity that resulted in higher yields and increased sales.

Fair value adjustment relating to inventory sold, which represents the fair value cost adjustment portion of cost of goods sold that arise from biological asset transformation and harvest, were $26,553 for the year ended March 31, 2018, representing an increase of $2,337 or 10%, compared to the same period of the prior year due primarily to sales growth which resulted in increased production.

Production costs and cost of finished inventory harvest sold were partially offset by fair value adjustment on biological assets. Fair value adjustments are sensitive to changes in the Company’s average selling price and other changes in the Company’s valuation estimates which include, but are not limited to, average selling prices, remaining costs to complete, the allocation rate and method of production costs, the stage of plant growth and cycles and expected yields. Any changes in underlying estimates and assumptions used to determine fair value gains on the transformation of biological assets could have a negative impact on expected gains.

G ROSS P ROFIT

Gross profit, including gain on fair value changes of biological assets for the three months ended March 31, 2018 and 2017 was $13,309 and $10,316 or 111% and 100% of sales, respectively. Gross profit, including gain on fair value changes of biological assets for the years ended March 31, 2018 and 2017 was $46,670 and $37,939, or 107% and 94% of sales, respectively. Gross profit increased during the three and twelve months ended March 31, 2018 compared to the same periods of fiscal 2017, primarily due to an increase in sales and an increase in fair value gains driven by increased production capacity, yield improvements, and the sale of extracts commencing in November 2016. Gross profit adjusted for the fair value incremental impact of biological assets is presented below, see “Adjusted Product Contribution Margin (Non-IFRS Measure)”.

EXPENSES


	Year ended						Three months ended									Year ended						Three months ended
	Mar. 31 2018			Mar. 31, 2018			Dec. 31, 2017			Sep. 30, 2017			Jun. 30, 2017			Mar. 31 2017			Mar. 31, 2017			Dec. 31, 2016			Sep. 30, 2016			Jun. 30, 2016
Selling and marketing		11,438			4,488			2,610			2,331			2,009			7,181			2,061			1,742			1,815			1,563
General and administrative		34,482			11,032			9,665			8,600			5,185			13,700			4,877			5,162			2,066			1,595
Research and development		1,128			242			187			317			382			875			322			150			186			217
Amortization of property, plant and equipment		1,983			549			678			359			397			495			162			130			109			94
Amortization of intangible assets		632			475			157			—			—			—			—			—			—			—
Initial public offering related costs		2,611			—			—			102			2,509			—			—			—			—			—
Fair value loss on shareholder loans		192			—			—			—			192			—			—			—			—			—
Fair value loss on deferred share units		428			16			412			—			—			—			—			—			—			—
Interest income		(1,271	)		(909	)		(223	)		(124	)		(15	)		(75	)		(56	)		(13	)		(2	)		(4	)
Finance costs		694			176			169			109			240			121			59			16			23			23

Total expenses		52,317			16,069			13,655			11,694			10,899			22,297			7,425			7,187			4,197			3,488

Current income taxes		(1,246	)		(2,776	)		(277	)		1,479			328			1,798			1,798			—			—			—
Deferred income taxes		3,130			416			2,020			700			(6	)		2,886			(1,094	)		789			1,697			1,494

Total expenses for the three and twelve months ended March 31, 2018 were $16,069 and $52,317, respectively, an increase of $8,644 and $30,020, compared to the three and twelve months ended March 31, 2017 when total expenses were $7,425 and $22,297, respectively. The increase in total expenditures was mainly due to our investment in the recreational market and development for international business initiatives, as well as continuous improvements in the Company’s research and development activities and increased operating and overhead expenses due to increased advertising and promotional expenses related to the preparation of the Company’s launch of its recreational brand.

Selling and marketing expenses for the three and twelve months ended March 31, 2018 were $4,488 and $11,438, an increase of $2,427 and $4,257, respectively compared to the three and twelve months ended March 31, 2017 selling and marketing expenses of $2,061 and $7,181, respectively. These expenses include costs for patient education programs, marketing, promotions, sponsorship, and royalty fees. These increased expenditures in selling and marketing expenses were driven primarily by an increase in advertising and marketing and patient education program fees to support ongoing strategy development and initiatives. This was offset by a royalty fee rebate applied during the year ended March 31, 2018 that reduced fees for the previous two quarters to nil. During the three and twelve months ended March 31, 2018, the Company continued to expand its selling and marketing programs through participation in industry events, greater focus on brand and marketing strategies, and the attainment of new human resource talent to support these initiatives.

The Company intends to continue to invest in selling and marketing initiatives throughout the next year to promote the Company’s existing products and to prepare for the anticipated launch of the recreational market.

General and administrative (“G&A”) expenses for the three and twelve months ended March 31, 2018 were $11,032 and $34,482 (92% and 79% of sales) increasing $6,155 and $20,782, respectively, compared to the three and twelve months ended March 31, 2017 expenses of $4,877 and $13,700 (47% and 34% of sales). Increased G&A expenditures during the three and twelve months ended March 31, 2018 can be specifically attributed to stock based compensation expenses, fair value increase on the DSU plan, increase in payroll costs due to increased human resource talent, new market research initiatives, overhead expenses related to the Bradford Facility, professional fees to support ongoing strategy development and general corporate matters, and costs required to report as a publicly listed entity.

Research and development (“R&D”) costs for the three and twelve months ended March 31, 2018 were $242 and $1,128, representing a decrease of $80 and an increase of $253, from $322 and $875 for the three and twelve months ended March 31, 2017, respectively. This increase in R&D expenditures for the year ended March 31, 2018 was due primarily to new and ongoing initiatives, clinical trials and human resource additions to support product growth and development.

During the three and twelve months ended March 31, 2018, the Company incurred nil and $2,611 in initial public company related costs. These costs include various professional services, legal, consulting, and program development fees incurred to support the Company’s IPO.

Income taxes for the three and twelve months ended March 31, 2018 were ($2,360) and $1,884 (2017 – $704 and $4,684), respectively. The Company is subject to current income taxes at a statutory rate of 25.0% however the effective tax rate for the three and twelve months ended March 31, 2018 differs from the statutory rate due to non-deductible stock based compensation expense resulting in higher taxable income. All non-capital loss carry forwards were used during the year ended March 31, 2017.

Net loss for the three and twelve months ended March 31, 2018 was $812 and $7,531 (2017 – net income of $2,187 and $10,958), respectively. Decrease in net income was primarily due to increased overhead expenses partially offset by increased sales and gross profit as the Company expanded production capacity, specifically driven by fair value gains experienced at Bradford Facility. The main drivers of increased overhead expense for the three and twelve months ended March 31, 2018 were stock option expenses, IPO related costs, business development costs, investments in sales, marketing and brand development, and other G&A expenses incurred to support the current and future growth of the Company.

A DJUSTED EBITDA (N ON -IFRS M EASURE )


	Year ended						Three months ended									Year ended						Three months ended
	Mar. 31 2018			Mar. 31, 2018			Dec. 31, 2017			Sep. 30, 2017			Jun. 30, 2017			Mar. 31 2017			Mar. 31, 2017			Dec. 31, 2016			Sep. 30, 2016			Jun. 30, 2016
Income (loss) before income taxes		(5,647	)		(3,172	)		(3,258	)		53			730			15,642			2,891			2,527			5,437			4,787
Adjustments:
Depreciation and amoritzation		5,517			1,872			1,776			926			943			1,692			588			432			354			318
Fair value change in DSU		428			16			412			—			—
Stock-based compensation		11,418			2,177			3,546			4,275			1,420			3,053			604			2,251			99			99
Interest income		(1,271	)		(909	)		(223	)		(124	)		(15	)		(75	)		(56	)		(13	)		(2	)		(4	)
Finance costs		694			176			169			109			240			121			59			16			23			23
Initial public offering related fees		2,611			—			—			102			2,509			454			454			—			—			—
Fair value loss on shareholder loans		192			—			—			—			192			—			—			—			—			—
Net impact, fair value of biological assets		(16,236	)		(4,845	)		(2,655	)		(4,656	)		(4,080	)		(7,036	)		(2,918	)		(1,120	)		(1,261	)		(1,737	)

Adjusted EBITDA		(2,294	)		(4,685	)		(233	)		685			1,939			13,851			1,622			4,093			4,650			3,486

Adjusted EBITDA for the three and twelve months ended March 31, 2018 was ($4,685) and ($2,294), representing a decrease of $6,307 and $16,145, compared to the three and twelve months ended March 31, 2017, respectively. The decrease in EBITDA was primarily due to the Company’s investment in the recreational market and its international business initiatives, as well as continuous improvements in R&D activities. As a result, increased operating and overhead expenses, such as advertising and promotion, were incurred for the preparation of the Company’s launch of its recreational brand and other initiatives. Additionally, the introduction of the VAC Policy whereby the Company began to offer discounts to qualifying Veterans to assist with the non-reimbursable portion of their medication, contributed to a reduction in gross profit and EBITDA.

C ASH C OST P ER G RAM S OLD (N ON -IFRS M EASURE )

The following are the Company’s cash production costs, on a total and per gram and equivalent gram sold basis, for the years ended March 31, 2018 and 2017 as compared to reported production costs (excluding costs resulting from the fair value of biological assets), which represents cost of sales, in accordance with IFRS:


	Year ended						Three months ended									Year ended						Three months ended
	Mar. 31 2018			Mar. 31, 2018			Dec. 31, 2017			Sep. 30, 2017			Jun. 30, 2017			Mar. 31 2017			Mar. 31, 2017			Dec. 31, 2016			Sep. 30, 2016			Jun. 30, 2016
Production costs		13,212			3,550			4,020			2,731			2,912			9,436			2,962			1,832			2,376			2,266
Amortization included in production costs		(2,924	)		(870	)		(941	)		(567	)		(546	)		(1,197	)		(426	)		(302	)		(245	)		(224	)
Recovery of production costs		—			—			—			—			—			—			—			405			(405	)		—
Post production costs		(2,699	)		(681	)		(762	)		(617	)		(639	)		(1,896	)		(751	)		(396	)		(459	)		(290	)

Cash production costs		7,589			1,998			2,317			1,547			1,727			6,343			1,785			1,539			1,267			1,752

Total grams sold		4,896,213			1,424,643			1,263,490			1,051,151			1,156,929			3,668,104			1,167,325			993,259			852,245			655,275
Cash cost per total gram sold	$	1.55		$	1.40		$	1.83		$	1.46		$	1.49		$	1.73		$	1.53		$	1.55		$	1.49		$	2.67
Change in conversion of equivalent grams		138,193			—			59,998			38,049			40,146			29,632			29,632			—			—			—
Adjusted total grams sold ¹		5,034,406			1,424,643			1,323,488			1,089,200			1,197,075			3,697,736			1,196,957			993,259			852,245			655,275
Adjusted cash cost per total gram sold	$	1.51		$	1.40		$	1.75		$	1.42		$	1.44		$	1.72		$	1.49		$	1.55		$	1.49		$	2.67

¹	As defined. See “Non-IFRS Measures” section for discussion on how equivalent grams and kilograms are calculated.

The cash cost per adjusted total gram sold for the three months ended March 31, 2018 and 2017, was $1.40 and $1.49, respectively, a decrease of $0.09 or 6% compared to the three months ended March 31, 2017. The adjusted cash cost per gram sold for the years ended March 31, 2018 and 2017, were $1.51 and $1.72, respectively, a decrease of $0.21 or 12% compared to the year ended March 31, 2017. The cost improvements per gram were due to increased production and yield improvements that resulted in improved efficiencies in labour utilization and allocation of fixed costs.

No recovery was recognized during the year ended March 31, 2018. During the year ended March 31, 2017, the Company recognized a recovery of inventory that resulted in a net decrease in production costs of $405. This recovery was primarily the result of dried cannabis held for extraction that was produced during the nine months ended December 31, 2016 but was not valued until the Markham Commercial Licence was amended to allow the Company to produce cannabis oil. While the adjustment does not affect the annual results, it does impact production costs for the three months ended December 31, 2016 and September 30, 2016, and therefore, has been excluded and then added back in estimating cash production costs for those quarters.

A DJUSTED P RODUCT C ONTRIBUTION M ARGIN (N ON -IFRS M EASURE )

The following is the Company’s Adjusted Product Contribution Margin compared to reported gross profit, which includes the gain on changes in fair value of biological assets, in accordance with IFRS for the years ended March 31, 2018 and 2017:


	Year ended						Three months ended									Year ended						Three months ended
	Mar. 31 2018			Mar. 31, 2018			Dec. 31, 2017			Sep. 30, 2017			Jun. 30, 2017			Mar. 31 2017			Mar. 31, 2017			Dec. 31, 2016			Sep. 30, 2016			Jun. 30, 2016
Gross profit		46,670			13,309			9,985			11,747			11,629			37,939			10,316			9,714			9,634			8,275
Adjustments:
Fair value adjustment on inventory sold		26,553			6,107			8,232			5,621			6,593			24,216			7,652			5,110			6,644			4,810
Fair value adjustment on biological assets		(44,098	)		(12,261	)		(10,887	)		(10,277	)		(10,673	)		(31,252	)		(10,570	)		(6,230	)		(7,905	)		(6,547	)
Fair value adjustment on carrying inventory		1,309			1,309			—			—			—			—			—			—			—			—

Net gain on fair value measurement of biological assets		(16,236	)		(4,845	)		(2,655	)		(4,656	)		(4,080	)		(7,036	)		(2,918	)		(1,120	)		(1,261	)		(1,737	)

Adjusted product contribution margin		30,434			8,464			7,330			7,091			7,549			30,903			7,398			8,594			8,373			6,538

Total grams sold		4,896,213			1,424,643			1,263,490			1,051,151			1,156,929			3,668,104			1,167,325			993,259			852,245			655,275
Adjusted product contribution per total gram sold	$	6.22		$	5.94		$	5.80		$	6.75		$	6.53		$	8.42		$	6.34		$	8.65		$	9.82		$	9.98
Adjusted total grams sold ¹		5,034,406			1,424,643			1,323,488			1,089,200			1,197,075			3,697,736			1,196,957			993,259			852,245			655,275
Adjusted product contribution per adjusted total gram sold	$	6.05		$	5.94		$	5.54		$	6.51		$	6.31		$	8.36		$	6.18		$	8.65		$	9.82		$	9.98

¹	As defined. See “Non-IFRS Measures” section for discussion on how equivalent grams and kilograms are calculated.

Adjusted product contribution margin for the three months ended March 31, 2018 was $8,464 or $5.94 per adjusted gram sold, an increase of $1,066, compared to $7,398 or $6.18 per adjusted gram sold, for the three months ended March 31, 2017. This increase was due to sales growth which was primarily the result of increased patient demand, yield improvements, and the continued growth of cannabis oil extracts for sale.

Adjusted product contribution margin for the year ended March 31, 2018 was $30,434 or $6.05 per adjusted gram sold, a decrease of $469, compared to $30,903 or $8.36 per adjusted gram for the year ended March 31, 2017. This marginal decrease in Adjusted Product Contribution Margin was the result of increased labour costs and depreciation attributable to the Bradford Facility expansion, in addition to both price and volume limits imposed by the VAC Policy whereby the Company began to offer discounts to qualifying Veterans to assist with the non-reimbursable portion of their medication.

LIQUIDITY, CAPITAL RESOURCES AND FINANCING

The Company believes it has sufficient liquidity to support continued operations and to meet its short-term liabilities and commitments as they become due. The Company manages its liquidity risk by monitoring its operating requirements. The Company prepares budgets and cash forecasts to ensure it has sufficient funds to fulfill obligations. In managing working capital, the Company may, where necessary, limit or control the amount of working capital used for operations or other initiatives, pursue additional financing, manage the timing of its expenditures, or sell assets.

The table below summarizes total capitalization as at March 31, 2018 and 2017:


As at March 31,	2018		2017
Term credit facility		9,750		—
Revolving credit facility		845		—
Collateralized credit facility		—		7,500
Shareholder loans		—		2,189

Total debt		10,595		9,689

Total equity		328,044		52,320

Total capitalization		338,639		62,009

On April 17, 2017, the Company entered into a new $20,000 Credit Agreement with a major Canadian bank. The Credit Agreement provides the Company with a $10,000 term credit facility and a $10,000 revolving credit facility (together the “New Credit Facility”), subject to covenant requirements. The Former Credit Facility lender continues to indirectly hold 50% of the Company’s outstanding debt under the New Credit Facility, which is administered by and payable to the New Credit Facility lender. The Company utilized the proceeds of the term facility to repay all principal and interest outstanding of $7,500 on the Former Credit Facility, the balance was used to fund the build-out of the Bradford Facility. As of the date of this MD&A, the Company advanced $845 from the revolving credit facility.

On November 10, 2017, the Company amended the Credit Agreement to remove certain financial covenants (the “November 2017 Amended Credit Agreement”). The November 2017 Amended Credit Agreement also removed the election to defer principal payments, and as such, quarterly principal repayments of $250 are required each three month period ended December 31, March 31, June 30, and December 31. The first payment was made on January 2, 2018.

On March 29, 2018, the Company further amended the Credit Agreement (the “March 2018 Amended Credit Agreement”). Under the March 2018 Amended Credit Agreement, the interest coverage ratio, the total leverage ratio and the capitalization ratio under the Credit Agreement were removed and replaced with the following financial covenants for periods July 1, 2019 and onwards: (i) maintaining a total leverage ratio of not more than 3.00 to 1.00; (ii) maintaining shareholders equity of not less than a shareholders’ equity floor as defined in the March 2018 Amended Credit Agreement; and (iii) maintaining a fixed charge coverage ratio of not less than 1.25 to 1.00. For periods prior to July 1, 2019, the Company must maintain a cash and cash equivalent balance of at least 150% of the aggregate outstanding principle balance of all amounts borrowed under the Credit Agreement.

As at March 31, 2018, the Company was in compliance with all covenants contained in the March 2018 Amended Credit Agreement.

On June 7, 2017, the Company completed its IPO and secondary offering (together, the “Offering”) of an aggregate of 10,600,000 common shares (the “Offered Shares”) of the Company at a price of $9.50 per Offered Share (the “Offering Price”) for aggregate gross proceeds of $100,700, with certain selling shareholders receiving $20,000 of the gross proceeds as part of a secondary offering.

On December 4, 2017, the Company closed its December 2017 Offering, which was a short form prospectus offering on a “bought deal basis”, pursuant to which the Company issued an aggregate of 3,625,470 Common Shares at a price of $16.55 per Common Share, for aggregate gross proceeds to the Company of $60,002.

While the Company believes that it has the ability to generate sufficient amounts of cash and cash equivalents, in the short-term and long term, to maintain current operational capacity, additional sources of capital and/or financing will be required to meet planned growth. Liquidity will fluctuate based on demand for working capital resources required for these initiatives.

The Company is subject to risks and uncertainties that could significantly impair its ability to raise funds through debt or equity or to generate profits sufficient to meet future obligations, operational, or development needs. See “Risks” for information on the risks and uncertainties that could have a negative effect on the Company’s liquidity.

The table below sets out the cash and working capital (including cash and cash equivalents) as at March 31, 2018 and 2017:


As at March 31,	2018		2017
Cash and cash equivalents		215,868		12,899
Working capital (including cash and cash equivalents)		255,738		24,705

The Company’s working capital as at March 31, 2018, was $255,738 and has increased $231,033 compared to March 31, 2017 ($24,705). This increase in working capital was due primarily to the net proceeds of $256,005 raised from the issuance of share capital and warrants. Cash and cash equivalents is inclusive of $5,000 invested in short-term, cashable Guaranteed Investment Certificates (“GICs”).

Accounts receivable as at March 31, 2018 was $10,750, an increase of $797 from March 31, 2017 of $9,953. This increase was primarily driven by the sales tax refunds receivable, partially offset by a decrease in trade accounts receivable due to increased efforts in collection. Subsequent to March 31, 2018, the Company received an HST refund of $2,820 in settlement of sales tax refunds receivable included in accounts receivable as at March 31, 2018.

Inventories as at March 31, 2018 were $32,856, an increase of $23,345, compared to March 31, 2017 of $9,511. The increase in inventories was due to increased production, deemed costs arising from fair value gains on biological assets, and the addition of cannabis oil inventory that were previously not valued, partially offset by the fair value adjustment of the carrying value of inventory.

Biological assets as at March 31, 2018 were $3,202, an increase of $393 compared to March 31, 2017 of $2,809. This increase was due to increased fair value gains on biological assets resulting from increased production and the addition of cannabis oil extracts that increased the expected yield and fair value of biological assets.

Accounts payable and accrued liabilities as at March 31, 2018 were $16,989, an increase of $9,754 from March 31, 2017 of $7,235. The increase is primarily due to progress billings associated with the second phase of the Bradford Facility construction project.

The tables below summarize the Company’s cash flows for years ended March 31, 2018 and 2017:


Years ended March 31,	2018			2017
Operating activities		(13,156	)		12,188
Financing activities		259,647			31,714
Investing activities		(43,522	)		(31,920	)

Cash and cash equivalents, beginning of period		12,899			917
Cash and cash equivalents, end of period		215,868			12,899

Cash and cash equivalents as at March 31, 2018 were $215,868, which was $202,969 higher than the balance of $12,899 as at March 31, 2017. Increase in cash and cash equivalents was primarily due to the net proceeds from the IPO of Common Shares of the Company, as well as the December 2017 and January 2018 Offerings, offset by additions to property, plant and equipment relating to construction at the Bradford Facility.

C ASH F LOW U SED IN O PERATING A CTIVITIES

Cash flow used in operating activities for the year ended March 31, 2018 was $13,156, representing a decrease of $25,344 over the cash flow provided by operating activities of $12,188 for the year ended March 31, 2017. Increased operating and overhead expenses due to advertising and promotional efforts related to the preparation of the Company’s launch of its recreational brand, as well as increased professional fees to support ongoing strategy development and general corporate matters, payroll costs due to increased human resource talent, and costs required to report as a publicly listed entity, resulted in the additional use of cash flow during the year ended March 31, 2018, compared to the year ended March 31, 2017. See “Expenses” under “Results of Operations for years ended March 31, 2018 and 2017” above.

C ASH F LOW P ROVIDED BY F INANCING A CTIVITIES

Cash flow provided by financing activities for the year ended March 31, 2018 was $259,647, an increase of $227,933 compared to cash flow provided by financing activities for the year ended March 31, 2017 of $31,714. The increase in cash flows provided by financing activities was primarily due to net proceeds from the issuance of share capital and warrants of $256,005 (2017—$24,694).

C ASH F LOW U SED IN I NVESTING A CTIVITIES

Cash flow used in investing activities totaled $43,522 for the year ended March 31, 2018. This is an increase of $11,602 compared to the year ended March 31, 2017 of $31,920. This increase in cash flows used in investing activities was primarily due to an increase in additions to property, plant and equipment during the year, which included additional spending on production rooms, leasehold improvements, furniture and other equipment related to the construction and development of the Bradford facility, as well as additions to intangible assets.

C OMMITMENTS

The Company has debt, operating lease contractual obligations, and construction related contractual obligations that it has committed to and which are presented in the table below:


	Less than 1 year		1-3 years		4-5 years		After 5 years		Total
Operating lease ¹		289		620		675		358		1,942
Term credit facility		1,000		2,000		2,000		4,750		9,750
Revolving credit facility		845		—		—		—		845
Capital projects ²		8,325		—		—		—		8,325

¹	Operating lease is exclusive of common area costs.

²	Relates to capital commitments that the Company has made to specific vendors for capital projects pertaining to on-going construction projects.

As at March 31, 2018, the first phase of the Bradford Facility construction project has been completed and the Company planted its first cannabis plants at the facility. Approximately $8,325 of future payments have been committed in relation to the continuous capital development of the Bradford Facility. Furthermore, the Company is currently committed to making payments under an operating lease for its Markham Facilities as well as payments with regards to its debt obligations.

On March 1, 2018, the Company signed a waiver committing the Company to purchase a green house and land in Exeter, Ontario for the purchase price of $26,000 plus applicable taxes and closing costs. The Company subsequently closed the transaction on April 11, 2018.

The Company has an obligation to purchase additional intangible assets on each of December 8, 2018, 2019, and 2020 by way of issuance of Common Shares, contingent on the seller meeting specified targets. Should the seller satisfy the specified targets on the dates listed above, the purchase price of each intangible asset will be $3,750, $3,250, and $3,000, respectively, as previously agreed upon. As at March 31, 2018, this obligation has not been reflected in the consolidated financial statements.

OFF-BALANCE SHEET ARRANGEMENTS

The Company has the following off-balance sheet arrangements in addition to those as described below under “Transactions with Related Parties”.

On April 19, 2015, as part of an amendment to the Licence Agreement with Tikun Olam (both as defined below under “Transactions with Related Parties”), Tikun Olam agreed to reduce future royalties owed by MedReleaf under the terms of the original licence agreement by an amount equal to $250 which is to be offset against future royalties owed by MedReleaf at the earliest possible time provided that this does not occur prior to July 17, 2017. As at March 31, 2018, $250 of royalty fees were applied against the $250 Royalty Rebate, reducing the Royalty Rebate to nil.

L EGAL P ROCEEDINGS

The Company currently, and from time to time, is involved in legal proceedings, as well as demands, claims and threatened litigation, that arise in the normal course of the Company’s business. The Company is currently engaged in a dispute before the Agriculture Food and Rural Affairs Appeals (“AFRAA”) Tribunal in connection with an unsuccessful unionization effort by United Food and Commercial Workers Union (“UFCW Canada”) at the Markham Facility. In 2015, UFCW Canada filed applications for union certification before the Ontario Labour Relations Board (the “OLRB”) and the Canada Industrial Relations Board (the “CIRB”). The OLRB ordered that a vote of employees be held, which received a majority of votes against unionization. The OLRB also found that it lacked jurisdiction to consider the UFCW Canada’s application for certification because the Company is not governed by the Labour Relations Act (Ontario) and is instead governed by the Agricultural Employees Protection Act (“AEPA”). UFCW Canada’s application for certification to the CIRB was similarly dismissed on the basis that the CIRB lacked jurisdiction. UFCW Canada subsequently initiated the current complaint before the AFRAA Tribunal, which includes a challenge of the constitutionality of the AEPA.

TRANSACTIONS WITH RELATED PARTIES

The Company has engaged in transactions and has outstanding balances with related parties of the Company.

Included in G&A expenses for the year ended March 31, 2018 was nil (2017—$122) in consulting fees paid to Two Plus Management Corp. a consulting company whose principal is Neil Closner, an executive officer and shareholder of the Company.

Included in G&A expenses for the year ended March 31, 2018 was $15 (2017—$57) in consulting fees paid to Vive Technologies Inc., whose principal is Jeremy Friedberg, a consultant and shareholder of the Company.

Under the Licence Agreement, the Company is subject to royalties on certain net revenue in connection with Tikun Olam Ltd.‘s intellectual property commencing in the third year of the term of the Licence Agreement (July 18, 2015). Total royalties included in selling and marketing expenses for the year ended March 31, 2018 was $272 (2017—$535). In accordance with the share purchase promissory note, these royalties, less applicable withholding taxes, have been offset against the share purchase loan outstanding. In consideration for certain licensing concessions, Tikun Olam Ltd. agreed to reduce future royalties owed by the Company under the terms of the original licence agreement by an amount equal to $250 (the “Royalty Rebate”), which is to be offset against future royalties owed by the Company commencing July 17, 2017. During the year ended March 31, 2018, $250 of royalty fees were applied against the $250 Royalty Rebate, reducing the Royalty Rebate to nil. As at March 31, 2018, the Company included in accrued liabilities $151 (2017—$103) of withholding taxes payable on behalf of Tikun Olam Ltd. and $522 (2017—$146) of royalty fees payable.

These transactions are in the normal course of business and are measured at their exchange amounts, as mutually agreed to by the related parties and the Company.

CRITICAL ACCOUNTING ESTIMATES

The preparation of the Financial Statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, sales and expenses, and the related disclosure of contingent liabilities. The Company bases its judgments on historical experience and on various other assumptions that it believes are reasonable under the circumstances, the results of which form the basis for making estimates about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

The following discusses the most significant accounting judgments and estimates that the Company has made in the preparation of the Financial Statements.

I NVENTORY

Inventory, consisting of harvested goods, cannabis oil extracts and accessories is measured at the lower of cost and net realizable value.

Cost includes production costs directly attributable to the production or purchase of inventory items as well as deemed costs attributable to fair value gains on the transformation of biological assets. These deemed costs are estimated using assumptions that include, but are not limited to, average selling prices, remaining costs to complete, the allocation rate and method of production costs, the stage of plant growth and cycles, and expected yields. Any change in these assumptions could negatively impact operational results, the actual realizable value of inventory and future expected gains.

B IOLOGICAL A SSETS

Gains or losses arising from changes in fair value less costs to sell during the years, exclusive of capitalized production costs, are included in the results of operations of the related year. Upon harvest, capitalized production costs are transferred to finished harvest and included in the results of operations during the year in which the harvested cannabis is sold and revenue recognized.

E STIMATED U SEFUL L IVES AND D EPRECIATION OF P ROPERTY AND E QUIPMENT

The depreciation of property and equipment is dependent on estimates of the useful lives, which are determined through the exercise of judgement. Actual useful lives may differ from those estimates and may require future write-down or impairment. The assessment of any impairments of these assets takes in to account such factors as economic and market conditions and the useful lives of these assets.

I NTANGIBLE A SSETS

Intangible assets are comprised of trademarks, patents, and other intangible assets and are considered to have an indefinite useful life. No amortization is recognized for indefinite useful life intangible assets.

Intangible assets with an indefinite useful life are tested for impairment annually or when events or changes in circumstances indicate that they might be impaired. An intangible asset is impaired if the recoverable amount is less than its carrying amount. The recoverable amount is the higher of the asset’s fair value less cost to sell and the value in use. If the recoverable amount of the individual asset cannot be estimated because it does not generate independent economic inflows, the entire cash generating unit (“CGU”) is tested for impairment. A CGU is the smallest group of assets that can generate cash inflows independent of other assets.

S HARE - BASED C OMPENSATION

In determining the amount and timing of expenditures related to share-based compensation, the Company uses judgement to determine key estimates such as the value of shares, the rate of forfeiture of options granted, the expected life of the option, the volatility of the value of the shares and the risk-free interest rate used.

A SSET R ETIREMENT O BLIGATIONS

Asset retirement obligations estimate the future fair value cost required to remediate the Company’s leased facility in Markham. The estimated valuation is based on management’s best judgement and third-party estimates where available and requires the Company to make assumptions including discount rate, the existence of any future obligations, the likelihood that any obligations will be incurred and their amounts and timing.

S HARE I SSUANCE AND S HARE L ISTING C OSTS

In connection with the Company’s Offering and listing of the Company’s existing shares on the TSX (the “Listing”), the Company incurred underwriters’ fees, legal costs, consulting fees, initial listing fees, travel and other professional fees. All costs that were incremental and directly attributable to the issuance of new common shares were recorded as a reduction to share capital. All other costs incurred in relation to the Company’s listing of existing shares and preparing the Company to operate and report as a publicly listed Company were expensed to Initial public offering costs. The Company’s management applied judgement in determining which costs to attribute to the Offering and which to attribute to the Listing, where costs were incurred jointly, the Company allocated the costs based on the percentage (9%) of common shares applicable to the Offering (8,494,742 common shares) and the percentage (91%) applicable to the Listing (81,880,206 common shares).

D EFERRED S HARE U NITS

Certain Non-Employee Directors (“NED”) can elect to receive up to 100% of their annual compensation in Deferred Share Units (“DSU”). Each DSU grant price is determined using the Company’s five day volume weighted average trading price (“VWAP”). NEDs can elect to receive settlement of their DSUs by way of a lump sum cash payment on any date the NED ceases to be a director of the Company or any of its subsidiaries (the “Settlement Date”). The settlement amount is equal to the market value on the Settlement Date of one share for each DSU credited to the director’s account on the Settlement Date.

Upon initial recognition on the date of grant, the Company records a DSU liability for DSUs that have vested, in Accounts payable and accrued liabilities. The DSU liability is remeasured at its fair value at the end of each fiscal reporting period and on the settlement date, with changes in fair value recognized through net (loss) income.

I NVESTMENT T AX C REDITS

The Company claims investment tax credits for expenditures incurred as a result of scientific research and development initiatives. Management makes a number of estimates and assumptions in determining the amount of investment tax credits eligible to be claimed.

I NCOME T AXES

In calculating the amount of current and deferred income tax expenses, liabilities and assets, management must use judgement in making estimates and assumptions including but not limited to, the timing of when future liabilities or benefits will be realized, the tax rates expected to be in effect and applicable to temporary differences when they reverse, taxable income, and the utilization of tax loss carry forwards and credits available, if any.

NEW STANDARDS AND INTERPRETATIONS NOT YET ADOPTED

IFRS 9 – F INANCIAL I NSTRUMENTS

IFRS 15 – R EVENUE FROM C ONTRACTS WITH C USTOMERS

IFRS 16 – L EASES

In 2016, the IASB issued IFRS 16, Leases (“IFRS 16”), replacing IAS 7, Leases, and related interpretations. The standard introduces a single on-balance sheet recognition and measurement model for lessees, eliminating the distinction between operating and finance leases. Lessors continue to classify leases as finance and operating leases. IFRS 16 becomes effective for annual periods beginning on or after January 1, 2019, and is to be applied retrospectively. Early adoption is permitted if IFRS 15 has been adopted. The Company is currently assessing the impact of the new standard on its consolidated financial statements.

FINANCIAL INSTRUMENTS

The Company’s financial instruments as at March 31, 2018, consisted of cash and cash equivalents, accounts receivable, convertible note receivable, accounts payable and accrued liabilities, and term and revolving credit facilities.

C ASH AND C ASH E QUIVALENTS

Included in cash and cash equivalents are short-term investments in short-term Guaranteed Investment Certificates which involves exposure to credit and interest rate risk. Credit risk is managed by selecting high quality issuers and low risk investments which minimizes the potential of default by the issuer of the certificates. Interest rate risk is mitigated by the short-term, cashable nature of the securities.

A CCOUNTS R ECEIVABLE

Accounts receivable is comprised of amounts due from patients, insurance providers, third party e-commerce payment processing facilitators, and input tax credit refunds. Accounts receivable are subject to credit risk and liquidity risk that could result in an inability to collect amounts due. Credit risk is mitigated by regular monitoring of aged receivables and managing the underlying business relationships with insurance providers. Liquidity risk is mitigated by requiring advance payment for most non-insurance or high-risk transactions.

C ONVERTIBLE L OAN R ECEIVABLE

The convertible loan receivable consists of a promissory note issued by Ehave in favour of the Company, to develop software and a branded application for the Company. The note is convertible into equity securities of Ehave at the option of the Company and is subject to risk which is mitigated by managing the underlying business relationship.

A CCOUNTS P AYABLE AND A CCRUED L IABILITIES

Accounts payable and accrued liabilities is comprised of trade and non-trade payables, employee related costs and compensation accrued, sales tax and other government remittances payable, and other Company obligations expected to be settled within one year. These obligations are subject to liquidity risk, in that the Company may not be able to settle its obligations as they become due. See “Liquidity, Capital Resources and Financing”, above, for discussion on how the Company manages liquidity risk.

T ERM C REDIT F ACILITY

The Term Credit Facility is a variable rate, 10-year secured loan and is subject to interest and liquidity risk. The Company regularly monitors economic and market conditions to assess the likelihood and impact of changes in variable interest rates. See “Liquidity, Capital Resources and Financing”, above, for discussion on how the Company manages liquidity risk.

DISCLOSURE CONTROLS AND INTERNAL CONTROLS OVER FINANCIAL REPORTING

I NTERNAL C ONTROLS O VER F INANCIAL R EPORTING

In accordance with National Instrument 52-109 – Certification of Disclosure in Issuers’ Annual and Interim Filings, management is responsible for establishing and maintaining adequate Disclosure Controls and Procedures (“DCP”) and Internal Control Over Financial Reporting (“ICFR”). Management has designed DCP and ICFR based on the 2013 Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), with the objective of providing reasonable assurance that the Company’s financial reports and information, including the Company’s Condensed Interim Consolidated Financial Statements and MD&A were prepared in accordance with IFRS. There have been no changes to the design of internal controls over financial report that occurred during the year ended March 31, 2018 that have materially affected or are reasonably likely to materially affect the internal controls over financial reporting. The CEO and CFO have concluded that the design of DCP and ICFR were adequate and to provide such assurance as at March 31, 2018.

L IMITATIONS OF C ONTROLS AND P ROCEDURES

The Company’s management, including the CEO and CFO, believes that any DCP or ICFR, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, they cannot provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been prevented or detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by unauthorized override of the control. The design of any control system also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Accordingly, because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

OUTSTANDING SHARE DATA

As at the date of this MD&A and March 31, 2018, the following Common Shares and securities convertible into Common Shares of the Company were issued and outstanding:


	June 18, 2018		March 31, 2018
Common shares outstanding		101,329,195		100,779,791
Convertible warrants		2,875,000		2,875,000
Common stock options		5,918,871		6,645,835

Shares outstanding and issuable upon conversion of convertible warrants and exercise of common stock options		110,123,066		110,300,626

RISKS AND UNCERTAINTIES

MedReleaf is subject to various risks that could have a material and negative effect on the Company, it’s financial performance, condition and outlook. These risks could cause actual results to differ materially from those expressed or implied in forward-looking statements included in this MD&A, the Company’s financial statements and other Company reports and documents. These risks include but are not limited to, the following risk factors.

R EGULATORY R ISKS

•

The Company may not always be able to successfully comply with the regulatory requirements for Licensed Producers as set out by the ACMPR and Health Canada;

•

The laws, regulations and guidelines generally applicable to the medical cannabis industry may change in ways unforeseen by the Company, changes with respect to the reimbursement program established for Veterans or the cancellation thereof and the potential implementation of a legal framework regulating the recreational market for cannabis;

•

If MedReleaf is not able to comply with all safety, health and environmental regulations applicable to its operations, it may be held liable for any breaches thereof; and

•

The Company (and all other Licensed Producers) are constrained by law in their ability to market their products.

L EGAL R ISKS

•

The Company may be subject to product liability claims;

•

The Company may become subject to liability arising from any fraudulent or illegal activity by its employees, contractors, and consultants;

•

The Company may be subject to litigation in the ordinary course of its business; and

•

F INANCIAL R ISKS

•

The Markham and Bradford Facilities are integral to the Company’s business, financial condition, and results of operations;

•

The Company will seek to maintain adequate insurance coverage in respect of the risks faced by it, however, premiums for such insurance may not continue to be commercially justifiable and there may be coverage limitations and other exclusions which may not be sufficient to cover potential liabilities faced by the Company;

•

MedReleaf may not be able to secure adequate or reliable sources of funding required to operate its business and meet consumer demand for its products;

•

The Company’s credit facilities may impose limitations on the types of transactions or financial arrangements required to adequately manage the Company’s business; and

•

Management may not be able to successfully implement adequate internal controls over financial reporting.

B USINESS R ISKS

•

The Company is dependent upon its Licences for the ability to grow, store and sell medical cannabis and other products derived therefrom;

•

The medical cannabis industry and market is relatively new in Canada, and the Company may ultimately be unable to succeed in this new industry and market;

•

The Company may compete for market share with other companies, including licensed producers, which may have longer operating histories and more manufacturing and marketing experience than the Company;

•

MedReleaf may seek to expand its business and operations into jurisdictions outside of Canada, and there are risks associated with doing so;

•

The Company may not be able to transport its medical cannabis products to patients in a safe and efficient manner;

•

MedReleaf may not be able to successfully develop new products or find a market for their sale;

•

MedReleaf may be unable to expand its operations in accordance with patient demand or to manage its operations beyond their current scale;

•

Management has limited experience with the requirements and demands of managing a publicly-traded company;

•

The proposed Arrangement Agreement between MedReleaf and Aurora may impose certain risks on the Company’s current operations;

•

If the proposed Arrangement Agreement is not completed, the market price of the Common Shares may decline and the Company’s business may suffer;.and

•

The Company may not be able to meet the increased demand associated with the legalization of the recreational market; conversely, the legalization of the recreational market may result in an over-supply in the cannabis industry that could impact the Company’s operations.

R ISKS INHERENT IN AN AGRICULTURAL BUSINESS

•

Access to certain key inputs such as raw materials, electricity, water and other utilities, and certain providers thereof, may be required to maintain a successful cannabis growing operation; and

•

The Company is subject to risks inherent in an agricultural business.

P ERCEPTION R ISKS

•

The Company’s cannabis-based pharmaceutical products may be the subject to recalls for a variety of reasons;

•

MedReleaf, or the medical cannabis industry more generally, may receive unfavourable publicity or become subject to negative consumer perception;

•

Third parties with whom the Company does business may perceive themselves as being exposed to reputational risk as result of their relationship with the Company; and

•

Certain events or developments in the medical cannabis industry more generally may impact MedReleaf’s reputation.

G ENERAL R ISKS

•

The Company may experience breaches of security at its facilities or in respect of electronic documents and data storage and may face risks related to breaches of applicable privacy laws;

•

The Company may not be able to develop and maintain lasting consumer relationships with patients;

•

The Company may not be able to successfully identify and execute future acquisitions or dispositions, or to successfully manage the impacts of such transactions on its operations;

•

Conflicts of interest may arise between MedReleaf and its directors and officers as a result of other business activities undertaken by such individuals;

•

The Company may be subject to risks related to its information technology systems, including cyber-attacks; and

•

The Company may face disruption in connection with labour organization efforts.

For a more detailed description of the various risks associated with the Company, refer to the AIF under the heading “Risk Factors”, which is available under the Company’s SEDAR profile at www.sedar.com .

Exhibit 5.1

Consent of Independent Auditors

The Board of Directors

Aurora Cannabis Inc.

We consent to the use in this Registration Statement on Form F-10 of Aurora Cannabis Inc. of our report dated June 18, 2018, on the consolidated financial statements of MedReleaf Corp., which comprise the consolidated statements of financial position as at March 31, 2018 and 2017, the consolidated statements of comprehensive (loss) income, shareholders’ equity and cash flows for the years then ended, and the notes, comprising a summary of significant accounting policies and other explanatory information (collectively the “consolidated financial statements”) included herein and to the reference to our firm under the heading “Experts” in such registration statement.

/s/ KPMG LLP

Chartered Professional Accountants, Licensed Public Accountants

April 2, 2019

Toronto, Canada

Exhibit 5.2

April 2, 2019

United States Securities and Exchange Commission

Dear Sirs and Mesdames:

Re:

Aurora Cannabis Inc.

We consent to the use in this Registration Statement on Form F-10 of Aurora Cannabis Inc. (the “Company”) of our report dated September 24, 2018, on the consolidated financial statements of the Company., which comprise the consolidated statements of financial position as at June 30, 2018 and 2017, the consolidated statements of comprehensive income (loss), consolidated statements of changes in equity and consolidated cash flows for the years then ended, and the notes, comprising a summary of significant accounting policies and other explanatory information included herein and to the reference to our firm under the heading “Experts” in such registration statement.

Yours truly,

/s/ MNP LLP

Chartered Professional Accountants

Exhibit 5.3

Deloitte LLP

122 1st Ave. S.

Suite 400

Saskatoon SK S7K 7E5

Canada

Tel: +13063434400

Fax: +13063434480

www.deloitte.ca

CONSENT OF INDEPENDENT AUDITOR

We consent to the incorporation by reference in this Registration Statement on Form F-10 of our report dated January 29, 2018 relating to the consolidated financial statements of CanniMed Therapeutics Inc. appearing in the Registration Statement on Form 40-F of Aurora Cannabis Inc.

/s/ Deloitte LLP

Chartered Professional Accountants

Licensed Professional Accountants

Saskatoon, Canada

April 2, 2019

Exhibit 5.4

April 2, 2019

United States Securities and Exchange Commission

Dear Sirs/Mesdames:

Re:

Aurora Cannabis Inc.

We hereby consent to the use of our name in the Registration Statement on Form F-10 filed by Aurora Cannabis Inc. on April 2, 2019, as such may thereafter be amended or supplemented, and in the base shelf prospectus included therein, on the cover pages and under the headings “Legal Matters”, “Interest of Experts” and “Enforceability of Civil Liabilities By U.S. Investors” in the Prospectus.

In giving this consent, we do not thereby admit that we come within the category of persons whose consent is required by section 7 of the Securities Act of 1933, as amended.

Yours truly,

/s/ McMillan LLP

Exhibit 5.5

April 2, 2019

United States Securities and Exchange Commission

Ladies and Gentlemen:

Re:

Aurora Cannabis Inc.

In giving this consent, we do not thereby admit that we come within the category of persons whose consent is required by section 7 of the Securities Act of 1933, as amended.

Yours truly,

/s/ Jenner & Block LLP

Jenner & Block LLP