---



---

TABLE OF CONTENTS

|Managements
      Responsibility for the Financial Statements                 | 1   
|------------------------------------------------------------------------------ | ----
|                                                                               |     
|Independent
      Auditors Report                                             | 2-3 
|                                                                               |     
|Consolidated
      Statements of Financial Position                            | 4   
|                                                                               |     
|Consolidated
      Statements of (Loss) Income and Comprehensive (Loss) Income | 5   
|                                                                               |     
|Consolidated
      Statements of Changes in Equity                             | 6   
|                                                                               |     
|Consolidated
      Statements of Cash Flows                                    | 7   
|                                                                               |     
|Notes
      to the Consolidated Financial Statements                           | 8-37





|CONSOLIDATED FINANCIAL STATEMENTS  |  FOR THE
      YEARS ENDED AUGUST 31, 2019 AND 2018 | 2
|---------------------------------------------------------------------------------------- | -

---





November 23, 2019

Managements Responsibility for the Financial Statements

The accompanying consolidated financial statements of
Organigram Holdings Inc. (the Company) have been prepared by the Companys
management in accordance with International Financial Reporting Standards as
issued by the International Accounting Standards Board and contain estimates
based on managements judgment. Internal control systems are maintained by
management to provide reasonable assurance that assets are safe-guarded and
financial information is reliable.

The Board of Directors of the Company is responsible for
ensuring that management fulfills its responsibilities for financial reporting
and is ultimately responsible for reviewing and approving the financial
statements and the accompanying management discussion and analysis. The Board of
Directors carries out this responsibility principally through its Audit
Committee.

The Audit Committee is appointed by the Board of Directors. It
meets with the Companys management and auditors and reviews internal controls
and financial reporting matters to ensure that management is properly
discharging its responsibilities before submitting the financial statements to
the Board of Directors for approval.

Deloitte LLP, appointed as the Companys auditors by the Board
of Directors, has audited these consolidated financial statements for the year
ended August 31, 2019. Their report follows.





|(signed) Greg Engel   | (signed) Paolo De Luca, CPA, CA
|----------------------- | ---------------------------------
|Chief Executive Officer | Chief Financial Officer          
|Moncton, New Brunswick  | Moncton, New Brunswick           





|CONSOLIDATED FINANCIAL STATEMENTS  |  FOR THE
      YEARS ENDED AUGUST 31, 2019 AND 2018 | 1
|---------------------------------------------------------------------------------------- | -

---

|                    | Deloitte LLP
|------------------- | ------------
|816 Main Street    
|Moncton NB E1C 1E6 
|Canada             
|                   
|Tel: (506) 389-8073
|Fax: (506) 632-1210
|www.deloitte.ca    

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of 
  Organigram Holdings Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated statement of
  financial position of Organigram Holdings Inc. and subsidiaries (the Company)
  as of August 31, 2019, the related consolidated statement of loss and
  comprehensive loss, consolidated statement of changes in equity, and
  consolidated statement of cash flows, for the year ended August 31, 2019, and
  the related notes to the consolidated financial statements (collectively
  referred to as the "financial statements"). In our opinion, the financial
  statements present fairly, in all material respects, the financial position of
  the Company as of August 31, 2019, and its financial performance and its cash
  flows for the year ended August 31, 2019, in conformity with International
  Financial Reporting Standards as issued by the International Accounting
  Standards Board.

Basis for Opinion

These financial statements are the responsibility of the
  Companys management. Our responsibility is to express an opinion on the
  Companys financial statements based on our audit. We are a public accounting
  firm registered with the Public Company Accounting Oversight Board (United
  States) (PCAOB) and are required to be independent with respect to the Company
  in accordance with the U.S. federal securities laws and the applicable rules and
  regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the
  PCAOB. Those standards require that we plan and perform the audit to obtain
  reasonable assurance about whether the financial statements are free of material
  misstatement, whether due to error or fraud. The Company is not required to
  have, nor were we engaged to perform, an audit of its internal control over
  financial reporting. As part of our audit, we are required to obtain an
  understanding of internal control over financial reporting but not for the
  purpose of expressing an opinion on the effectiveness of the Companys internal
  control over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of
  material misstatement of the financial statements, whether due to error or
  fraud, and performing procedures that respond to those risks. Such procedures
  included examining, on a test basis, evidence regarding the amounts and
  disclosures in the financial statements. Our audit also included evaluating the
  accounting principles used and significant estimates made by management, as well
  as evaluating the overall presentation of the financial statements. We believe
  that our audit provides a reasonable basis for our opinion.

Chartered Professional Accountants 
  Moncton, Canada 
  November 24, 2019

We have served as the Company's auditor since 2015.



|CONSOLIDATED FINANCIAL STATEMENTS  |  FOR THE
      YEARS ENDED AUGUST 31, 2019 AND 2018 | 2
|---------------------------------------------------------------------------------------- | -

---

|                             | Deloitte LLP
|---------------------------- | ------------
|100 Queen Street, Suite 1600
|Ottawa, ON K1P 5T8          
|Canada                      
|                            
|Tel: (613) 236-2442         
|Fax: (613) 236-2195         
|www.deloitte.ca             

Independent Auditors Report

To the Shareholders and the Board of Directors of 
  Organigram Holdings Inc.

We have audited the accompanying consolidated financial
  statements of Organigram Holdings Inc., which comprise the consolidated
  statement of financial position as at August 31, 2018, and the consolidated
  statements of income and comprehensive income, consolidated statement of changes
  in equity and consolidated statement of cash flows for the year then ended, and
  a summary of significant accounting policies and other explanatory information.

Managements Responsibility for the
  Consolidated Financial Statements

Management is responsible for the preparation and fair
  presentation of these consolidated financial statements in accordance with
  International Financial Reporting Standards as issued by the International
  Accounting Standards Board, 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.

Auditors Responsibility

Our responsibility is to express an opinion on these
  consolidated financial statements based on our audit. We conducted our audit 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 the auditors 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, the auditor considers 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 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 financial position of Organigram Holdings
  Inc. as at August 31, 2018, and its financial performance and its cash flows for
  the year then ended in accordance with International Financial Reporting
  Standards as issued by the International Accounting Standards Board.

Chartered Professional Accountants 
  Licensed Public
  Accountants 
  November 24, 2019 
  Ottawa, Canada



|CONSOLIDATED FINANCIAL STATEMENTS  |  FOR THE
      YEARS ENDED AUGUST 31, 2019 AND 2018 | 3
|---------------------------------------------------------------------------------------- | -

---

ORGANIGRAM HOLDINGS INC.CONSOLIDATED
STATEMENTS OF FINANCIAL POSITIONAs at August 31, 2019 and
2018(Expressed in CDN $000s except share amounts)

|                                                    |   | AUGUST 31, 2019 |   |  |   | AUGUST 31, 2018 | 
|--------------------------------------------------- | - | --------------- | - |  | - | --------------- | 
|ASSETS                                              |   |                 |   |  |   |                 | 
|Current assets                                      |   |                 |   |  |   |                 | 
|Cash                                                | $ | 47,555          |   |  | $ | 55,064          | 
|Short term investments (Note 4)                     |   | 380             |   |  |   | 75,000          | 
|Accounts receivable (Note 5)                        |   | 16,541          |   |  |   | 3,736           | 
|Loan receivable (Note 6)                            |   | 909             |   |  |   | -               | 
|Biological assets (Note 7)                          |   | 20,652          |   |  |   | 19,858          | 
|Inventories (Note 8)                                |   | 93,144          |   |  |   | 44,969          | 
|Prepaid expenses and deposits (Note 13 and Note 24) |   | 17,100          |   |  |   | 3,372           | 
|Assets classified as held for sale (Note 25)        |   | -               |   |  |   | 1,215           | 
|                                                    |   | 196,281         |   |  |   | 203,214         | 
|Property, plant and equipment (Note 9)              |   | 219,046         |   |  |   | 98,639          | 
|Intangible assets (Note 10)                         |   | 1,498           |   |  |   | -               | 
|Deferred charges (Note 13 and Note 24)              |   | 592             |   |  |   | 714             | 
|Investments in associates (Note 14)                 |   | 11,108          |   |  |   | -               | 
|                                                    | $ | 428,525         |   |  | $ | 302,567         | 
|                                                    |   |                 |   |  |   |                 | 
|LIABILITIES                                         |   |                 |   |  |   |                 | 
|Current Liabilities                                 |   |                 |   |  |   |                 | 
|Accounts payable and accrued liabilities            | $ | 40,355          |   |  | $ | 10,764          | 
|Current portion of long term debt (Note 11)         |   | 3,509           |   |  |   | 421             | 
|Liabilities classified as held for sale (Note 25)   |   | -               |   |  |   | 65              | 
|                                                    |   | 43,864          |   |  |   | 11,250          | 
|                                                    |   |                 |   |  |   |                 | 
|Long-term debt (Note 11)                            |   | 46,067          |   |  |   | 2,877           | 
|Unsecured convertible debentures (Note 12)          |   | -               |   |  |   | 95,866          | 
|Contigent share consideration (Note 14)             |   | 1,117           |   |  |   | -               | 
|Deferred tax liability (Note 21)                    |   | 10,471          |   |  |   | 7,980           | 
|                                                    |   | 101,519         |   |  |   | 117,973         | 
|                                                    |   |                 |   |  |   |                 | 
|SHAREHOLDERS' EQUITY                                |   |                 |   |  |   |                 | 
|Share capital (Note 13)                             |   | 318,125         |   |  |   | 157,790         | 
|Reserve for options and warrants (Note 13)          |   | 17,707          |   |  |   | 26,045          | 
|Accumulated other comprehensive loss                |   | (43             | ) |  |   | -               | 
|(Accumulated deficit) retained earnings             |   | (8,783          | ) |  |   | 759             | 
|                                                    |   | 327,006         |   |  |   | 184,594         | 
|                                                    | $ | 428,525         |   |  | $ | 302,567         | 

On Behalf of the Board:s/Greg Engel, Directors/Peter
Amirault, Director

The accompanying notes are an integral part of these
Consolidated Financial Statements.

|CONSOLIDATED FINANCIAL STATEMENTS  |  FOR THE
      YEARS ENDED AUGUST 31, 2019 AND 2018 | 3
|---------------------------------------------------------------------------------------- | -

---

ORGANIGRAM HOLDINGS INC.CONSOLIDATED
STATEMENTS OF (LOSS) INCOME AND COMPREHENSIVE (LOSS) INCOMEFor the years
ended August 31, 2019 and 2018(Expressed in CDN $000s except share
amounts)

|                                                                                     |   | AUGUST 31, 2019 |   |  |   | AUGUST 31, 2018 |  
|------------------------------------------------------------------------------------ | - | --------------- | - |  | - | --------------- | -
|REVENUES                                                                             |   |                 |   |  |   |                 |  
|Gross revenue (Note 18)                                                              | $ | 97,547          |   |  | $ | 12,429          |  
|Excise taxes                                                                         |   | (17,134         | ) |  |   | -               |  
|Net revenue                                                                          |   | 80,413          |   |  |   | 12,429          |  
|                                                                                     |   |                 |   |  |   |                 |  
|Cost of sales                                                                        |   | 37,788          |   |  |   | 5,525           |  
|Indirect production (Note 19)                                                        |   | 4,733           |   |  |   | 1,289           |  
|Gross margin before fair value adjustments                                           |   | 37,892          |   |  |   | 5,615           |  
|Fair value changes to biological assets and changesin inventory sold (Note 7)        |   | 10,577          |   |  |   | 46,018          |  
|Gross margin                                                                         |   | 48,469          |   |  |   | 51,633          |  
|                                                                                     |   |                 |   |  |   |                 |  
|OPERATING EXPENSES                                                                   |   |                 |   |  |   |                 |  
|General and administrative (Note 23)                                                 |   | 18,593          |   |  |   | 5,552           |  
|Sales and marketing (Note 26)                                                        |   | 14,625          |   |  |   | 5,437           |  
|Share-based compensation (Note 13)                                                   |   | 9,151           |   |  |   | 4,228           |  
|Impairment of property, plant and equipment (Note 9)                                 |   | 613             |   |  |   | -               |  
|Total operating expenses                                                             |   | 42,982          |   |  |   | 15,217          |  
|                                                                                     |   |                 |   |  |   |                 |  
|INCOME FROM OPERATIONS                                                               |   | 5,487           |   |  |   | 36,416          |  
|Financing costs                                                                      |   | 9,668           |   |  |   | 10,094          |  
|Investment income                                                                    |   | (662            | ) |  |   | (1,455          | )
|Share of loss from investments in associates (Note 14)                               |   | 1,261           |   |  |   | -               |  
|Impairment of investments in associates (Note 14)                                    |   | 950             |   |  |   | -               |  
|Unrealized loss on changes in fair value of contingentconsideration (Note 14)        |   | 145             |   |  |   | -               |  
|(Loss) income from continuing operations before tax                                  |   | (5,875          | ) |  |   | 27,777          |  
|                                                                                     |   |                 |   |  |   |                 |  
|Income tax expense                                                                   |   |                 |   |  |   |                 |  
|Deferred, net (Note 21)                                                              |   | 3,629           |   |  |   | 5,653           |  
|                                                                                     |   |                 |   |  |   |                 |  
|Net (loss) income from continuing operations                                         | $ | (9,504          | ) |  | $ | 22,124          |  
|                                                                                     |   |                 |   |  |   |                 |  
|Loss from discontinued operations (Note 25)                                          |   | (38             | ) |  |   | (1,611          | )
|                                                                                     |   |                 |   |  |   |                 |  
|NET (LOSS) INCOME                                                                    | $ | (9,542          | ) |  | $ | 20,513          |  
|                                                                                     |   |                 |   |  |   |                 |  
|Other comprehensive loss                                                             |   |                 |   |  |   |                 |  
|Foreign currency translation loss, net of tax                                        |   | (43             | ) |  |   | -               |  
|                                                                                     |   |                 |   |  |   |                 |  
|COMPREHENSIVE (LOSS) INCOME                                                          | $ | (9,585          | ) |  | $ | 20,513          |  
|Net (loss) income from continuing operations per common share,basic (Note 13 (vi))   | $ | (0.067          | ) |  | $ | 0.184           |  
|Net (loss) income from continuing operations per common share,diluted (Note 13 (vi)) | $ | (0.067          | ) |  | $ | 0.174           |  
|Net loss from discontinued operations per common share,basic (Note 13 (vi))          | $ | -               |   |  | $ | (0.013          | )
|Net loss from discontinued operations per common share,diluted (Note 13 (vi))        | $ | -               |   |  | $ | (0.013          | )
|Net (loss) income per common share, basic (Note 13 (vi))                             | $ | (0.068          | ) |  | $ | 0.170           |  
|Net (loss) income per common share, diluted (Note 13 (vi))                           | $ | (0.068          | ) |  | $ | 0.162           |  

The accompanying notes are an integral part of these
Consolidated Financial Statements.

|CONSOLIDATED FINANCIAL STATEMENTS  |  FOR THE
      YEARS ENDED AUGUST 31, 2019 AND 2018 | 4
|---------------------------------------------------------------------------------------- | -

---

ORGANIGRAM HOLDINGS INC.CONSOLIDATED
STATEMENTS OF CHANGES IN EQUITYFor the years ended August 31, 2019 and
2018(Expressed in CDN $000s except share amounts)

|                                                            |  | NUMBER OF SHARES |  |   | SHARE CAPITAL |   |   | RESERVE FOR OPTIONS AND WARRANTS |   |   | ACCUMULATED  OTHER COMPREHENSIVE LOSS |   |   | RETAINED EARNINGS/(ACCUMULATED DEFICIT) |   |   | SHAREHOLDERS' EQUITY |  
|----------------------------------------------------------- |  | ---------------- |  | - | ------------- | - | - | -------------------------------- | - | - | ------------------------------------- | - | - | --------------------------------------- | - | - | -------------------- | -
|Balance - September 1, 2017                                 |  | 103,521,404      |  | $ | 99,531        |   | $ | 3,081                            |   | $ | -                                     |   | $ | (19,755                                 | ) | $ | 82,857               |  
|Share-based compensation(Note 13 (v))                       |  | -                |  |   | -             |   |   | 5,049                            |   |   | -                                     |   |   | -                                       |   |   | 5,049                |  
|Share-based payments (Note 13 (iii))                        |  | 50,000           |  |   | 144           |   |   | -                                |   |   | -                                     |   |   | -                                       |   |   | 144                  |  
|Exercise of stock options (Note 13 (iii))                   |  | 504,801          |  |   | 1,183         |   |   | (462                             | ) |   | -                                     |   |   | -                                       |   |   | 721                  |  
|Exercise of warrants (Note 13 (iv))                         |  | 4,330,837        |  |   | 6,693         |   |   | (739                             | ) |   | -                                     |   |   | -                                       |   |   | 5,954                |  
|Conversion of debentures (Note 13(iii))                     |  | 372,324          |  |   | 2,312         |   |   | (294                             | ) |   |                                       |   |   |                                         |   |   | 2,018                |  
|Equity financing (Note 13 (iii))                            |  | 16,428,572       |  |   | 48,711        |   |   | 8,789                            |   |   | -                                     |   |   | -                                       |   |   | 57,500               |  
|Equity financing issue costs(Note 13 (iii))                 |  | -                |  |   | (3,116        | ) |   | (562                             | ) |   | -                                     |   |   | -                                       |   |   | (3,678               | )
|Convertible debenture allocationof discount (Note 13 (iii)) |  | -                |  |   | -             |   |   | 16,905                           |   |   | -                                     |   |   | -                                       |   |   | 16,905               |  
|Convertible debenture issue costs(Note 13 (iii))            |  | -                |  |   | -             |   |   | (1,061                           | ) |   | -                                     |   |   | -                                       |   |   | (1,061               | )
|Tax impact of equity issue costs                            |  | -                |  |   | 2,332         |   |   | (4,661                           | ) |   | -                                     |   |   | -                                       |   |   | (2,329               | )
|Net income and comprehensive income                         |  | -                |  |   | -             |   |   | -                                |   |   | -                                     |   |   | 20,513                                  |   |   | 20,513               |  
|Balance - August 31, 2018                                   |  | 125,207,938      |  | $ | 157,790       |   | $ | 26,045                           |   | $ | -                                     |   | $ | 759                                     |   | $ | 184,594              |  
|                                                            |  |                  |  |   |               |   |   |                                  |   |   |                                       |   |   |                                         |   |   |                      |  
|Balance - September 1, 2018                                 |  | 125,207,938      |  | $ | 157,790       |   | $ | 26,045                           |   | $ | -                                     |   | $ | 759                                     |   | $ | 184,594              |  
|Share-based compensation(Note 13 (v))                       |  | 41,000           |  |   | 180           |   |   | 14,608                           |   |   | -                                     |   |   | -                                       |   |   | 14,788               |  
|Exercise of stock options (Note 13 (iii))                   |  | 2,167,864        |  |   | 6,588         |   |   | (2,418                           | ) |   | -                                     |   |   | -                                       |   |   | 4,170                |  
|Exercise of warrants (Note 13 (iv))                         |  | 7,751,700        |  |   | 39,257        |   |   | (8,281                           | ) |   | -                                     |   |   | -                                       |   |   | 30,976               |  
|Exercise of restricted share units(Note 13 (v))             |  | 182,473          |  |   | 837           |   |   | (837                             | ) |   | -                                     |   |   | -                                       |   |   | -                    |  
|Conversion of debentures(Note 13 (iii))                     |  | 20,845,372       |  |   | 112,166       |   |   | (11,247                          | ) |   | -                                     |   |   | -                                       |   |   | 100,919              |  
|Tax impact of equity andconvertible debentures              |  | -                |  |   | 1,307         |   |   | (163                             | ) |   | -                                     |   |   | -                                       |   |   | 1,144                |  
|Foreign currency translationgain, net of tax                |  | -                |  |   | -             |   |   | -                                |   |   | (43                                   | ) |   | -                                       |   |   | (43                  | )
|Net loss                                                    |  | -                |  |   | -             |   |   | -                                |   |   | -                                     |   |   | (9,542                                  | ) |   | (9,542               | )
|Balance - August 31, 2019                                   |  | 156,196,347      |  | $ | 318,125       |   | $ | 17,707                           |   | $ | (43                                   | ) | $ | (8,783                                  | ) | $ | 327,006              |  

The accompanying notes are an integral part of these
Consolidated Financial Statements.

|CONSOLIDATED FINANCIAL STATEMENTS  |  FOR THE
      YEARS ENDED AUGUST 31, 2019 AND 2018 | 5
|---------------------------------------------------------------------------------------- | -

---

ORGANIGRAM HOLDINGS INC.CONSOLIDATED
STATEMENTS OF CASH FLOWSFor the years ended August 31, 2019 and
2018(Expressed in CDN $000s except share amounts)

|                                                                                   |   | AUGUST 31, 2019 |   |  |   | AUGUST 31, 2018 |  
|---------------------------------------------------------------------------------- | - | --------------- | - |  | - | --------------- | -
|CASH PROVIDED (USED)                                                               |   |                 |   |  |   |                 |  
|OPERATING ACTIVITIES                                                               |   |                 |   |  |   |                 |  
|Net (loss) income from continuing operations                                       | $ | (9,504          | ) |  | $ | 22,124          |  
|Items not affecting cash:                                                          |   |                 |   |  |   |                 |  
|Share-based compensation (Note 13)                                                 |   | 14,894          |   |  |   | 5,033           |  
|Depreciation and amortization (Note 9 and Note 10)                                 |   | 8,902           |   |  |   | 3,528           |  
|Loss on disposal of property, plant and equipment (Note 9)                         |   | 133             |   |  |   | 39              |  
|Impairment losses (Note 9 and Note 14)                                             |   | 1,563           |   |  |   | -               |  
|Fair value adjustment to biological assets                                         |   | (8,060          | ) |  |   | (10,736         | )
|Financing costs                                                                    |   | 9,668           |   |  |   | 10,093          |  
|Investment income                                                                  |   | (662            | ) |  |   | (1,455          | )
|Share of loss from investments in associates (Note 14)                             |   | 1,261           |   |  |   | -               |  
|Unrealized loss on changes in fair value of contingent consideration (Note 14)     |   | 145             |   |  |   | -               |  
|Deferred tax expense                                                               |   | 3,635           |   |  |   | 5,653           |  
|                                                                                   |   |                 |   |  |   |                 |  
|Changes in non-cash working capital:                                               |   |                 |   |  |   |                 |  
|Net change in accounts receivable                                                  |   | (13,134         | ) |  |   | 337             |  
|Net change in biological assets                                                    |   | 7,266           |   |  |   | (6,342          | )
|Net change in inventories                                                          |   | (48,175         | ) |  |   | (42,342         | )
|Net change in accounts payable and accrued liabilities                             |   | 10,562          |   |  |   | 3,982           |  
|Net change in prepaid expenses and deferred charges                                |   | (13,540         | ) |  |   | (2,169          | )
|Net cash used in continuing operations                                             |   | (35,046         | ) |  |   | (12,255         | )
|Net cash used in operating activities related to discontinued operations (Note 25) |   | (35             | ) |  |   | (449            | )
|Net cash used in operating activities                                              |   | (35,081         | ) |  |   | (12,704         | )
|                                                                                   |   |                 |   |  |   |                 |  
|FINANCING ACTIVITIES                                                               |   |                 |   |  |   |                 |  
|Proceeds from equity financing (Note 13)                                           |   | -               |   |  |   | 57,500          |  
|Proceeds from convertible debenture issuance (Note 12)                             |   | -               |   |  |   | 115,000         |  
|Payment of share issue costs (Note 13)                                             |   | -               |   |  |   | (3,678          | )
|Payment of convertible debenture issue costs (Note 12)                             |   | -               |   |  |   | (7,155          | )
|Payment of long-term debt (Note 11)                                                |   | (12,674         | ) |  |   | (388            | )
|Proceeds from long-term debt, net of issue costs of $1,250 (2018 - nil) (Note 11)  |   | 58,851          |   |  |   | 159             |  
|Stock options, warrants and units exercised (Note 13)                              |   | 35,146          |   |  |   | 6,673           |  
|Interest paid                                                                      |   | (6,995          | ) |  |   | (4,201          | )
|Net cash provided by financing activities                                          |   | 74,328          |   |  |   | 163,910         |  
|                                                                                   |   |                 |   |  |   |                 |  
|INVESTING ACTIVITIES                                                               |   |                 |   |  |   |                 |  
|Purchase of short-term investments (Note 4)                                        |   | -               |   |  |   | (174,200        | )
|Proceeds from short-term investments                                               |   | 75,000          |   |  |   | 131,200         |  
|Investment income                                                                  |   | 1,637           |   |  |   | 1,455           |  
|Investments in associates (Note 14)                                                |   | (12,758         | ) |  |   | -               |  
|Distributions received from investments in associates                              |   | 374             |   |  |   | -               |  
|Loan advance (Note 6)                                                              |   | (909            | ) |  |   | -               |  
|Proceeds on sale of property, plant and equipment (Note 9)                         |   | 168             |   |  |   | 15              |  
|Purchase of property, plant and equipment (Note 9)                                 |   | (108,764        | ) |  |   | (56,435         | )
|Purchase of intangible assets (Note 10)                                            |   | (1,530          | ) |  |   | -               |  
|Net cash used in investing activities related to continuing operations             |   | (46,782         | ) |  |   | (97,965         | )
|Net cash used in investing activities related to discontinued operations (Note 25) |   | -               |   |  |   | (32             | )
|Net cash used in investing activities                                              |   | (46,782         | ) |  |   | (97,997         | )
|                                                                                   |   |                 |   |  |   |                 |  
|Effects of foreign exchange on cash                                                |   | 26              |   |  |   | -               |  
|INCREASE (DECREASE) IN CASH                                                        | $ | (7,509          | ) |  | $ | 53,209          |  
|CASH POSITION                                                                      |   |                 |   |  |   |                 |  
|Beginning of period                                                                | $ | 55,064          |   |  | $ | 1,957           |  
|Cash included in disposal group (Note 25)                                          |   | -               |   |  |   | (102            | )
|End of period                                                                      | $ | 47,555          |   |  | $ | 55,064          |  

The accompanying notes are an integral part of these
Consolidated Financial Statements.

|CONSOLIDATED FINANCIAL STATEMENTS  |  FOR THE
      YEARS ENDED AUGUST 31, 2019 AND 2018 | 6
|---------------------------------------------------------------------------------------- | -

---

ORGANIGRAM HOLDINGS INC.NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTSFor the years ended August 31, 2019 and
2018(Expressed in CDN $000s except share amounts)

1. NATURE OF OPERATIONS

Organigram Holdings Inc. (the Company) is a publicly traded
corporation on the Toronto Stock Exchange (TSX) with its common shares trading
under the symbol OGI and on the Nasdaq Global Select Market under the symbol
OGI. The address of the registered office of OHI is 35 English Drive, Moncton,
New Brunswick, Canada, E1E 3X3.

The Companys major subsidiaries are Organigram Inc., a
Licensed Producer (LP) of cannabis and cannabis derived products in Canada
regulated by Health Canada under the Cannabis Act and the Cannabis Regulations
of Canada, and 10870277 Canada Inc., a holding company for Organigram Holdings
Inc.

Organigram Inc. was incorporated, under the laws of the
Province of New Brunswick, Canada, on March 1, 2013. 10870277 Canada Inc. and
Organigram Holdings Inc. are federal companies under the Canada Business
Corporations Act.

2. BASIS OF PREPARATION

i) Statement of complianceThe consolidated financial
statements have been prepared in compliance with the International Financial
Reporting Standards (IFRS) as issued by the International Accounting Standards
Board (IASB) and interpretations of the IFRS Interpretations Committee
(IFRIC).

These consolidated financial statements were approved and
authorized for issue by the Board of Directors of the Company on November 23,
2019.

ii) Basis of measurementThese consolidated financial
statements have been prepared on a historical cost basis except for biological
assets, short-term investments, share-based compensation, and contingent share
consideration, which are measured at fair value.

Historical cost is the fair value of the consideration given in
exchange for goods and services, which is generally based upon the fair value at
the time of the transaction of the consideration given in exchange for assets.

iii) Basis of consolidationThese consolidated financial
statements include the accounts of the Company and its subsidiaries on a
consolidated basis after elimination of intercompany transactions and balances.
Subsidiaries are entities the Company controls when it is exposed, or has
rights, to variable returns from its involvement and has the ability to affect
those returns through its power to direct the relevant activities of the entity.

iv) Foreign currency translationFunctional and presentation
currency
These consolidated financial statements are presented in Canadian
dollars, which is the Companys and its subsidiaries functional currency,
except for the Companys investment in associate in alpha-cannabis Pharma GmbH,
for which the functional currency has been determined to be Euros.

Transactions and balancesForeign currency transactions are
translated into the functional currency using the exchange rates prevailing at
the dates of the transactions. Foreign exchange gains and losses resulting from
the settlement of foreign currency transactions and from the translation at
period-end exchange rates of monetary assets and liabilities denominated in
currencies other than an operations functional currency are recognized in the
consolidated statements of (loss) income and comprehensive (loss) income.

Foreign operationsThe assets and liabilities of foreign
operations, including goodwill and fair value adjustments arising on
acquisition, are translated to Canadian Dollars at exchange rates at the
reporting date. The income and expenses of foreign operations are translated to
Canadian Dollars using average exchange rates for the month during which the
transactions occurred. Foreign currency differences are recognized in other
comprehensive income (loss) in the accumulated other comprehensive loss account.

When the Company disposes of its entire interest in a foreign
operation, or loses control over a foreign operation, the foreign currency gains
or losses accumulated in other comprehensive income (loss) related to the
foreign operation are recognized in profit or loss. If the Company disposes of
part of an interest in a foreign operation that remains a subsidiary, a
proportionate amount of foreign currency gains or losses accumulated in other
comprehensive income (loss) related to the subsidiary is reallocated between
controlling and non-controlling interests.

|CONSOLIDATED FINANCIAL STATEMENTS  |  FOR THE
      YEARS ENDED AUGUST 31, 2019 AND 2018 | 7
|---------------------------------------------------------------------------------------- | -

---

3. SIGNIFICANT ACCOUNTING POLICIES

i) Cash and cash equivalents
  Cash and cash equivalents are
financial assets that are measured at amortized cost, which approximate fair
value and include cash-on-hand and deposits held with financing institutions.

ii) Short term investments
  The Company considers short-term
  investments in the form of guaranteed investment certificates to be an investing
  activity. These investments are measured at amortized cost. The company also has
  equity securities that are carried at fair value through profit or loss.

iii) Biological assetsWhile the Companys biological assets
are within the scope of IAS 41 Agriculture, the direct and indirect costs of
biological assets are determined using an approach similar to the capitalization
criteria outlined in IAS 2 Inventories. They include the direct cost of seeds
and growing materials as well as other indirect costs such as utilities and
supplies used in the growing process. Indirect labour cost for individuals
involved in the growing and quality control process is also included, as well as
depreciation of manufacturing assets. All direct and indirect costs of
biological assets are capitalized as they are incurred. Unrealized fair value
gains/losses on growth of biological assets are recorded on the consolidated
statements of (loss) income and comprehensive (loss) income. Biological assets
are measured at their fair value less costs to sell on the consolidated
statement of financial position.

iv) InventoriesInventories for finished goods and packaging
and supplies are initially valued at cost, and subsequently at the lower of cost
and net realizable value. Net realizable value is the estimated selling price in
the ordinary course of business, less the estimated costs to sell. The Company
reviews inventories for obsolete, redundant and slow-moving goods and any such
inventories identified are written down to net realizable value. The direct and
indirect costs of finished goods inventory initially include the fair value of
the biological asset at the time of harvest. They also include subsequent costs
such as materials, labour and depreciation expense on equipment involved in
packaging, labeling and inspection. All direct and indirect costs related to
inventory are capitalized as they are incurred, and they are subsequently
recorded within cost of sales on the consolidated statements of (loss) income
and comprehensive (loss) income at the time cannabis is sold. Inventory is
measured at lower of cost or net realizable value on the statement of financial
position.

v) Property, plant and equipmentProperty, plant and
equipment are initially recognized at acquisition cost or manufacturing cost,
including any costs directly attributable to bringing the assets to the location
and condition necessary for them to be capable of operating in the manner
intended by the Companys management. Property, plant and equipment are
subsequently measured at cost less accumulated depreciation and impairment
losses.

Depreciation is recognized on a straight-line basis to write
down the cost less estimated residual value of buildings, computer equipment and
growing equipment. The following useful lives are applied:

Building
    25 yearsGrowing equipment
    10 yearsComputer equipment
    5 yearsVehicles
    5 yearsFurniture and fixtures
    10 years


Gains or losses arising on the disposal of property, plant and
equipment are determined as the difference between the disposal proceeds and the
carrying amount of the assets and are recognized in profit or loss within other
income or other expenses.

Assets in process are transferred to the appropriate asset
class when available for use and depreciation of the assets commences at that
point.

An assets residual value, useful life and depreciation method
are reviewed during each financial year and adjusted if appropriate. When parts
of an item of equipment have different useful lives, they are accounted for as
separate items (major components) of property, plant and equipment.

vi) GoodwillGoodwill represents the future economic
benefits arising from a business combination that are not individually
identified and separately recognized. Goodwill is carried at cost less
accumulated impairment losses. Refer to Note 4(viii) for a description of
impairment testing procedures.

vii) Assets held for saleAssets and liabilities held for
sale are no longer depreciated and are presented separately in the statement of
financial position at the lower of their carrying amount and fair value less
costs to sell. An asset is regarded as held for sale if its carrying amount will
be recovered principally through a sale transaction, rather than through
continuing use. For this to be the case, the asset must be available for
immediate sale and its sale must be highly probable.

viii) Impairment of long-lived assets
  Long-lived assets,
including property, plant and equipment are reviewed each reporting period for
indicators of impairment. Goodwill is assessed for indicators of impairment at
each reporting date and is tested annually or whenever events or changes in
circumstances indicate that the carrying amount of an asset exceeds its
recoverable amount. For the purpose of impairment testing, assets that cannot be
tested individually are grouped together into the smallest group of assets that
generates cash inflows from continuing use that are largely independent of the
cash inflows of other assets or groups of assets (the cash-generating unit, or
"CGU"). The recoverable amount of an asset or a CGU is the higher of its fair
value, less costs of disposal, and its value in use. If the carrying amount of
an asset exceeds its recoverable amount, an impairment charge is recognized
immediately in profit or loss equal to the amount by which the carrying amount
exceeds the recoverable amount. Except for goodwill, 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.

|CONSOLIDATED FINANCIAL STATEMENTS  |  FOR THE
      YEARS ENDED AUGUST 31, 2019 AND 2018 | 8
|---------------------------------------------------------------------------------------- | -

---

ix) Share-based paymentsThe Company measures equity settled
share-based payments based on their fair value at the grant date and recognizes
compensation expense in profit or loss over the vesting period based on the
Companys estimate of equity instruments that will eventually vest. Fair value
for options is determined using the Black-Scholes pricing model and fair value
for Restricted Share Units (RSUs) and Performance Share Units (PSUs) is
determined using the Companys share price at the grant date.

Expected forfeitures are estimated at the date of the grant and
subsequently adjusted if further information indicates actual forfeitures may
vary from the original estimate. The impact of the revision of the original
estimate is recognized in profit or loss such that the cumulative expenses
reflects the revised estimate.

For stock options granted to non-employees, the expense is
measured at the fair value of the goods and services received except when the
fair value cannot be estimated in which case it is measured at the fair value of
the equity instrument granted.

Consideration paid by employees or non-employees on the
exercise of options is recorded as share capital and the related share-based
expense is transferred from share-based reserve to share capital.

x) Investments in associatesAssociates are companies over
which OHI has significant influence over and are accounted for under the equity
method. Significant influence is presumed when the Company has an ownership
interest greater than 20%, unless certain qualitative factors overcome this
assumption. Conversely, where the Company has an ownership interest less than
20%, it is presumed that the Company does not have significant influence, unless
certain qualitative factors overcome this assumption. In assessing significant
influence and the ownership interest, potential voting rights that are currently
exercisable are taken into consideration.

Investments in associates are accounted for using the equity
method and are initially recognized at cost, inclusive of transaction costs. The
consolidated financial statements include the Companys share of the income or
loss and equity movement of equity accounted associates. In accordance with
IFRS, the associates most recent available financial statements are used in the
application of the equity method. Where the associates reporting period differs
from the Companys, the associate prepares financial information as of the same
period end as the Company, unless it is impracticable to do so. Otherwise, the
Company will adjust for its share of income and expenses and equity movement
based on the associates most recently completed financial statements, adjusted
for the effects of significant transactions. The Company does not recognize
losses exceeding the carrying value of its interest in the associate.

|CONSOLIDATED FINANCIAL STATEMENTS  |  FOR THE
      YEARS ENDED AUGUST 31, 2019 AND 2018 | 9
|---------------------------------------------------------------------------------------- | -

---

xi) Intangible assets
  Intangible assets are recorded at cost
less accumulated amortization and impairment losses, if any. Intangible assets
acquired in a business combination are measured at fair value at the acquisition
date. Amortization of definite life intangibles is provided on a straight-line
basis over their estimated useful lives, which do not exceed the contractual
period, if any, except for off-market supply agreements, where amortization is
provided based on the actual output received versus the estimated output
forecast to be received over the life of the agreement.

The estimated useful lives, residual values, and amortization
  methods are reviewed at each year end, and any changes in estimates are
  accounted for prospectively. Intangible assets with an indefinite life or not
  yet available for use are not subject to amortization.

Research costs are expensed as incurred. Development
  expenditures 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 as general and administrative expenses on the consolidated
  statement of income (loss) and comprehensive income (loss) as incurred.

xii) Earnings (loss) per share
  Basic earnings (loss) per
  share is calculated by dividing net income (loss) attributable to common
  shareholders by the weighted-average number of shares outstanding during the
  period. Diluted earnings (loss) per share is calculated in a similar manner, but
  with adjustments to give effect to all dilutive potential common shares
  outstanding during the period. The dilutive effect of warrants, options, RSUs
  and PSUs is calculated using the treasury stock method. The if-converted method
  which assumes that all convertible debt has been converted if the debt is
  in-the-money is used to calculate the dilutive effect of convertible debt.
  Anti-dilutive effects of potential conversions of securities are ignored for
  this calculation.

xiii) Revenue recognition
  Revenue from the direct sale of
  cannabis and cannabis oil for a fixed price is recognized when the Company
  transfers control of the good to the customer, which is at point of delivery for
  medical cannabis and recreational cannabis.

Revenue includes excise taxes, which the Company pays as
  principal, but excludes duties and taxes collected on behalf of third parties.
  Revenue also includes the net consideration to which the Company expects to be
  entitled. Revenue is recognized to the extent that it is highly probable that a
  significant reversal will not occur. Therefore, revenue is stated net of
  expected price discounts, allowances for customer returns and certain
  promotional activities and similar items. Generally, payment of the transaction
  price is due within credit terms that are consistent with industry practices,
  with no element of financing.

Net revenue is revenue less excise taxes. Excise taxes are
  effectively a production tax which becomes payable when the product is removed
  from the Companys premises and may or may not be directly related to the value
  of revenue depending on the province of sale. It is generally not included as a
  separate item on external invoices; increases in excise tax are not always
  passed on to the customer and where a customer fails to pay for product received
  the Company cannot reclaim the excise tax. The Company therefore recognizes
  excise tax, unless it regards itself as an agent of the regulatory authorities,
  as a cost to the Company.

xiv) Income taxes
  The measurement of income taxes payable
  and deferred income tax assets and liabilities requires management to make
  judgments in the interpretation and application of the relevant tax laws. The
  actual amount of income taxes only becomes final upon filing and acceptance of
  the tax return by the relevant authorities, which occurs subsequent to the
  issuance of the consolidated financial statements.

Income tax expense (recovery) in profit or loss is the sum of
current and deferred tax as explained below.

Current tax is the expected income tax payable (recoverable) on
the taxable income (loss) for the period, using tax rates enacted, or
substantively enacted, as at the end of the reporting period. Current tax
expense (recovery) included in profit or loss reflects the current tax for the
reporting period, plus adjustments to the current tax of prior periods, less
current tax recorded directly in other comprehensive income (loss) or equity.

Deferred taxes are accounted for under the liability method and
are the taxes expected to be payable or recoverable on the temporary differences
between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable
income. Deferred tax liabilities are generally recognized for all taxable
temporary differences and deferred tax assets are recognized to the extent that
it is probable that taxable income will be available against which deductible
temporary differences and unused tax losses and tax credits can be utilized.
Deferred tax is calculated on a non-discounted basis, using enacted or
substantively enacted tax rates expected to apply to taxable income in the years
in which those temporary differences are expected to be recovered or settled.
The carrying amounts of individual deferred tax assets are reviewed at the end
of each reporting period but are only recognized for the proportion probable
that sufficient taxable profits will be available for such assets to be
recovered.

Deferred tax is not recognized for temporary differences
related to the initial recognition of assets or liabilities in a transaction
that is not a business combination and that affects neither accounting nor
taxable profit or loss; differences relating to investments in subsidiaries to
the extent that it is probable that they will not reverse in the foreseeable
future; and, differences arising on the initial recognition of goodwill.

xv) Borrowing costs
  Borrowing costs directly attributable to
the acquisition, construction or production of qualifying assets, which are
assets that necessarily take a substantial period of time to get ready for their
intended use or sale, are added to the cost of those assets, until such time as
the assets are substantially ready for their intended use or sale. Other
borrowing costs are expensed in the period in which they are incurred and
reported in finance costs. No borrowing costs were capitalized during the
periods presented.

|CONSOLIDATED FINANCIAL STATEMENTS  |  FOR THE
      YEARS ENDED AUGUST 31, 2019 AND 2018 | 10
|---------------------------------------------------------------------------------------- | --

---

xvi) Discontinued operations
  A disposal group is presented
  as a discontinued operation if all of the following conditions are met: i) it is
  a component of the Company for which operations and cash flows can be clearly
  distinguished operationally and financially from the rest of the Company, ii) it
  represents a separate major line of business of operations that either has been
  disposed of or is classified as held for sale; or it is part of a single
  coordinated plan to dispose of a separate major line of business of operations.

Assets in a disposal group classified as held for sale are
  presented separately in the consolidated statements of financial position.
  Discontinued operations are presented separately from continuing operations in
  the consolidated statements of (loss) income and comprehensive (loss) income and
  consolidated statements of cash flows.

xvii) Critical accounting estimates and judgments
  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, income and expenses. 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 years affected.

The following are the estimates and judgments made by
  management in applying the accounting policies of the Company that have the most
  significant effect on the financial statements.

1) Biological assets and
  inventoryDetermination of the fair value of biological assets
  requires the Company to make a number of estimates, including estimating
  harvesting costs, selling costs, sales prices, wastage, oil conversion factor,
  expected yields, and post-harvest costs of the cannabis plant. In determining
  final inventory values, the Company estimates spoiled or expired inventory in
  determining net realizable value. Refer to Notes 8 and 9 for further
  information.

(2) Estimated useful lives of
  property, plant and equipmentAmortization of property, plant and
  equipment requires 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.

(3) Share-based
  paymentsIn determining the fair value of options and related
  expense, the Company makes such estimates as the expected life of the option,
  the volatility of the Companys share price, the risk-free interest rate, and
  the rate of forfeitures. Refer to Note 13 for further information.

(4) WarrantsIn
  determining the value of warrants, the Company estimates the expected life of
  the warrant, the volatility of the Companys share price and the risk-free
  interest rate.

(5) Compound Financial
  Instruments

In calculating the fair value
allocation between the liability component and the equity component of the
Companys unsecured convertible debentures (compound instruments), the Company
was required to make estimates and use judgment in determining an appropriate
discount rate on the debentures to arrive at a fair value. The identification of
convertible debentures components is based on interpretation of the substance
of the contractual arrangement and therefore requires judgment from management.
The separation of the components affects the initial recognition of interest on
the liability component. The determination of fair value of the liability is
also based on a number of assumptions, including contractual future cash flows,
discount rates and the presence of any derivative financial instruments. Refer
to Note 11 for further information.

(6) GoodwillGoodwill
impairment testing requires management to make estimates in the impairment
testing model. On an annual basis, the Company tests whether goodwill is
impaired, based on an estimate of its recoverable amount.

(7) Assets held for
saleAssets held for disposal and disposal groups are measured at the
lower of their carrying amount and their fair value less costs to sell. The
determination of the fair value less costs to sell includes the use of
management estimates and assumptions that tend to be uncertain.

(8) Adult-use recreational
cannabis revenue  provision for returns and price
adjustmentsGovernment customers typically have a right of
product return, and in some cases, the right to pricing adjustments for products
that are subsequently discounted or sold for a lower price in another
jurisdiction. The estimation of potential future returns and pricing adjustments
includes the use of management estimates and assumptions that may not be certain
given the evolving nature of the industry.

(9) Investments in
associatesManagement has applied significant judgment in the
determination of whether the Company exerts significant influence with respect
to its investments, which then allow the Company to account for its investments
under the equity accounting method. Further, management has applied significant
judgment and made use of management estimates and assumptions in determination
and quantification of any impairment losses that may need to be recorded against
its investments in associates.

|CONSOLIDATED FINANCIAL STATEMENTS  |  FOR THE
      YEARS ENDED AUGUST 31, 2019 AND 2018 | 11
|---------------------------------------------------------------------------------------- | --

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NEW STANDARDS AND INTERPRETATIONS ADOPTEDNew or amended
standards effective September 1, 2018
The Company has adopted the following
new or amended IFRS standards for the annual period beginning on September 1,
2018.

i) IFRS 2  Share-based Payments
  The amendment clarifies how
  to account for the effects of vesting and non-vesting conditions on the
  measurement of cash-settled share-based payments, share-based payment
  transactions with a net settlement feature and a modification to the terms and
  conditions that changes the classification of the transactions. The amendment is
  effective for annual periods beginning on or after January 1, 2018. This was
  effective for the Company beginning September 1, 2018.

The adoption of the new standard did not have a material impact
  on its consolidated financial statements.

ii) IFRS 9  Financial Instruments
  A finalized version of
  IFRS 9, which contains accounting requirements for financial instruments,
  replacing IAS 39 Financial Instruments: Recognition and Measurement. The
  standard contains requirements in the following areas: classification and
  measurement, impairment, hedge accounting and de-recognition.

Classification and measurement
  Under IFRS 9, financial
  assets are initially measured at fair value plus, in the case of a financial
  asset not at fair value through profit and loss (FVTPL), transaction
  costs.

Financial assets are subsequently measured at:

|i)   | FVTPL;                                                                         
|---- | -------------------------------------------------------------------------------
|     |                                                                                
|ii)  | amortized cost;                                                                
|     |                                                                                
|iii) | debt measured at fair value through other comprehensive
      income (FVOCI);
|     |                                                                                
|iv)  | equity investments designated at FVOCI; or                                     
|     |                                                                                
|v)   | financial instruments designated at
      FVTPL.                               

The classification is based on whether the contractual cash flow
  characteristics represent solely payment of principal and interest (the SPPI
  test) as well as the business model under which the financial assets are
  managed. Financial assets are required to be reclassified only when the business
  model under which they are managed has changed. All reclassifications are to be
  applied prospectively from the reclassification date.

Debt investments are recorded at amortized cost for financial
  assets that are held within a business model with the objective to hold the
  financial assets in order to collect contractual cash flows that meet the SPPI
  test.

The assessment of the Companys business models for managing
  the financial assets was made as of the date of initial application of September
  1, 2018. The assessment of whether contractual cash flows on debt instruments
  meet the SPPI test was made based on the facts and circumstances as at the
  initial recognition of the financial assets.

Consistent with IAS 39, all financial liabilities held by the
  Company under IFRS 9 are initially measured at fair value and subsequently
  measured at amortized cost.

The following table summarizes the original measurement
categories under IAS 39 and the new measurement categories under IFRS 9 for each
class of the Companys financial assets and financial liabilities:

|                                                             | IAS
      39 CLASSIFICATION | IFRS
      9 CLASSIFICATION
|------------------------------------------------------------ | --------------------------- | ---------------------------
|                                                             |                             |                            
|Cash and cash equivalents                                    | Loans and receivables       | Amortized cost             
|                                                             |                             |                            
|Short-term investments excluding marketable
      securities | Held to maturity            | Amortized cost             
|                                                             |                             |                            
|Accounts receivable                                          | Loans and receivables       | Amortized cost             
|                                                             |                             |                            
|Loan receivable                                              | N/A                         | Amortized cost             
|                                                             |                             |                            
|Marketable securities                                        | N/A                         | FVTPL                      
|                                                             |                             |                            
|Accounts payable and accrued liabilities                     | Other liabilities           | Amortized cost             
|                                                             |                             |                            
|Long-term debt                                               | Other liabilities           | Amortized cost             
|                                                             |                             |                            
|Unsecured convertible debentures                             | Other liabilities           | Amortized cost             

The adoption of IFRS 9 did not have an impact on the Companys
measurement of financial assets and liabilities.

|CONSOLIDATED FINANCIAL STATEMENTS  |  FOR THE
      YEARS ENDED AUGUST 31, 2019 AND 2018 | 12
|---------------------------------------------------------------------------------------- | --

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Impairment
Under IFRS 9, the Company is required to apply an expected
credit loss (ECL) model to all debt financial assets not held at FVTPL, where
credit losses that are expected to transpire in future years are provided for,
irrespective of whether a loss event has occurred or not as at the balance sheet
date. For trade receivables, the Company has applied the simplified approach
under IFRS 9 and has calculated ECLs based on lifetime expected credit losses
taking into consideration historical credit loss experience and financial
factors specific to the debtors and general economic conditions. The Company has
assessed the impairment of its amounts receivable using the ECL model, and no
difference was noted. As a result, no impairment loss has been recognized upon
transition and at September 1, 2018.

iii) IFRS 15  Revenue from Contracts with Customers
  In May
  2014, the IASB issued IFRS 15  Revenue from Contracts with Customer (IFRS
  15), which provides a comprehensive framework for recognition, measurement and
  disclosure of revenue from contracts with customers, excluding contracts within
  the scope of the standards on leases, insurance contracts and financial
  instruments.

The Company has applied IFRS 15 retrospectively but determined
  that there is no change to the comparative periods or transitional adjustments
  required as a result of the adoption of this standard. The pattern and timing of
  revenue recognition under the new standard is consistent with prior year
  practice. The Companys accounting policy for revenue recognition under IFRS 15
  is as follows:

To determine the amount and timing of revenue to be recognized,
  the Company follows a 5-step process:

|1. | Identifying the contract with a customer                                 
|-- | -------------------------------------------------------------------------
|   |                                                                          
|2. | Identifying the performance obligations                                  
|   |                                                                          
|3. | Determining the transaction price                                        
|   |                                                                          
|4. | Allocating the transaction price to the performance
      obligations    
|   |                                                                          
|5. | Recognizing revenue when/as performance obligation(s) are
      satisfied

Revenue from the direct sale of cannabis and cannabis oil for a
  fixed price is recognized when the Company transfers control of the good to the
  customer, which is at point of delivery for medical cannabis and recreational
  cannabis.

Revenue includes excise taxes, which the Company pays as
  principal, but excludes duties and taxes collected on behalf of third parties.
  Revenue also includes the net consideration to which the Company expects to be
  entitled. Revenue is recognized to the extent that it is highly probable that a
  significant reversal will not occur. Therefore, revenue is stated net of
  expected price discounts, allowances for customer returns and certain
  promotional activities and similar items. Generally, payment of the transaction
  price is due within credit terms that are consistent with industry practices,
  with no element of financing.

Net revenue is revenue less excise taxes. Excise taxes are
  effectively a production tax which becomes payable when the product is removed
  from the Companys premises and may or may not be directly related to the value
  of revenue depending on the province of sale. It is generally not included as a
  separate item on external invoices; increases in excise tax are not always
  passed on to the customer and where a customer fails to pay for product received
  the Company cannot reclaim the excise tax. The Company therefore recognizes
  excise tax, unless it regards itself as an agent of the regulatory authorities,
  as a cost to the Company.

New or amended standards issued but not yet effective

IFRS 16 
  Leases
  In January 2016, the IASB issued IFRS 16  Leases (IFRS 16),
  which establishes principles for the recognition, measurement, presentation and
  disclosure of leases, with the objective of ensuring that lessees and lessors
  provide relevant information that faithfully represents those transactions. IFRS
  16, which replaces IAS 17 Leases, brings most leases onto the statement of
  financial position for lessees eliminating the distinction between operating and finance leases. IFRS 16
  introduces a single lessee accounting model and requires a lessee to recognize
  assets and liabilities for all leases with a term of more than twelve months,
  unless the underlying asset is of low value. A lessee is required to recognize a
  right-of-use asset representing its right to use the underlying asset and a
  lease liability representing its obligation to make lease payments. The
  right-of-use asset is treated similarly to other non-financial assets and
  depreciated accordingly, and the liability accrues interest. The lease liability
  is initially measured at the present value of the lease payments payable over
  the lease term, discounted at the rate implicit in the lease or an entity's
  incremental borrowing rate if the implicit rate cannot be readily determined.

A lessee shall apply IFRS 16 to its leases either
  retrospectively to each prior reporting period presented or retrospectively with
  the cumulative effect of initially applying IFRS 16 being recognized at the date
  of initial application. Lessees are permitted to make an election for leases
  with a term of 12 months or less, or where the underlying asset is of low value
  and not recognize lease assets and lease liabilities. The expense associated
  with these leases can be recognized on a straight-line basis over the lease term
  or on another systematic basis.

IFRS 16 applies to annual reporting periods beginning on or
after January 1, 2019. This will be effective for the Company beginning
September 1, 2019. The Company reviewed its current and past leases.
Reclassification of leases for office space, manufacturing equipment, and
certain computer hardware will result in the establishment of additional
right-of-use assets and lease liabilities on the statement of financial
position, as well as changes in the timing and presentation of lease-related
expenses on the statement of income. The Company is finalizing its evaluation of
the effect of this standard on the consolidated financial statements but expects
there will be no material impact.

|CONSOLIDATED FINANCIAL STATEMENTS  |  FOR THE
      YEARS ENDED AUGUST 31, 2019 AND 2018 | 13
|---------------------------------------------------------------------------------------- | --

---

4. SHORT TERM INVESTMENTS

The Companys short-term investments included the following on
  August 31, 2019 and August 31, 2018:

|DESCRIPTION                             |  | INTEREST % |  |   | AUGUST 31, 2019 |  |  |   | AUGUST 31, 2018 | 
|--------------------------------------- |  | ---------- |  | - | --------------- |  |  | - | --------------- | 
|GIC - matured December 21, 2018         |  | 1.55%      |  | $ | -               |  |  | $ | 25,000          | 
|GIC - matured August 27, 2019           |  | 2.00%      |  |   | -               |  |  |   | 50,000          | 
|Equity securities in VIVO Cannabis Inc. |  |            |  |   | 380             |  |  |   | -               | 
|                                        |  |            |  | $ | 380             |  |  | $ | 75,000          | 

On October 16, 2018, the Company sold its wholly-owned
  subsidiary, THC, for consideration consisting of shares in the purchaser (an
  unaffiliated publicly-traded company), VIVO Cannabis Inc. These securities are
  carried at fair value through profit or loss. At August 31, 2019, the shares in
  this company had a fair value of $0.44 per share.

|CONSOLIDATED FINANCIAL STATEMENTS  |  FOR THE
      YEARS ENDED AUGUST 31, 2019 AND 2018 | 14
|---------------------------------------------------------------------------------------- | --

---

5. ACCOUNTS RECEIVABLE

The Companys accounts receivable included the following
  balances as of August 31, 2019 and August 31, 2018:

|                                      |   | AUGUST 31, 2019 |   |  |   | AUGUST 31, 2018 |  
|------------------------------------- | - | --------------- | - |  | - | --------------- | -
|Trade receivables                     | $ | 11,900          |   |  | $ | 817             |  
|Harmonized sales taxes receivable     |   | 4,741           |   |  |   | 2,526           |  
|Accrued investment income             |   | -               |   |  |   | 241             |  
|Government programs                   |   | 168             |   |  |   | 80              |  
|Other accounts receivable             |   | -               |   |  |   | 96              |  
|Less: Provision for doubtful accounts |   | (268            | ) |  |   | (24             | )
|                                      | $ | 16,541          |   |  | $ | 3,736           |  

Included in other accounts receivable is a $nil (August 31,
  2018 - $75) promissory note bearing interest at 3% and redeemable on demand.

6. LOAN RECEIVABLE

On July 26, 2019, the Company entered into an advance payment
  and support agreement (Payment Agreement) with 703454 N.B. Inc. (carrying on
  business as 1812 Hemp) (1812 Hemp). Under the terms of the agreement, the
  Company will advance up to $3,000 until October 31, 2019 to 1812 Hemp in the
  form of a secured loan. These amounts may be applied against future purchases of
  hemp under the license and supply agreement described in Note 10. The aggregate
  amount of advances outstanding as of January 1, 2020 will accrue interest of
  9.0% per annum, calculated monthly, until the entire balance of advances is
  paid. The full amount of any outstanding advances are due and payable by 1812
  Hemp on the earlier of: i) June 30, 2020; ii) the date on which 1812 Hemp
  breaches or defaults on any of its agreements; and iii) the date on which the
  license and supply agreement is terminated in accordance with its terms.
  Notwithstanding the foregoing, in the event that on or before February 28, 2020
  1812 Hemp has offered the Company sufficient hemp to retire in full the
  outstanding balance of advances and the Companys purchases of such hemp are not
  sufficient to retire in full the outstanding balance of advances, then 1812
  Hemps obligation to repay the outstanding balance of advances shall be
  suspended until June 30, 2021.

At August 31, 2019, $909 remains outstanding with respect to
  this arrangement. Subsequent to year-end, additional advances were made as
  described in Note 27.

|CONSOLIDATED FINANCIAL STATEMENTS  |  FOR THE
      YEARS ENDED AUGUST 31, 2019 AND 2018 | 15
|---------------------------------------------------------------------------------------- | --

---

7. BIOLOGICAL ASSETS

The Company measures biological assets consisting of cannabis
  plants at fair value less costs to sell up to the point of harvest, which
  becomes the basis for the cost of finished goods inventories after harvest.
  Subsequent expenditures on these finished goods inventories after harvest are
  capitalized based on IAS 2 Inventories.

The changes in the carrying value of biological assets as of
  August 31, 2019 and 2018 are as follows:

|                                                                                   |   | OTHER             |   |   |                    |   |   |         |  
|---------------------------------------------------------------------------------- | - | ----------------- | - | - | ------------------ | - | - | ------- | -
|                                                                                   |   | BIOLOGICAL ASSETS |   |   | CANNABIS ON PLANTS |   |   | TOTAL   |  
|                                                                                   |   |                   |   |   |                    |   |   |         |  
|Carrying amount, August 31,
      2017                                             | $ | 6                 |   | $ | 2,774              |   | $ | 2,780   |  
|                                                                                   |   |                   |   |   |                    |   |   |         |  
|Add (less) net production
      costs                                              |   | 593               |   |   | 14,357             |   |   | 14,950  |  
|                                                                                   |   |                   |   |   |                    |   |   |         |  
|Net change in fair value less
      costs to sell due to biological transformation |   | -                 |   |   | 10,736             |   |   | 10,736  |  
|                                                                                   |   |                   |   |   |                    |   |   |         |  
|Transferred to inventory upon
      harvest                                        |   | -                 |   |   | (8,608             | ) |   | (8,608  | )
|                                                                                   |   |                   |   |   |                    |   |   |         |  
|Carrying amount, August 31,
      2018                                             | $ | 599               |   | $ | 19,259             |   | $ | 19,858  |  
|                                                                                   |   |                   |   |   |                    |   |   |         |  
|Add (less) net production
      costs                                              |   | (596              | ) |   | 37,534             |   |   | 36,938  |  
|                                                                                   |   |                   |   |   |                    |   |   |         |  
|Net change in fair value less
      costs to sell due to biological transformation |   | -                 |   |   | (8,060             | ) |   | (8,060  | )
|                                                                                   |   |                   |   |   |                    |   |   |         |  
|Transferred to inventory upon
      harvest                                        |   | -                 |   |   | (28,084            | ) |   | (28,084 | )
|                                                                                   |   |                   |   |   |                    |   |   |         |  
|Carrying amount, August 31,
      2019                                             | $ | 3                 |   | $ | 20,649             |   | $ | 20,652  |  

The fair value less costs to sell of biological assets is
  determined using a model which estimates the expected harvest yield in grams for
  plants currently being cultivated, and then adjusts that amount for the expected
  selling price per gram and also for any additional costs to be incurred, such as
  post-harvest costs. The following unobservable inputs, all of which are
  classified as Level 3 on the fair value hierarchy (see Note 17), are used in
  determining the fair value of biological assets:

|i.   | Average selling price per gram  calculated as the
      weighted average historical selling price of cannabis sold by the Company,
      adjusted for expectations about future pricing;                                                                      
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                                                                                                
|ii.  | Yield by plant  represents the number of grams of
      finished cannabis inventory which are expected to be obtained from each
      harvested cannabis plant;                                                                                               
|     |                                                                                                                                                                                                                                                                
|iii. | Wastage of plants based on their various stages of growth
       represents the weighted average percentage of biological assets which
      are expected to fail to mature into cannabis plants that can be
      harvested;                                 
|     |                                                                                                                                                                                                                                                                
|iv.  | Post-harvest costs  calculated as the cost per gram of
      harvested cannabis to complete the sale of cannabis plants post-harvest,
      consisting of the cost of direct and indirect materials and labour related
      to drying, labelling and packing.

The Company estimates the harvest yields for the cannabis on
  plants at various stages of growth. As of August 31, 2019, it is expected that
  the Companys biological assets will yield 16,595 kilograms (August 31, 2018 
  11,036 kilograms) of cannabis when eventually harvested. The Companys estimates
  are, by their nature, subject to change and differences from the anticipated
  yield will be reflected in the fair value adjustment to biological assets in
  future periods. The Company accretes fair value on a straight-line basis
  according to stage of growth. As a result, a cannabis plant that is 50% through
  its 19-week growing cycle would be ascribed approximately 50% of its harvest
  date expected fair value less costs to sell (subject to wastage adjustments).

|CONSOLIDATED FINANCIAL STATEMENTS  |  FOR THE
      YEARS ENDED AUGUST 31, 2019 AND 2018 | 16
|---------------------------------------------------------------------------------------- | --

---

Management believes the most significant unobservable inputs
and their impact on fair value are as follows:

|SIGNIFICANT INPUTS &                     |   | WEIGHTED AVERAGE INPUT |  |   |                     |  |  | EFFECT ON FAIR VALUE                   | 
|---------------------------------------- | - | ---------------------- |  | - | ------------------- |  |  | -------------------------------------- | 
|ASSUMPTIONS                              |   | AUG.
      31, 2019    |  |   | AUG.
      31, 2018 |  |  | SENSITIVITY                            | 
|                                         |   |                        |  |   |                     |  |  |                                        | 
|Average net selling price per
      gram | $ | 5.65                   |  | $ | 5.65                |  |  | Increase or decrease by $1.00 per gram | 
|                                         |   |                        |  |   |                     |  |  |                                        | 
|Average yield per plant                  |   | 151 grams              |  |   | 149 grams           |  |  | Increase or decrease by 10 grams       | 

The fair value adjustment to biological assets and inventory
  sold consists of the following:

|                                                                       |   | AUGUST 31, 2019 |   |  |   | AUGUST 31, 2018 |  
|---------------------------------------------------------------------- | - | --------------- | - |  | - | --------------- | -
|                                                                       |   |                 |   |  |   |                 |  
|Realized fair value amounts included in inventory sold                 | $ | (50,477         | ) |  | $ | (5,822          | )
|Increase (decrease) in fair value on growth of biological
      assets |   | 75,338          |   |  |   | 51,840          |  
|Adjustment to net realizable value                                     |   | (14,284         | ) |  |   | -               |  
|Fair value adjustment to biological assets                             | $ | 10,577          |   |  | $ | 46,018          |  

8. INVENTORIES

The Companys inventories are comprised of the following
  balances as of August 31, 2019 and August 31, 2018:

|                                         |  | AUGUST 31, 2019 | 
|---------------------------------------- |  | --------------- | 
|                                         |  | QUANTITY        | 
|Plants in drying stage                   |  | 13,985 plants   | 
|Dry cannabis                             |  |                 | 
|Available for packaging                  |  | 5,506 kg        | 
|Packaged inventory                       |  | 1,557 kg        | 
|Flower and trim available for extraction |  | 4,939 kg        | 
|Concentrated extract                     |  | 790 kg          | 
|Cannabis oil                             |  |                 | 
|Bulk formulated oil                      |  | 3,149 L         | 
|Bottled and packaged oil                 |  | 880 L           | 
|Packaging and supplies                   |  |                 | 
|                                         |  |                 | 

|                                         |  | AUGUST 31, 2018 | 
|---------------------------------------- |  | --------------- | 
|                                         |  | QUANTITY        | 
|Plants in drying stage                   |  | 8,142 plants    | 
|Dry cannabis                             |  |                 | 
|Available for packaging                  |  | 5,032 kg        | 
|Packaged inventory                       |  | 71 kg           | 
|Flower and trim available for extraction |  | 1,918 kg        | 
|Concentrated extract                     |  | 40 kg           | 
|Cannabis oil                             |  |                 | 
|Bulk formulated oil                      |  | 2,632 L         | 
|Bottled and packaged oil                 |  | 168 L           | 
|Packaging and supplies                   |  |                 | 
|                                         |  |                 | 

|CONSOLIDATED FINANCIAL STATEMENTS  |  FOR THE
      YEARS ENDED AUGUST 31, 2019 AND 2018 | 17
|---------------------------------------------------------------------------------------- | --

---

Flower and trim available for extraction are converted into
  concentrated extract, which can then be used for oil formulation (combining with
  a carrier oil) or other products such as edibles, and beverage and vaporizable
products.

The amount of inventory expensed in cost of sales for the year
  ended August 31, 2019 was $35,224 (August 31, 2018 - $4,658).

9. PROPERTY, PLANT AND
  EQUIPMENT

GROWING &CONSTRUCTION
      
      
      PROCESSINGLAND
      
      
      BUILDINGS
      
      
      IN
        PROCESS
      
      
      EQUIPMENT
      
      
      OTHER
      
      
      TOTALCostBalance, August 31, 2017
      $
      1,440
      
      $
      14,150
      
      $
      22,200
      
      $
      7,908
      
      $
      2,304
      
      $
      48,002Additions
      
      765
      
      
      15,536
      
      
      34,851
      
      
      4,986
      
      
      791
      
      
      56,929Construction completed
      
      -
      
      
      17,415
      
      
      (45,058
      )
      
      27,609
      
      
      34
      
      
      -Disposals
      
      -
      
      
      -
      
      
      -
      
      
      (10
      )
      
      (42
      )
      
      (52
      )Included in assets for sale
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      (165
      )
      
      (165
      )Balance, August 31, 2018
      $
      2,205
      
      $
      47,101
      
      $
      11,993
      
      $
      40,493
      
      $
      2,922
      
      $
      104,714Accumulated depreciationBalance, August 31, 2017
      $
      -
      
      $
      (816
      )
      $
      -
      
      $
      (1,114
      )
      $
      (726
      )
      $
      (2,656
      )Depreciation
      
      -
      
      
      (1,181
      )
      
      -
      
      
      (1,844
      )
      
      (479
      )
      
      (3,504
      )Disposals
      
      -
      
      
      -
      
      
      -
      
      
      2
      
      
      6
      
      
      8Included in assets for sale
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      77
      
      
      77Balance, August 31, 2018
      $
      -
      
      $
      (1,997
      )
      $
      -
      
      $
      (2,956
      )
      $
      (1,122
      )
      $
      (6,075
      )CostBalance, August 31, 2018
      $
      2,205
      
      $
      47,101
      
      $
      11,993
      
      $
      40,493
      
      $
      2,922
      
      $
      104,714Additions
      
      6
      
      
      15,753
      
      
      105,512
      
      
      5,554
      
      
      3,366
      
      
      130,191Construction completed
      
      -
      
      
      8,042
      
      
      (51,990
      )
      
      42,698
      
      
      1,250
      
      
      -Disposals
      
      -
      
      
      (122
      )
      
      -
      
      
      (201
      )
      
      -
      
      
      (323
      )Impairment loss
      
      -
      
      
      -
      
      
      -
      
      
      (613
      )
      
      -
      
      
      (613
      )Balance, August 31, 2019
      $
      2,211
      
      $
      70,774
      
      $
      65,515
      
      $
      87,931
      
      $
      7,538
      
      $
      233,969Accumulated depreciationBalance, August 31, 2018
      $
      -
      
      $
      (1,997
      )
      $
      -
      
      $
      (2,956
      )
      $
      (1,122
      )
      $
      (6,075
      )Depreciation
      
      -
      
      
      (2,245
      )
      
      -
      
      
      (5,679
      )
      
      (946
      )
      
      (8,870
      )Disposals
      
      -
      
      
      5
      
      
      -
      
      
      17
      
      
      -
      
      
      22Balance, August 31, 2019
      $
      -
      
      $
      (4,237
      )
      $
      -
      
      $
      (8,618
      )
      $
      (2,068
      )
      $
      (14,923
      )Net book valueAugust 31, 2018
      $
      2,205
      
      $
      45,104
      
      $
      11,993
      
      $
      37,537
      
      $
      1,800
      
      $
      98,639August 31, 2019
      $
      2,211
      
      $
      66,537
      
      $
      65,515
      
      $
      79,313
      
      $
      5,470
      
      $
      219,046


Most of the additions during the year-ended August 31, 2019 were related to the Company’s expansion located at 35 English Drive, while the remainder were related to purchases of packaging equipment and IT system upgrades to facilitate recreational cannabis sales.

During the year ended August 31, 2019 certain growing and
  processing equipment was identified as being impaired either as a result of it
  being obsolete or inefficient and costly for production use. This equipment was
  impaired to a carrying value of $nil.

|CONSOLIDATED FINANCIAL STATEMENTS  |  FOR THE
      YEARS ENDED AUGUST 31, 2019 AND 2018 | 18
|---------------------------------------------------------------------------------------- | --

---

The following table reconciles additions of property, plant and
  equipment per the above table to the purchases of property, plant and equipment
per the statements of cash flows:

|                                                                                    |   | AUGUST 31, 2019 |   |  |   | AUGUST 31, 2018 |  
|----------------------------------------------------------------------------------- | - | --------------- | - |  | - | --------------- | -
|                                                                                    |   |                 |   |  |   |                 |  
|Additions                                                                           | $ | 130,191         |   |  | $ | 56,929          |  
|Acquisitions related to discontinued operations                                     |   | -               |   |  |   | (32             | )
|Net change in accounts payable and accrued liabilities related to purchases of PP&E |   | (21,427         | ) |  |   | (462            | )
|Purchase of property, plant and equipment                                           | $ | 108,764         |   |  | $ | 56,435          |  

10. INTANGIBLE ASSETS

SUPPLY AGREEMENTCostBalance, August 31, 2018
        $
        -Additions
        
        1,530Balance, August 31, 2019
        $
        1,530Accumulated amortizationBalance, August 31, 2018
        $
        -Amortization
        
        (32
        )Balance, August 31, 2019
        $
        (32
        )Net book valueAugust 31, 2018
        $
        -August 31, 2019
        $
        1,498


On January 18, 2019, the Company entered into an agreement with
  703454 N.B. Inc. (1812 Hemp or 1812), a New Brunswick based industrial hemp
  research company, to secure supply and support research and development on the
  genetic improvement of hemp through traditional plant breeding methods. As part
  of the agreement, the Company will receive a 25% discount to the price per
  kilogram of dried hemp flower harvested that is purchased. The term of the
  agreement is from December 17, 2018 to December 16, 2023 and the Company has the
  option to renew it for another 5 years within six months notice. In addition,
  the Company has a right-of-first refusal on the future procurement of high CBD
  hemp from 1812. The Company paid $1,500 to 1812 plus transaction costs of $30 in
  connection with this transaction, which it has recorded as an intangible asset
  with a finite useful life that will be amortized based on the actual volume of
  dried hemp flower purchased as a proportion of its forecast purchase volumes.

11. LONG-TERM DEBT

|                                                                                                                                                                                                                                                                                                                 |   | AUGUST 31, 2019 |   |  |   | AUGUST 31, 2018 |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | --------------- | - |  | - | --------------- | -
|                                                                                                                                                                                                                                                                                                                 |   |                 |   |  |   |                 |  
|Bank of M ontreal ("BM O") senior secured
      term loan ("Term Loan") maturing M ay 31, 2022 at Bankers' Acceptance
      +2.50% (4.46%) with principal repayments starting February 28, 2020 based
      on a 10 year amortization (amended subsequent to year-end to M ay 31, 2020
      - refer to Note 27) | $ | 50,000          |   |  | $ | -               |  
|                                                                                                                                                                                                                                                                                                                 |   |                 |   |  |   |                 |  
|Farm Credit Canada ("FCC") credit facility
      refinanced with BM O Term Loan                                                                                                                                                                                                                                  |   | -               |   |  |   | 1,740           |  
|                                                                                                                                                                                                                                                                                                                 |   |                 |   |  |   |                 |  
|FCC real property loan refinanced with BM O
      Term Loan                                                                                                                                                                                                                                                      |   | -               |   |  |   | 1,194           |  
|                                                                                                                                                                                                                                                                                                                 |   |                 |   |  |   |                 |  
|FCC real property loan refinanced with BM O
      Term Loan                                                                                                                                                                                                                                                      |   | -               |   |  |   | -               |  
|                                                                                                                                                                                                                                                                                                                 |   |                 |   |  |   |                 |  
|Atlantic Canada Opportunities Agency ("ACOA")
      Business Development Program loan maturing September 1, 2024 with a 7 year
      amortization, bearing interest at an interest rate of 0%                                                                                                                    |   | 314             |   |  |   | 406             |  
|                                                                                                                                                                                                                                                                                                                 |   |                 |   |  |   |                 |  
|Vehicle loans - five year term maturing June
      17, 2024                                                                                                                                                                                                                                                      |   | 98              |   |  |   |                 |  
|                                                                                                                                                                                                                                                                                                                 |   |                 |   |  |   |                 |  
|Deferred financing costs                                                                                                                                                                                                                                                                                         |   | (836            | ) |  |   | (42             | )
|                                                                                                                                                                                                                                                                                                                 |   |                 |   |  |   |                 |  
|                                                                                                                                                                                                                                                                                                                 |   | 49,576          |   |  |   | 3,298           |  
|                                                                                                                                                                                                                                                                                                                 |   |                 |   |  |   |                 |  
|Less: current portion of long term debt                                                                                                                                                                                                                                                                          |   | (3,509          | ) |  |   | (421            | )
|                                                                                                                                                                                                                                                                                                                 |   |                 |   |  |   |                 |  
|Long-term portion                                                                                                                                                                                                                                                                                                | $ | 46,067          |   |  | $ | 2,877           |  

|CONSOLIDATED FINANCIAL STATEMENTS  |  FOR THE
      YEARS ENDED AUGUST 31, 2019 AND 2018 | 19
|---------------------------------------------------------------------------------------- | --

---

On November 30, 2018, the Company closed its third loan with
  FCC for $10,000. Transaction costs of $149 were incurred in connection with this
  loan, which had been capitalized against the loan balance. This loan, along with
  the other two FCC loans noted in the above table, were refinanced with the BMO
  Term Loan described below. Since the third loan was only outstanding during the
current fiscal year, it has not been disclosed in the above table.

On May 31, 2019, the Company closed a credit facility with Bank
  of Montreal (BMO) as lead arranger and agent as well as a syndicate including
  three other lenders. The facility consists of a $115,000 term loan (Term Loan)
  and a $25,000 revolving credit facility (Revolver, or together, the
  Facilities), both of which mature on May 31, 2022. Included in the facility is
  an uncommitted option to increase the Facilities by an incremental $35,000 to a
  total of $175,000, subject to agreement by BMO and the syndicate lenders and
  satisfaction of certain legal and business conditions.

The Facilities are secured by assets of the Company and its
  subsidiaries. The proceeds of the term loan will be used to fund the Phase 4 and
  5 expansions of the Moncton campus and were also used to refinance the Companys
  long-term debt with FCC. The revolving credit facility may be used for general
  corporate and working capital purposes.

Pursuant to the agreed upon conditions of the Facilities, the
  Company has initially drawn $50,000 of the Term Loan on closing and can continue
  to draw down additional funds as required up to the $115,000 Term Loan
  commitment through to November 30, 2019 (refer to Note 27 for amendment made
  subsequent to year-end extending date to March 31, 2020). Principal repayments
  on the Term Loan will commence on February 28, 2020 (refer to Note 27 for
  amendment made subsequent to year-end deferring start date to May 31, 2020) at a
  rate of 2.5% per quarter of the total Term Loan balance. The Company may, at its
  discretion, repay the balance of the Facilities without penalty, at any
  time.

Under the terms of the Credit Facility, the Company can elect,
  at its sole discretion, to receive advances under the Term Loan through certain
  availment options, which includes prime rate loans and bankers acceptances with
  maturity dates between 28 and 182 days. The Company, therefore, has the choice
  to continuously roll over the bankers acceptances upon their maturities or to
  convert the then outstanding principal and interest into prime rate loans at any
  time before May 31, 2022. The interest rate of the Facilities is a set margin
  over the above noted availment options, which may increase or decrease based on
  a pricing grid linked to the Companys debt to EBITDA coverage at each
  quarter-end.

During the year ended August 31, 2019, the Company converted
  its outstanding principal amount under the Term Loan to bankers acceptances,
  which reduced the cash interest rate from 5.70% (effective interest rate of
  6.39%) as at May 31, 2019 to 4.46% (effective interest rate of 5.18%) as at
  August 31, 2019. In accordance with IFRS 9, the loan conversion was determined
  to not be a modification of the loan terms. During the year ended August 31,
  2019, the Company rolled over the facility on a monthly basis through bankers
  acceptances with an average cash interest rate of 4.80% .

Transaction costs incurred with respect to the Facilities
  totaled $1,101, which have been allocated against the Term Loan ($915) and
  Revolver ($186 split between prepaid assets and deferred charges) based on the
  relative balance of the fully drawn facilities. The effective interest rate for
  the Term Loan based on these capitalized transaction costs and the current cash
  interest rate is approximately 5.18% at August 31, 2019. The Facilities contain
  customary financial and restrictive covenants. The Company was in compliance
  with all covenants at August 31, 2019.

Subsequent to the year-end, the Company amended certain terms
  of the Facilities as disclosed in Note 27.

The FCC loans previously outstanding for the Company were
  extinguished and refinanced as part of the above noted Facilities. Previously
  capitalized transaction costs were recorded as a loss on the extinguishment of
  the FCC loans and have been included in financing costs for the period.

Principal repayments required on the long-term debt in the next
  five fiscal years are as follows:

2020
      $
      3,8302021
      
      5,0802022
      
      41,3302023
      
      672024
      
      60Thereafter
      
      45Total
      $
      50,412


|CONSOLIDATED FINANCIAL STATEMENTS  |  FOR THE
      YEARS ENDED AUGUST 31, 2019 AND 2018 | 20
|---------------------------------------------------------------------------------------- | --

---

12. UNSECURED CONVERTIBLE DEBENTURES

On January 31, 2018, $115,000 of unsecured convertible
  debentures were issued. Each convertible debenture had a maturity date of
  January 31, 2020 (the maturity date) and bore interest from the date of
  closing at 6.00% per annum, payable semi-annually on June 30 and December 31 of
  each year commencing on June 30, 2018. Each convertible debenture was
  convertible, at the option of the holder, into common shares of the Company
  (common shares) at any time prior to the close of business on the earlier of:
  (i) the business day immediately preceding the maturity date, and (ii) if
  subject to redemption in the event of a change of control, the business day
  immediately preceding the payment date, at a conversion price of $5.42 per
  common share (the conversion price), subject to adjustment in certain events
  and to forced conversion by the Company in accordance with the indenture
  governing the convertible debentures. The Company may force conversion of the
  aggregate principal amount of the then outstanding convertible debentures at the
  conversion price on not less than 30 days notice should the daily volume
  weighted average trading price (VWAP) of the common shares be greater than
  $7.05 for any 10 consecutive trading days. The Company is also required to
  redeem the debentures at the holders option in the event of a change in control
  at a price equal to 104% of the principal amount plus accrued and unpaid
  interest.

The Company had allocated the gross proceeds from issuance
  between the estimated fair value of the debt and equity components using the
  residual method. The Company used an effective annualized discount rate of 15.3%
  to arrive at the valuation of the debt component before issue costs at $98,095
  and the equity component at $16,905. The effective interest rate on the debt
  component, inclusive of the equity discount and issue costs, was 18.0% .

On February 27, 2019, the Company elected to exercise its right
  under the indenture governing the convertible unsecured debentures to convert
  all of the principal amount outstanding of the remaining debentures on April 1,
  2019 into common shares of the Company on the basis of the daily VWAP of the
  common shares having exceeded $7.05 for 10 consecutive trading days. As of close
  of markets on February 26, 2019, the VWAP of the common shares for 10
  consecutive trading days exceeded $7.05. The conversion was completed on April
  1, 2019. It should be noted that although the Company exercised its right to
  force conversion, holders of the debentures still had the right to convert their
  debentures at their discretion prior to April 1, 2019 and therefore
  approximately $37,738 (face value) of debentures were converted into 6,962,725
  common shares during the month of March 2019. The Company did not issue
  fractional common shares on the conversion. Instead, the Company, in lieu of
  delivering a certificate representing such fractional interest, made a cash
  payment to the holder of an amount equal to the fractional interest in
  accordance with the indenture. As of April 1, 2019, no further liability or
  obligation exists with respect to the convertible unsecured debentures.

The debt component was measured at amortized cost. The
  conversion of debentures to common shares represents a non-cash financing
  activity, which has been excluded from the Companys statement of cash flows as
  these transactions do not provide or use any cash.

The balance of the debt component as at August 31, 2019 and
  August 31, 2018 consists of the following:

|                                                                                                        |   | AUGUST 31, 2019 |   |  |   | AUGUST 31, 2018 |  
|------------------------------------------------------------------------------------------------------- | - | --------------- | - |  | - | --------------- | -
|                                                                                                        |   |                 |   |  |   |                 |  
|Debentures - maturing January 31, 2020 bearing interest at
      an interest rate of 6.00% - face value | $ | 115,000         |   |  | $ | 115,000         |  
|                                                                                                        |   |                 |   |  |   |                 |  
|Less: conversion of debentures, cumulative (Note 13(iii))                                               |   | (115,000        | ) |  |   | (2,018          | )
|                                                                                                        |   |                 |   |  |   |                 |  
|Debentures - outstanding face value                                                                     |   | -               |   |  |   | 112,982         |  
|                                                                                                        |   |                 |   |  |   |                 |  
|Less: allocation to reserve for options and warrants for
      debenture discount                       |   | (16,905         | ) |  |   | (16,905         | )
|                                                                                                        |   |                 |   |  |   |                 |  
|Amortization of debenture discount                                                                      |   | 8,030           |   |  |   | 4,324           |  
|                                                                                                        |   |                 |   |  |   |                 |  
|Less: issue costs                                                                                       |   | (7,155          | ) |  |   | (7,155          | )
|                                                                                                        |   |                 |   |  |   |                 |  
|Issue costs allocated to equity                                                                         |   | 1,061           |   |  |   | 1,061           |  
|                                                                                                        |   |                 |   |  |   |                 |  
|Amortization of issue costs                                                                             |   | 2,899           |   |  |   | 1,559           |  
|                                                                                                        |   |                 |   |  |   |                 |  
|Unamortized discount and issue costs transferred to equity
      upon conversion of debentures          |   | 12,070          |   |  |   | -               |  
|                                                                                                        |   |                 |   |  |   |                 |  
|Debentures - carrying value                                                                             |   | -               |   |  |   | 95,866          |  
|                                                                                                        |   |                 |   |  |   |                 |  
|Less: current portion of debentures                                                                     |   | -               |   |  |   | -               |  
|                                                                                                        |   |                 |   |  |   |                 |  
|Long-term portion                                                                                       | $ | -               |   |  | $ | 95,866          |  

|CONSOLIDATED FINANCIAL STATEMENTS  |  FOR THE
      YEARS ENDED AUGUST 31, 2019 AND 2018 | 21
|---------------------------------------------------------------------------------------- | --

---

13. SHARE CAPITAL

(i) Authorized share capital
  The authorized share capital of
  the Company is an unlimited number of common shares without par value and an
  unlimited number of preferred shares without par value. All issued shares,
  consisting only of common shares, are fully paid.

(ii) Issued share capital
  As at August 31, 2019, the
  Companys issued and outstanding share capital consisted of 156,196,347 (August
  31, 2018  125,207,938) common shares with a stated value of $318,125 (August
  31, 2018 - $157,790).

(iii) Issuances of share capital
  Share-based payments
  On October 12, 2016, the Company issued
  437,957 common shares at a share price of $1.37 as share consideration to TGS
  International LLC (TGS) in exchange for a trademark licensing agreement valued
  at $600. As per the terms of the agreement, the shares were released to TGS
  according to an escrow schedule related to certain calendar and operational
  milestones. At August 31, 2019, the Company has recorded the current portion of
  the fee of $133 (August 31, 2018 - $133) as a prepaid expense, and the long-term
  portion of the fee of $133 (August 31, 2018 - $267) as a deferred charge on the
  consolidated statements of financial position. For the year ended August 31,
  2019, $133 (August 31, 2018 - $133) has been amortized to share-based
  compensation.

On July 14, 2017, the Company entered into an advisory services
  agreement with a cannabis consultant that resulted in the grant of 125,000
  common shares that vested over various service periods up to and including
  October 14, 2018. The fair value of the grant was measured based on the average
  monthly share price of the Company over the various tranches and vesting periods
  resulting in a cumulative expense of $539. On October 23, 2017, the Company
  issued 50,000 common shares, of which 20,000 related to the advisory services
  agreement, as share consideration to the consultant and recognized $144 to share
  capital. During the year ended August 31, 2019, the Company settled the
  remaining balance of 105,000 common shares due to the consultant in the form of
  41,000 common shares of the Company and 84,000 restricted stock units, which
  vest immediately, to purchase 84,000 common shares of the Company, which fully
  settles the Companys obligations relating to this agreement.

Exercise of stock options
  During the year ended August 31,
  2019, 2,167,864 (August 31, 2018  504,801) share options were exercised at an
  average exercise price of $1.92 (August 31, 2018 - $1.43) for an increase of
  $6,588 (August 31, 2018 - $1,183) to share capital and a decrease to the reserve
  for options and warrants of $2,418 (August 31, 2018 - $462).

Equity financing
  On December 18, 2017, the Company issued
  16,428,572 units by way of a bought deal at $3.50 per unit share for total gross
  consideration of $48,711 recorded to share capital and an increase of $8,789 to
  the reserve for options and warrants. Each unit consists of one common share and
  one-half common share purchase warrant (each whole common share purchase
  warrant, a Warrant). Each Warrant entitled the holder thereof to acquire one
  common share of the Company at a price of $4.00 until June 18, 2019. Total issue
  costs were $3,678, with $3,116 charged to share capital and the remaining $562
  charged to the reserve for options and warrants. These warrants are measured at
  fair value at the date of grant. In determining the amount of reserve for the
  warrants, the Company used the Black-Scholes option pricing model to establish
  the fair value of warrants granted using the following assumptions:

Risk free interest rate %
      1.6%Expected life of warrants (years)
      1.5Expected annualized volatility %
      64.6%Expected dividend yield %
      -


Volatility was estimated by using the weighted average
  historical volatility of the Company and other companies, that the Company
  considers comparable that have trading and volatility history. The expected life
  in years represents the period of time that the warrants granted are expected to
  be outstanding. The risk-free rate is based on government of Canada bonds with a
  remaining term equal to the expected life of the warrants. A forfeiture rate of
  zero percent was used as the Company anticipated all warrants will be
  exercised.

During the year-ended August 31, 2019, 7,739,205 (August 31,
  2018  127,649) of the $4.00 warrants were exercised into common shares prior to
  expiry on June 18, 2019 on a one for one basis. 347,432 warrants remained
  unexercised at the expiry time and expired as a result. The warrants were
  delisted from the TSX Venture Exchange on June 18, 2019.

Convertible debenture financing
  On January 31, 2018, 115,000
  convertible debentures were sold at a price of $1,000 per convertible debenture,
  for aggregate gross proceeds of $115,000 resulting in an increase to the reserve
  for options and warrants of $12,003, net of deferred tax of $4,902, related to
  the embedded conversion feature in the convertible debenture (see Note 12).
  Total issue cost was $7,155 with $6,094 charged to the debenture liability and
  the remaining $756, net of deferred tax of $305, charged to the reserve for
  options and warrants.

Conversion of debentures
  For the year ended August 31, 2019,
  the Company issued 20,845,372 (August 31, 2018  372,324) common shares at a
  price per share of $5.42 on the conversion of convertible debentures (Note 12)
  for an increase of $112,166 (August 31, 2018 - $2,312) to share capital and a
  decrease of $11,247 (August 31, 2018 - $294) to the reserve for options and
  warrants. This non-cash financing activity has been excluded from the Companys
statement of cash flows as it did not provide or use any cash.

|CONSOLIDATED FINANCIAL STATEMENTS  |  FOR THE
      YEARS ENDED AUGUST 31, 2019 AND 2018 | 22
|---------------------------------------------------------------------------------------- | --

---

On February 27, 2019, the Company elected to exercise its right
  under the indenture governing the convertible unsecured debentures to convert
  all of the principal amount outstanding of the remaining debentures on April 1,
  2019 into common shares of the Company on the basis of the daily VWAP of the
  common shares exceeding $7.05 for any 10 consecutive trading days (see Note 12).
  As of April 1, 2019, all of the convertible unsecured debentures issued were
  converted to common shares of the Company and no further liability or obligation
exists with respect to the convertible unsecured debentures.

(iv) Warrants
  During the year ended August 31, 2019,
  7,739,205 warrants (August 31, 2018  4,330,837) were exercised at an average
  price of $4.00 (August 31, 2018 - $1.38) for a value of $39,257 (August 31, 2018
  - $6,693) to share capital and a decrease to the reserve for options and
  warrants of $8,281 (August 31, 2018 - $739). All the outstanding warrants at
  June 18, 2019 that were not exercised into common shares prior to expiry on June
  18, 2019 lapsed.

The following table summarizes the movements in the Companys
  warrants for the years ended August 31, 2019 and 2018:

WEIGHTED AVERAGENUMBER
        
        
        EXERCISE PRICEBalance - August 31, 2017
        
        4,328,625
        
        $
        1.30Granted
        
        8,214,286
        
        $
        4.00Exercised/Released
        
        (4,330,837
        )
        $
        1.38Expired
        
        (125,437
        )
        $
        1.35Balance - August 31, 2018
        
        8,086,637
        
        $
        4.00Exercised/Released
        
        (7,739,205
        )
        $
        4.00Expired/Lapsed
        
        (347,432
        )
        $
        4.00Balance - August 31, 2019
        
        -
        
        $
        -


(v) Share-based compensationStock options
  Under the
  Companys stock option plan, options may be granted for up to 10% of the issued
  and outstanding common shares together with any other equity compensation plan
  of the Company, as approved by the Companys Board of Directors. The exercise
  price of any option is determined based on market price calculated in accordance
  with TSX rules at the time of grant.

The maximum exercise period after the grant of an option is 10
  years. When an employees service ends, the expiry date of their options is
  accelerated to 90 days thereafter, or less, depending on the terms of the
  related option agreement.

The Company also issues stock options to third parties in
  exchange for services.

|CONSOLIDATED FINANCIAL STATEMENTS  |  FOR THE
      YEARS ENDED AUGUST 31, 2019 AND 2018 | 23
|---------------------------------------------------------------------------------------- | --

---

The following table summarizes the movements in the Companys
outstanding stock options for the years ended August 31, 2019 and 2018:

|                          |  |            |   |   | WEIGHTED AVERAGE | 
|------------------------- |  | ---------- | - | - | ---------------- | 
|                          |  | NUMBER     |   |   | EXERCISE PRICE   | 
|                          |  |            |   |   |                  | 
|Balance - August 31, 2017 |  | 6,352,049  |   | $ | 1.48             | 
|                          |  |            |   |   |                  | 
|Granted                   |  | 2,056,648  |   | $ | 3.90             | 
|                          |  |            |   |   |                  | 
|Exercised                 |  | (504,801   | ) | $ | 1.43             | 
|                          |  |            |   |   |                  | 
|Cancelled / Forfeited     |  | (194,150   | ) | $ | 2.43             | 
|                          |  |            |   |   |                  | 
|Balance - August 31, 2018 |  | 7,709,746  |   | $ | 2.10             | 
|                          |  |            |   |   |                  | 
|Granted                   |  | 3,589,500  |   | $ | 7.59             | 
|                          |  |            |   |   |                  | 
|Exercised                 |  | (2,167,864 | ) | $ | 1.92             | 
|                          |  |            |   |   |                  | 
|Cancelled / Forfeited     |  | (298,188   | ) | $ | 6.41             | 
|                          |  |            |   |   |                  | 
|Balance - August 31, 2019 |  | 8,833,194  |   | $ | 4.23             | 

The following is a summary of the outstanding stock options as
  at August 31, 2019:

|OPTIONS
      OUTSTANDING | OPTIONS EXERCISABLE       
|------------------------- | --------------------------
|Quantity Outstanding      | Weighted Average Remaining
|at August 31,
      2019  | Contractual Life (years)  
|1,814,449                 | 6.02                      
|2,003,333                 | 7.42                      
|1,462,344                 | 8.20                      
|1,705,568                 | 9.13                      
|1,847,500                 | 9.70                      
|8,833,194                 | 8.07                      

Options outstanding have exercise prices that range from $0.30
  to $11.27 with a weighted average remaining life of 8.07 years. Total
  share-based compensation charges, including those related to production
  employees that are charged to biological assets and inventory, for the year
  ended August 31, 2019 was $14,894 (August 31, 2018  $5,033) of which $10,036
  (August 31, 2018 - $4,649) related to the Companys stock option plan. The fair
  value of options granted during the year ended August 31, 2019 was $13,848
  (August 31, 2018 - $4,124). These options are measured at fair value at the date
  of grant and are expensed over the options vesting period, which typically
  range from two to three-year terms with options vesting in annual tranches
  evenly over this time period. In determining the amount of share-based
  compensation related to the options, the Company used the Black-Scholes option
  pricing model to establish the fair value of options granted.

The following is the range of assumptions for the years ended
  August 31, 2019 and 2018:

|                               | AUGUST 31, 2019 |  | AUGUST 31, 2018
|------------------------------ | --------------- |  | ---------------
|Risk free interest rate        | 1.20% - 2.42%   |  | 1.59% - 2.26%  
|Expected life of options       | 5.0 - 6.5 years |  | 5.0 - 6.5 years
|Expected annualized volatility | 64% - 71%       |  | 62% - 69%      
|Expected dividend yield        | -               |  | -              
|Forfeiture Rate                | 7.3% - 8.0%     |  | 8.1% - 15.0%   

Volatility was estimated by using the weighted average
  historical volatility of the Company and other companies, that the Company
  considers comparable that have trading and volatility history. The expected life
  in years represents the period of time that options granted are expected to be
  outstanding. The risk-free rate is based on government of Canada bonds with a
  remaining term equal to the expected life of the options. The forfeiture rate is
  calculated based on historical experience.

Equity incentive plan
  Under the Companys Equity Incentive
  Plan (the Equity Plan), the maximum number of common shares that may be issued
  upon exercise of share units may not exceed 2,500,000 common shares and shall
  not exceed 10% of the issued and outstanding equity securities of the Company
  from time to time, combined with any equity securities granted under all other
  compensation arrangements adopted by the Company. As of August 31, 2019, the
  Company had only granted restricted share units (RSUs) under the Equity Plan,
  however subsequent to year-end the Company also granted performance share units
  (PSUs) as described in Note 27. The grant price of any RSU or PSU is
  determined based on market price calculated in accordance with TSX rules at the
time of grant.

|CONSOLIDATED FINANCIAL STATEMENTS  |  FOR THE
      YEARS ENDED AUGUST 31, 2019 AND 2018 | 24
|---------------------------------------------------------------------------------------- | --

---

The following table summarizes the movements in the Companys
outstanding RSUs:

|                          |  | NUMBER   |  
|------------------------- |  | -------- | -
|                          |  |          |  
|Balance - August 31, 2018 |  | 145,200  |  
|                          |  |          |  
|Granted                   |  | 879,635  |  
|                          |  |          |  
|Exercised                 |  | (182,473 | )
|                          |  |          |  
|Balance - August 31, 2019 |  | 842,362  |  

The estimated fair value of the equity settled RSUs granted
  during the year ended August 31, 2019 was $4,543 (August 31, 2018 - $953), which
  was based on the Companys share price at the grant date and will be recognized
  as an expense over the vesting period of the RSUs, which is one-half upfront
  with the balance recognized over two years. For the year ended August 31, 2019,
  $3,475 (August 31, 2018 - $49) has been recognized as share-based compensation
  expense.

(vi) Earnings (Loss) per shareEarnings (loss) per share represents net income (loss)
  attributable to common shareholders divided by the weighted average number of
  common shares outstanding during the year.

Diluted income (loss) per share is calculated by dividing the
  applicable net income (loss) by the sum of the weighted average number of common
  shares outstanding and all additional common shares that would have been
  outstanding if potentially dilutive common shares had been issued during the
  year.

The reconciliation of the weighted average number of shares,
  for the purposes of diluted earnings per share, to the weighted average number
  of ordinary shares, used in the calculation of basic earnings per share, is as
  follows:

|                                                                           |  | AUGUST 31, 2019 |  |  | AUGUST 31, 2018 | 
|-------------------------------------------------------------------------- |  | --------------- |  |  | --------------- | 
|Weighted average number of shares used in
      basic earnings per share   |  | 140,923,324     |  |  | 120,564,334     | 
|Options                                                                    |  | 5,194,827       |  |  | 3,979,470       | 
|Warrants                                                                   |  | 4,738,388       |  |  | 2,308,727       | 
|Restricted shares units                                                    |  | 684,534         |  |  | 8,022           | 
|Weighted average number of shares used in
      diluted earnings per share |  | 151,541,073     |  |  | 126,860,553     | 

The outstanding number and type of securities that could
  potentially dilute basic net income (loss) per share in the future but that were
  not included in the computation of diluted net income (loss) per share because
  to do so would have increased (decreased) the net income (loss) per share
  (anti-dilutive) are as follows:

|                       |  | AUGUST 31, 2019 |  |  | AUGUST 31, 2018 | 
|---------------------- |  | --------------- |  |  | --------------- | 
|Stock options          |  | 1,847,500       |  |  | 7,709,746       | 
|Convertible debentures |  | -               |  |  | 20,845,387      | 
|Warrants               |  | -               |  |  | 8,086,637       | 
|                       |  | 1,847,500       |  |  | 36,641,770      | 

|CONSOLIDATED FINANCIAL STATEMENTS  |  FOR THE
        YEARS ENDED AUGUST 31, 2019 AND 2018 | 25
|------------------------------------------------------------------------------------------ | --

---

14. INVESTMENTS IN ASSOCIATES

The carrying value of investments in associates consist of:

|                                         |   | ALPHA-CANNABIS |   |   | EVIANA HEALTH |   |   | HYASYNTH         |   |   |        |  
|---------------------------------------- | - | -------------- | - | - | ------------- | - | - | ---------------- | - | - | ------ | -
|                                         |   | PHARMA GMBH    |   |   | CORPORATION   |   |   | BIOLOGICALS INC. |   |   |        |  
|                                         |   | (A)            |   |   | (B)           |   |   | (C)              |   |   | TOTAL  |  
|Participating share (1)                  |   | 25.0%          |   |   | 19.9%         |   |   | 43.4%            |   |   |        |  
|Balance, September 1, 2018               | $ | -              |   | $ | -             |   | $ | -                |   | $ | -      |  
|Additions                                |   | 3,408          |   |   | 5,000         |   |   | 5,000            |   |   | 13,408 |  
|Transaction costs                        |   | 160            |   |   | 73            |   |   | 89               |   |   | 322    |  
|Distributions                            |   | -              |   |   | (374          | ) |   | -                |   |   | (374   | )
|Share of net income (loss)               |   | (50            | ) |   | (734          | ) |   | (477             | ) |   | (1,261 | )
|Impairment loss                          |   | -              |   |   | (950          | ) |   | -                |   |   | (950   | )
|Foreign currency translation gain (loss) |   | (22            | ) |   | (15           | ) |   | -                |   |   | (37    | )
|Balance, August 31, 2019 (2)             | $ | 3,496          |   | $ | 3,000         |   | $ | 4,612            |   | $ | 11,108 |  

Note 1: % Interest includes the potential ownership interest
  that could result from the conversion of debentures and exercise of warrants

Note 2: OHI utilizes the most recently issued quarterly
  financial statements of its associates in its results with a two months lag
  since the Company does not have the same reporting date as its associates (for
  example, for the period ended August 31, OHI utilizes its associates June 30
  results)

The following table presents current and non-current assets,
  current and non-current liabilities as well as revenues and net loss of the
  Companys material investments in equity method investees for the year ended
  June 30, 2019, the most recently issued quarterly financial statements:

|                                                  |   | EVIANA HEALTH |   |   | HYASYNTH         |  
|------------------------------------------------- | - | ------------- | - | - | ---------------- | -
|                                                  |   | CORPORATION   |   |   | BIOLOGICALS INC. |  
|Statement of financial position                   |   |               |   |   |                  |  
|Current assets                                    | $ | 10,024        |   | $ | 3,223            |  
|Non-current assets                                |   | 3,173         |   |   | 484              |  
|                                                  |   |               |   |   |                  |  
|Current liabilities                               |   | 1,329         |   |   | 62               |  
|Non-current liabilities (Note 1)                  |   | 8,290         |   |   | 5,175            |  
|                                                  |   |               |   |   |                  |  
|Statement of comprehensive loss (Note 2)          |   |               |   |   |                  |  
|Revenue                                           |   | -             |   |   | -                |  
|Net income (loss) to shareholders                 |   | (1,626        | ) |   | (1,098           | )
|Other comprehensive income (loss) to shareholders |   | (319          | ) |   | -                |  
|Comprehensive income (loss) to shareholders       | $ | (1,945        | ) | $ | (1,098           | )

Note 1: Non-current liabilities include OHIs convertible
  debenture investment at its carrying value of $5,000 and $5,000 (excluding
  capitalized transaction costs and equity discount), for Eviana Health
  Corporation and Hyasynth Biologicals Inc., respectively.

Note 2: Net loss is from the date of acquisition to June 30,
  2019 as per the associates most recently issued quarterly financial statements.

a) alpha-cannabis Pharma GmbH
  On October 10, 2018, OHI
  executed an investment agreement with alpha-cannabis® Pharma GmbH (ACG)
  pursuant to which the Company acquired 8,333 common shares of ACG, representing
  a 25% stake in the capital of ACG, for aggregate proceeds of €1,625 ($2,436).
  Established in 2016, ACG is a privately-held company that is strategically
  positioned to serve the German medical cannabis market.

The Company has a commitment to deliver additional
  consideration of up to €875 in the form of OHI shares contingent on the
  achievement of certain gross margin-based milestones. The Company has estimated
  the fair value of these contingent shares as €649 ($972) as of the investment
  date and has included a corresponding long-term liability as a contingent share
  consideration in the statement of financial position. At August 31, 2019, the
  Company revalued the contingent liability and recorded a corresponding loss in
  the statement of operations of $145 for the year then ended.

Concurrent with the Companys investment in ACG, the parties
  entered into a CBD supply agreement, whereby ACG may supply the Company with
  synthetic CBD, as well as a cannabis supply agreement, whereby OHI may supply
  ACG with dried cannabis flowers.

|CONSOLIDATED FINANCIAL STATEMENTS  |  FOR THE
      YEARS ENDED AUGUST 31, 2019 AND 2018 | 26
|---------------------------------------------------------------------------------------- | --

---

b) Eviana Health Corporation
On October 2, 2018, OHI
  participated in the debenture offering of Eviana Health Corporation (Eviana)
  by way of private placement. Eviana is a Canadian Securities Exchange (CSE)
  listed company that was established with the aim of delivering customized
  consumer health care products using natural hemp strains of cannabis sativa for
  cannabinoid-based topical creams and products. The Companys investment is in
  the form of convertible debentures and share purchase warrants, which together
  provide a potential ownership interest of up to 21.4%, which is capped at 19.9%
  based on certain Canadian securities regulations and contractual obligations. In
  addition to this ownership interest, the Company also considered various
  qualitative factors in arriving at the determination that significant influence
  exists, including representation on Evianas board of directors, and thereby
concluding that the equity method of accounting is appropriate.

The convertible debentures have a face value of $5,000, bear
  interest at 10% per annum, are non-redeemable, and mature on October 2, 2020.
  The convertible debentures are convertible at the option of the holder at any
  time at a price of $1.15 per share, or into 4,347,826 common shares. Conversion
  of the debentures may be forced by Eviana in the event that the volume weighted
  average price of the common shares of Eviana for ten consecutive days is greater
  than $2.15, subject to a minimum volume of 100,000 shares in each of those 10
  days.

The share purchase warrants were acquired for no additional
  consideration, concurrent with the debenture offering, are transferrable, and
  are exercisable until October 2, 2020. 2,500 share purchase warrant units were
  acquired, each of which is convertible into 870 common shares per unit, or
  2,175,000 common shares in aggregate, at an exercise price of $1.30 per share.

Concurrent with the Companys investment in Eviana, the parties
  entered into a CBD oil supply agreement, whereby the Company has the right, but
  not obligation, to purchase up to 25% of Evianas annual CBD oil at 95% of the
  agreed raw CBD oil wholesale market price for a period of 5 years from the date
  on which the CBD oil is first made commercially available by Eviana for
  wholesale.

At August 31, 2019, the Company identified indicators of
  impairment with respect to its investment in Eviana. The Company determined the
  recoverable amount of Eviana to approximate $3,000 based on a value in use
  (VIU) model that applied a discount rate of 35% to the forecast interest and
  principal payments of the debt component of the convertible debenture. If the
  discount rate were increased (decreased) by 5%, the impairment loss for the
  year-ended August 31, 2019 would increase (decrease) by $262.

c) Hyasynth Biologicals Inc.
  On September 12, 2018, OHI
  invested in Hyasynth Biologicals Inc. (Hyasynth) by way of convertible secured
  debentures, to be purchased in three tranches and valued in the aggregate at
  $10,000. Tranche 1 was issued on this date and there are two additional Tranches
  that may be issued based on the achievement of specific milestones. Hyasynth is
  a privately-held biotechnology company based in Montreal and leader in the field
  of cannabinoid science and biosynthesis. The Companys investment is in the form
  of convertible debentures, which provide a potential ownership interest of up to
  43.4% based on Tranche 1. In addition to the ownership interest, the Company
  also considered various qualitative factors in arriving at the determination that significant
  influence exists, including representation on Hyasynths board of directors, and
  thereby concluded that the equity method of accounting is appropriate.

Tranche 1 of the convertible debentures have a face value of
  $5,000, bear interest at 8.0% per annum, are secured, and mature on the earlier
  of August 31, 2023 or the closing date of a qualified sale transaction, unless
  an automatic or optional conversion has occurred. Tranche 1 of the convertible
  debentures are convertible at the option of the holder at any time at a price of
  $40 per share, or into 125,000 common shares. Conversion of the debentures may
  be automatically triggered based on the completion of a qualified transaction or
  Hyasynths facility reaching a pre-defined production capacity. Tranche 2 and 3
  of the convertible debentures, each of which commit $2.5 million for an
  aggregate of $5 million, have certain production-related milestones that must be
  achieved within a 24- and 36-month period, respectively, for issuance to occur.

Concurrent with the Companys investment in Hyasynth, the
  parties entered into a CBD supply agreement, whereby the Company has the ability
  to purchase up to 100% of Hyasynths annual cannabinoid or cannabinoid-related
  production at a 10% discount to the agreed upon wholesale market price for a
  period of 10 years from the date Hyasynth commences commercial production of the
  products.

|CONSOLIDATED FINANCIAL STATEMENTS  |  FOR THE
      YEARS ENDED AUGUST 31, 2019 AND 2018 | 27
|---------------------------------------------------------------------------------------- | --

---

15. RELATED PARTY TRANSACTIONS

Key management personnel are those persons having the authority
  and responsibility for planning, directing and controlling activities of the
  entity, directly or indirectly. The key management personnel of the Company are
  the members of the Companys executive management team and Board of Directors.
  The transactions are conducted at arms length and in the normal course of
  operations.

(i) Management and Board compensation
  For the years ended
  August 31, 2019 and 2018, the Companys expenses included the following
  management and board compensation:

|                                  |   | AUGUST 31, 2019 |  |  |   | AUGUST 31, 2018 | 
|--------------------------------- | - | --------------- |  |  | - | --------------- | 
|Salaries and consulting fees      | $ | 2,521           |  |  | $ | 2,094           | 
|Share-based compensation          |   | 5,155           |  |  |   | 3,939           | 
|Total key management compensation | $ | 7,676           |  |  | $ | 6,033           | 

During the year ended August 31, 2019, 685,000 stock options
  (August 31, 2018  1,461,648) were granted to key management personnel at an
  average exercise price of $4.75 (August 31, 2018 - $3.63) and aggregate fair
  value of $1,736 (August 31, 2018 - $2,417). In addition, during the year ended
  August 31, 2019, 631,949 RSUs (August 31, 2018  129,962), were granted to key
  management personnel with an aggregate fair value of $3,002 (August 31, 2018 
  $856).

During the year ended August 31, 2019, 37,500 share purchase
  warrants (August 31, 2018  nil) were exercised by key management personnel and
  directors at an exercise price of $4.00 per share.

(ii) Significant transactions with associates
  For the year
  ended August 31, 2019, the Company received interest income of $374 (August 31,
  2018 - $nil) on its convertible debenture investment in Eviana disclosed in Note
  14, which has been recorded as distributions under the equity accounting method.
  The Company had no other transactions nor any balances outstanding with its
  associates.

16. CAPITAL MANAGEMENT

The Company considers its capital to consist of share capital,
  reserve for options and warrants, long-term debt, unsecured convertible
  debentures, accumulated other comprehensive income, and retained earnings, which
  is disclosed in the August 31, 2019 consolidated statement of financial position
  as $376,582 (August 31, 2018 - $283,758).

The Company manages its capital structure and adjusts it based
  on funds available to the Company, in order to fund its expansion and
  construction of its growing facility. The Board of Directors does not establish
  quantitative return on capital criteria for management, but rather relies on the
  expertise of the Companys management to sustain future development of the
  business.

Management reviews its capital management approach on an
  ongoing basis and believes that this approach, given the relative stage of the
  Company, is reasonable. There has been no change in how the Company defines or
  manages capital during the period.

17. FAIR VALUE OF FINANCIAL INSTRUMENTS AND
  FINANCIAL RISK FACTORS

i) Fair Value of Financial Instruments
  Fair value is the
  price that would be received to sell an asset or paid to transfer a liability in
  an orderly fashion between market participants. The Company records certain
  financial instruments at fair value. The Companys financial instruments include
  cash, short-term investments (including marketable securities), accounts
  receivable, loan receivable, accounts payable and accrued liabilities, long-term
  debt, unsecured convertible debentures, and contingent share consideration.

Fair value measurements are categorized into Level 1, 2 or 3
  based on the degree to which the inputs to the fair value measurements are
  observable and the significance of the inputs to the fair value measurement in
  its entirety, which are described as follows:

- Level 1 inputs are quoted prices in active markets for identical assets or
      liabilities that the entity can access at the measurement date.
- Level 2 inputs, other than quoted prices included within Level 1, that are
      observable for the asset or liability, either directly or indirectly; and

- Level 3 inputs are unobservable inputs for the asset or liability.

The fair value of cash and cash equivalents, short-term
  investments, accounts receivable, loan receivable, accounts payable and accrued
  liabilities approximate their carrying amounts due to their short-term nature.
  The fair value of marketable securities is based on quoted prices in active
  markets and is reflected in the carrying value of these financial assets. The
  fair value of long-term debt approximates $50,412.

The fair value of the contingent share consideration is based
  on Level 3 unobservable inputs. The determination of the fair value of this
  liability is primarily driven by the Companys expectations of the investment in
  associate achieving certain milestones. The expected milestones were assigned
  probabilities and the expected related cash flows were discounted to derive the
  fair value of the contingent consideration. At August 31, 2019, the probability
  of achieving the milestones was estimated to be 100% and the discount rate was
  estimated to be 20%. If the probabilities of achieving the milestones decreased
  by 10%, the estimated fair value of the contingent share consideration would
  decrease by approximately $160. If the discount rates increased or decreased by
  5%, the estimated fair value of contingent consideration would decrease or
  increase, respectively, by approximately $46.

|CONSOLIDATED FINANCIAL STATEMENTS  |  FOR THE
      YEARS ENDED AUGUST 31, 2019 AND 2018 | 28
|---------------------------------------------------------------------------------------- | --

---

During the period, there were no transfers of amounts between
Levels 1, 2 and 3.

ii) Financial Risk Factors
  The Company is exposed to various
  risks through its financial instruments, as follows:

(i) Credit risk arises from deposits with banks,
  short-term investments (excluding investments in equity securities), and
  outstanding trade and loan receivables. For trade receivables, the Company does
  not hold any collateral as security but mitigates this risk by dealing only with
  what management believes to be financially sound counterparties and,
  accordingly, does not anticipate significant loss for non-performance. For other
  receivables, out of the normal course of business such as the loan receivable,
  management generally obtains guarantees and general security agreements. The
  maximum exposure to credit risk approximates the $64,476 (August 31, 2018 -
  $133,800) of cash, short term investments, accounts receivable, and loans
  receivable on the balance sheet.

As of August 31, 2019 and 2018, the Companys aging of trade
  receivables was approximately as follows:

|                                      |   | AUGUST 31, 2019 |   |  |   | AUGUST 31, 2018 |  
|------------------------------------- | - | --------------- | - |  | - | --------------- | -
|0-60 days                             | $ | 11,748          |   |  | $ | 353             |  
|61-120 days                           |   | 152             |   |  |   | 488             |  
|Gross trade receivables               | $ | 11,900          |   |  | $ | 841             |  
|Less: Provision for doubtful accounts |   | (268            | ) |  |   | (48             | )
|                                      | $ | 11,632          |   |  | $ | 793             |  

(ii)Liquidity risk -The Companys liquidity risk is
  the risk the Company will not be able to meet its financial obligations as they
  become due. The Company manages its liquidity risk by reviewing on an ongoing
  basis its capital requirements. At August 31, 2019, the Company had $47,555
  (August 31, 2018  $55,064) of cash and working capital of $152,417 (August 31,
  2018 - $191,964). Further, the Company has access additional capital by way of
  its committed debt Facilities as described in Note 11.

The Company is obligated to the following contractual
  maturities relating to their undiscounted cash flows:

Carrying 
        Amount
      
      
      Contractual 
        Cash Flows
      
      
      Less than 
        1 year
      
      
      1 to 3 years
      
      
      3 to 5 years
      
      
      More than 
        5 yearsAccounts payable and accrued liabilities
      $
      40,355
      
      $
      40,355
      
      $
      40,355
      
      
      -
      
      
      -
      
      
      -Long-term debt
      
      49,576
      
      
      50,412
      
      
      3,830
      
      
      46,410
      
      
      127
      
      
      45Interest payments
      
      -
      
      
      6,696
      
      
      2,232
      
      
      4,464
      
      
      -
      
      
      -Operating lease obligations
      
      -
      
      
      3,074
      
      
      1,180
      
      
      993
      
      
      901
      
      
      -$
      89,931
      
      $
      100,537
      
      $
      47,597
      
      $
      51,867
      
      $
      1,028
      
      $
      45


The contractual maturities noted above are based on contractual
  due dates of the respective financial liabilities. Interest payments for the BMO
  Term Loan are based on the cash interest rate in effect at August 31, 2019,
  which is subject to change as described in Note 11.

In connection with the Companys Moncton Campus expansion
  plans, the Company is contractually committed to approximately $20,000 of
  capital expenditures. An incremental $52,800 of uncommitted capital expenditures
  are estimated to be required to meet the Companys planned growth and
  activities, most of which pertains to the Phase 4 and Phase 5 expansion plans.

(iii) Market risk is the risk that the fair value or
  future cash flows of a financial instrument will fluctuate because of changes in
  market prices. Market risk for the Company comprises of:

Interest rate risk is the risk
  that the fair value or future cash flows of a financial instrument will
  fluctuate because of changes in market interest rates. The Company is exposed to
  interest rate risk at August 31, 2019 pursuant to the variable rate loans
  described in Note 11. A 1% change in benchmark interest rates will increase or
  decrease the Companys interest expense by $500 (August 31, 2019 - $29) per
  year.

18. REVENUE

During the three months ended May 31, 2019, the Company
  determined that the classification of sales returns and recoveries is more
  accurately reflected as and most comparable to industry peers as a component of
  gross revenue rather than a separate line in the statement of operations. As a
  result, sales recoveries of $493 have been reclassified from sales returns to
  gross revenue for year ended August 31, 2018 to conform to the current year
  presentation. The net recovery for the prior year comparative period was due to
  unused credits previously issued through a client credit program, which expired
  on March 6, 2018. Net revenue for the Company is defined as gross  revenue, which is net of any customer discounts, rebates, and sales returns and  recoveries, less excise taxes.

|CONSOLIDATED FINANCIAL STATEMENTS  |  FOR THE
      YEARS ENDED AUGUST 31, 2019 AND 2018 | 29
|---------------------------------------------------------------------------------------- | --

---

Revenues are disaggregated as follows:

|                                                    |   | AUGUST 31, 2019 |   |  |   | AUGUST 31, 2018 | 
|--------------------------------------------------- | - | --------------- | - |  | - | --------------- | 
|                                                    |   |                 |   |  |   |                 | 
|Adult-use recreational wholesale revenue (Canadian) | $ | 85,018          |   |  | $ | -               | 
|Direct to patient medical revenue (Canadian)        |   | 11,192          |   |  |   | 11,002          | 
|Wholesale to Licensed Producers revenue (Canadian)  |   | 709             |   |  |   | -               | 
|International (business to business)                |   | 98              |   |  |   | -               | 
|Other revenue                                       |   | 530             |   |  |   | 1,427           | 
|Gross revenue                                       | $ | 97,547          |   |  | $ | 12,429          | 
|Excise taxes                                        |   | (17,134         | ) |  |   | -               | 
|Net revenue                                         | $ | 80,413          |   |  | $ | 12,429          | 

Recreational revenue is primarily comprised of provincial
  government bodies and large retailers that sell cannabis through their
  respective distribution models, whereas wholesale revenue is comprised of
  wholesale shipments to other cannabis companies, including licensed producers,
  for further processing and sales onto end customers.

During the year ended August 31, 2019, the Company had 2
  customers that individually represented more than 10% of the Companys net
  revenue.

19. INDIRECT PRODUCTION

The production cost of late-stage biological assets that are
  disposed of, inventory that does not pass the Companys quality assurance
  standards, and obsolete packaging are expensed to indirect production. For the
  year ended August 31, 2019, $4,733 (August 31, 2018  $1,289) was recorded as
  indirect production.

20. CONTINGENCIES

The Company recognizes loss contingency provisions for probable
  losses when management can reasonably estimate the loss. When the estimated loss
  lies within a range, the Company records a loss contingency provision based on
  its best estimate of the probable loss. If no particular amount within that
  range is a better estimate than any other amount, the mid-point of the range is
  used. As information becomes known a loss contingency provision is recorded when
  a reasonable estimate can be made. The estimates are reviewed at each reporting
  date and the estimates are changed when expectations are revised. An outcome
  that deviates from the Companys estimate may result in an additional expense or
  release in a future accounting period.

During 2015, the Company was named as a defendant in a lawsuit
  in New Brunswick for breach of confidence, conversion, breach of contract,
  conspiracy and breach of trust, breach of fiduciary duty, and negligent
  misrepresentation. The Company believes the lawsuit to be without merit though
  it will rigorously defend the action. No amount has been accrued in relation to
  the consolidated financial statements for the claim.

On March 3, 2017, a claim in connection with a proposed
  class-action lawsuit (the Claim) was filed with the Supreme Court of Nova
  Scotia seeking to represent a class who purchased medical marijuana that was the
  subject of the Companys product recalls in December 2016 and January 2017 as it
  may have contained trace elements of the pesticides myclobutanil and bifenazate
  which are not approved for use by licensed producers. The Claim identifies
  several causes of action including, among others: (i) negligent design,
  development and testing, (ii) negligent manufacturing, (iii) negligent
  distribution, marketing and sale, (iv) breach of contract, and (v) breach of the
  Competition Act, the Consumer Protection Act, and the Sale of Goods Act, and is
  seeking remedy in the form of, among other things, the disgorgement of profits
  accrued to the Company for the sale of contaminated products, exemplary or
  punitive damages and certain costs. The Claim also contains a request for an
  order certifying the proceeding as a class proceeding.

The March 3, 2017 Claim was amended on November 16, 2017, to
  include a claim for alleged adverse health consequences caused as a result of
  using the recalled product. As at the date hereof, the Company has not received
  any medical information demonstrating adverse health effects caused as a result
  of using the recalled product.

The Company and its insurers are contesting the litigation. The
  litigation process will continue into the foreseeable future unless settled out
  of court. No amount has been recorded in the consolidated financial statements
  since a reliable estimate cannot be made of the amount of the potential
  obligation.

During late June 2018, certification hearings were heard before
  the Court in Halifax, Nova Scotia. On January 18, 2019, the Court issued its
  decision granting certification. On March 4, 2019, the Company filed a notice
  for leave to appeal the certification of the class action brought against it.
  Leave to appeal was granted and the appeal was heard on October 15, 2019. The
  decision from the appeal hearing is pending.

The Company is contesting the litigation. The Company reported
  the Claim to its insurance provider which appointed counsel to defend the Claim.
  Insurance may be available to cover all or a portion of the fees or damages
  which may be associated with the Claim although the Companys coverage may be
  subject to varying limits and exclusions. The litigation process will continue
  into the foreseeable future unless settled out of court. No amount has been
  recorded in the consolidated financial statements since the amount cannot be
  reliably measured at this point.

|CONSOLIDATED FINANCIAL STATEMENTS  |  FOR THE
      YEARS ENDED AUGUST 31, 2019 AND 2018 | 30
|---------------------------------------------------------------------------------------- | --

---

21. INCOME TAXES

There are no current income taxes payable or recoverable for
  the year ended August 31, 2019.

Components of deferred income tax expense are as follows:

|                                                  |   | AUGUST 31, 2019 |  |  |   | AUGUST 31, 2018 |  
|------------------------------------------------- | - | --------------- |  |  | - | --------------- | -
|                                                  |   |                 |  |  |   |                 |  
|Origination and reversal of temporary differences | $ | 1,987           |  |  | $ | 8,644           |  
|Change in tax rate and rate differences           |   | 281             |  |  |   | 178             |  
|Change in unrecognized temporary differences      |   | 1,349           |  |  |   | (3,165          | )
|Prior period adjustments                          |   | 12              |  |  |   | (4              | )
|Total income tax expense                          |   | 3,629           |  |  |   | 5,653           |  

A reconciliation of income tax expense at the statutory rate to
  amounts recorded in the consolidated financial statements is provided below.

|                                                             |   | AUGUST 31, 2019 |   |  |   | AUGUST 31, 2018 |  
|------------------------------------------------------------ | - | --------------- | - |  | - | --------------- | -
|                                                             |   |                 |   |  |   |                 |  
|Income (loss) from continuing operations before income taxes | $ | (5,875          | ) |  | $ | 27,777          |  
|Statutory rate                                               |   | 29.00%          |   |  |   | 29.00%          |  
|                                                             |   |                 |   |  |   |                 |  
|Tax calculated at statutory rate                             |   | (1,704          | ) |  |   | 8,055           |  
|Non-deductible (non-taxable) items                           |   | 3,742           |   |  |   | 742             |  
|Difference between current and future tax rates              |   | 281             |   |  |   | 74              |  
|Benefit of deductible temporary differences not recognized   |   | 1,349           |   |  |   | (3,165          | )
|Other                                                        |   | (39             | ) |  |   | (53             | )
|Income tax expense per financial statements                  | $ | 3,629           |   |  | $ | 5,653           |  

|CONSOLIDATED FINANCIAL STATEMENTS  |  FOR THE
      YEARS ENDED AUGUST 31, 2019 AND 2018 | 34
|---------------------------------------------------------------------------------------- | --

---

Recognized deferred tax assets and liabilities consist of the
  following:

|                                                            |   | AUGUST 31, 2019 |   |  |   | AUGUST 31, 2018 |  
|----------------------------------------------------------- | - | --------------- | - |  | - | --------------- | -
|Deferred tax assets are attributable to the following:      |   |                 |   |  |   |                 |  
|Non-capital losses                                          | $ | 10,708          |   |  | $ | 8,604           |  
|Share issuance costs                                        |   | -               |   |  |   | 1,657           |  
|                                                            |   | -               |   |  |   | 32              |  
|Deferred tax assets                                         |   | 10,708          |   |  |   | 10,293          |  
|Set-off of tax                                              |   | (10,708         | ) |  |   | (10,293         | )
|Net deferred tax asset                                      | $ | -               |   |  | $ | -               |  
|Deferred tax liabilities are attributable to the following: |   |                 |   |  |   |                 |  
|Long-term assets                                            | $ | (4,983          | ) |  | $ | (1,275          | )
|Biological assets                                           |   | (961            | ) |  |   | (3,307          | )
|Inventories                                                 |   | (15,200         | ) |  |   | (10,385         | )
|Unsecured convertible debentures                            |   | -               |   |  |   | (3,306          | )
|Other                                                       |   | (35             | ) |  |   | -               |  
|Deferred tax liabilities                                    |   | (21,179         | ) |  |   | (18,273         | )
|Set-off of tax                                              |   | 10,708          |   |  |   | 10,293          |  
|Net deferred tax liability                                  | $ | (10,471         | ) |  | $ | (7,980          | )

The changes in temporary differences during the years ended
  August 31, 2019 and 2018 were as follows:

|                                 |   | NET BALANCE AT 
      AUGUST 31, 2018 |   |   | RECOGNIZED IN 
      PROFIT OR LO SS |   |   | RECOGNIZED 
      DIRECTLY IN 
      EQUITY & OCI |   |   | NET BALANCE AT 
      AUGUST 31, 2019 |  
|-------------------------------- | - | ------------------------------------- | - | - | ------------------------------------ | - | - | ------------------------------------------------- | - | - | ------------------------------------- | -
|                                 |   |                                       |   |   |                                      |   |   |                                                   |   |   |                                       |  
|Non-capital losses               | $ | 8,604                                 |   | $ | 2,723                                |   | $ | (619                                              | ) | $ | 10,708                                |  
|Share issuance costs             |   | 1,657                                 |   |   | -                                    |   |   | (1,657                                            | ) |   | -                                     |  
|PP&E                             |   | (1,275                                | ) |   | (3,708                               | ) |   | -                                                 |   |   | (4,983                                | )
|Biological assets                |   | (3,307                                | ) |   | 2,346                                |   |   | -                                                 |   |   | (961                                  | )
|Inventories                      |   | (10,385                               | ) |   | (4,815                               | ) |   | -                                                 |   |   | (15,200                               | )
|Unsecured convertible debentures |   | (3,306                                | ) |   | (108                                 | ) |   | 3,414                                             |   |   | -                                     |  
|Other                            |   | 32                                    |   |   | (67                                  | ) |   | -                                                 |   |   | (35                                   | )
|Net tax assets (liabilities)     | $ | (7,980                                | ) | $ | (3,629                               | ) | $ | 1,138                                             |   | $ | (10,471                               | )
|                                 |   |                                       |   |   |                                      |   |   |                                                   |   |   |                                       |  
|                                 |   | NET BALANCE AT 
      AUGUST 31, 2017 |   |   | RECOGNIZED IN 
      PROFIT OR LO SS |   |   | RECOGNIZED 
      DIRECTLY IN 
      EQUITY & OCI |   |   | NET BALANCE AT 
      AUGUST 31, 2018 |  
|                                 |   |                                       |   |   |                                      |   |   |                                                   |   |   |                                       |  
|Non-capital losses               | $ | 132                                   |   | $ | 7,797                                |   | $ | 675                                               |   | $ | 8,604                                 |  
|Share issuance costs             |   | -                                     |   |   | -                                    |   |   | 1,657                                             |   |   | 1,657                                 |  
|PP&E                             |   | (132                                  | ) |   | (1,143                               | ) |   | -                                                 |   |   | (1,275                                | )
|Biological assets                |   | -                                     |   |   | (3,307                               | ) |   | -                                                 |   |   | (3,307                                | )
|Inventories                      |   | -                                     |   |   | (10,385                              | ) |   | -                                                 |   |   | (10,385                               | )
|Unsecured convertible debentures |   | -                                     |   |   | 1,353                                |   |   | (4,659                                            | ) |   | (3,306                                | )
|Other                            |   | -                                     |   |   | 32                                   |   |   | -                                                 |   |   | 32                                    |  
|Net tax assets (liabilities)     | $ | -                                     |   | $ | (5,653                               | ) | $ | (2,327                                            | ) | $ | (7,980                                | )

|CONSOLIDATED FINANCIAL STATEMENTS  |  FOR THE
      YEARS ENDED AUGUST 31, 2019 AND 2018 | 32
|---------------------------------------------------------------------------------------- | --

---

At August 31, 2019, the Company has non-capital loss
  carryforwards available to offset future taxable income in Canada, which expire
  as follows:

|                |   | AUGUST 31, 2019 | 
|--------------- | - | --------------- | 
|                |   |                 | 
|August 31, 2035 | $ | 1,070           | 
|August 31, 2037 |   | 11,727          | 
|August 31, 2038 |   | 16,690          | 
|August 31, 2039 |   | 11,562          | 
|                | $ | 41,049          | 

The Company recognizes tax benefits on losses or other
  deductible amounts where the probable criteria for the recognition of deferred
  tax assets has been met. The Company's unrecognized deductible temporary
  differences and unused tax losses for which no deferred tax asset is recognized
  consist of the following amounts:

|                                 |   | AUGUST 31, 2019 |  |  |   | AUGUST 31, 2018 | 
|-------------------------------- | - | --------------- |  |  | - | --------------- | 
|                                 |   |                 |  |  |   |                 | 
|Deductible temporary differences | $ | 12,010          |  |  | $ | 1,467           | 
|Tax losses                       |   | 3,809           |  |  |   | 1,219           | 
|                                 | $ | 15,819          |  |  | $ | 2,686           | 

22. SEGMENTED INFORMATION

The Company previously operated in two operating segments 
  production and sale of cannabis and patient counselling, operating as THC. THC
  was disposed of on October 16, 2018 (see Note 25). As a result, the Company
  currently operates in only one operating segment, the production and sale of
  cannabis. All assets for the production and sale of cannabis segment are
  domiciled within Canada and effectively all revenues are generated in Canada,
  except those revenues disclosure in Note 18.

23. GENERAL AND ADMINISTRATIVE EXPENSES BY NATURE (excluding discontinued operations)

|                                          |   | AUGUST 31, 2019 |  |  |   | AUGUST 31, 2018 | 
|----------------------------------------- | - | --------------- |  |  | - | --------------- | 
|Office and general                        | $ | 7,942           |  |  | $ | 1,465           | 
|Professional fees                         |   | 4,636           |  |  |   | 684             | 
|Wages and benefits                        |   | 4,443           |  |  |   | 2,520           | 
|Depreciation and amortization             |   | 664             |  |  |   | 509             | 
|Travel and accommodation                  |   | 456             |  |  |   | 345             | 
|Research and development                  |   | 409             |  |  |   | -               | 
|Utilities                                 |   | 43              |  |  |   | 29              | 
|Total general and administrative expenses | $ | 18,593          |  |  | $ | 5,552           | 

24. LICENSING AND ENDORSEMENT AGREEMENT

On October 4, 2016, the Company entered into a Licensing and
  Endorsement Agreement with Swear Net Inc. (the Trailer Park Boys TPB) for an
  exclusive product and branding partnership. In exchange for services, the
  Company paid $100 in cash and issued 150,000 options at a strike price of $1.52
  per share. The fee is being recognized over the life of the agreement of five
  years as services are delivered. For the year ended August 31, 2019, $99 (August
  31, 2018 - $120) has been amortized to share-based compensation and $32 (August
  31, 2018 - $nil) has been amortized to selling and marketing expenses. At August
  31, 2019, the Company has recorded the current portion of the cash payment and
  stock options fee of $89 (August 31, 2018 - $122) as a prepaid expense and the
  long-term portion of the fee of $24 (August 31, 2018 - $46) in deferred charges
  on the consolidated statements of financial position.

Under the agreement, the Company issued an additional 350,000
  in options at a price of $1.52 which vest in accordance with certain conditions
  being met and a royalty payment of 4% of gross revenues generated specifically
  from the sales and promotion of certain products as set out in the agreement. As
  of August 31, 2019, these conditions have been met. For the year ended August
  31, 2019, $51 has been expensed (August 31, 2018  $155) to share-based
  compensation. At August 31, 2019, the Company has recorded the current portion
  of the stock options fee of $51 (August 31, 2018 - $51) as a prepaid expense and
  the long-term portion of the fee of $55 (August 31, 2018 - $106) in deferred
  charges on the consolidated statements of financial position.

|CONSOLIDATED FINANCIAL STATEMENTS  |  FOR THE
      YEARS ENDED AUGUST 31, 2019 AND 2018 | 33
|---------------------------------------------------------------------------------------- | --

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25. OPERATIONS OF TRAUMA HEALING CENTERS

Trauma Healing Centers, Incorporated (THC) offered a
  multi-disciplinary approach to post traumatic stress disorder treatment, chronic
  pain, trauma therapy, and medical cannabis as an alternative medicine.

During the fourth quarter of fiscal year 2018, management
  decided to divest of operations of THC. Consequently, assets and liabilities
  allocable to THC were classified as a disposal group. Revenue and expenses,
  gains and losses relating to the discontinuation of THC have been eliminated
  from profit or loss from the Companys continuing operations and are shown as a
  single line item in the statements of (loss) income and comprehensive (loss)
  income.

Operating income (loss) of THC and the loss from re-measurement
  of assets and liabilities classified as held for sale are summarized as follows
  up to the date of disposal (see below):

|                                                             |   | FOR THE PERIOD            |   |  |   |                    |  
|------------------------------------------------------------ | - | ------------------------- | - |  | - | ------------------ | -
|                                                             |   | SEPTEMBER 1, 2018         |   |  |   | FOR THE YEAR ENDED |  
|                                                             |   | TO
      OCTOBER 16, 2018 |   |  |   | AUGUST 31, 2018    |  
|                                                             |   |                           |   |  |   |                    |  
|Revenue                                                      |   |                           |   |  |   |                    |  
|                                                             |   |                           |   |  |   |                    |  
|Sales                                                        | $ | 138                       |   |  | $ | 1,154              |  
|                                                             |   |                           |   |  |   |                    |  
|Cost of sales                                                |   | 54                        |   |  |   | 537                |  
|                                                             |   |                           |   |  |   |                    |  
|Gross margin from discontinued
      operations              |   | 84                        |   |  |   | 617                |  
|                                                             |   |                           |   |  |   |                    |  
|Expenses                                                     |   |                           |   |  |   |                    |  
|                                                             |   |                           |   |  |   |                    |  
|General and administrative                                   |   | 75                        |   |  |   | 941                |  
|                                                             |   |                           |   |  |   |                    |  
|Sales and marketing                                          |   | -                         |   |  |   | 60                 |  
|                                                             |   |                           |   |  |   |                    |  
|Impairment of goodwill                                       |   | -                         |   |  |   | 1,228              |  
|                                                             |   |                           |   |  |   |                    |  
|Total expenses                                               |   | 75                        |   |  |   | 2,229              |  
|                                                             |   |                           |   |  |   |                    |  
|Investment income (expense)                                  |   | -                         |   |  |   | 1                  |  
|                                                             |   |                           |   |  |   |                    |  
|Income (loss) from operations                                | $ | 9                         |   |  | $ | (1,611             | )
|                                                             |   |                           |   |  |   |                    |  
|Loss on remeasurement to fair value less
      costs to sell |   | (47                       | ) |  |   | -                  |  
|                                                             |   |                           |   |  |   |                    |  
|Loss on discontinued operations                              | $ | (38                       | ) |  | $ | (1,611             | )

The carrying amounts of assets and liabilities in this disposal
  group are summarized as follows:

|                                         |   | AUGUST 31, 2018 | 
|---------------------------------------- | - | --------------- | 
|Current Assets                           |   |                 | 
|Cash                                     | $ | 102             | 
|Accounts receivable                      |   | 88              | 
|Other current assets                     |   | 9               | 
|                                         |   | 199             | 
|Property, plant and equipment            |   | 89              | 
|Goodwill                                 |   | 927             | 
|Assets classified as held for sale       | $ | 1,215           | 
|Current liabilities                      |   |                 | 
|Accounts payable and accrued liabilities | $ | 65              | 

Cash flows generated by THC for the reporting periods are
  summarized as follows:

|                                   |   | FOR THE PERIOD            |   |  |   |                    |  
|---------------------------------- | - | ------------------------- | - |  | - | ------------------ | -
|                                   |   | SEPTEMBER 1, 2018         |   |  |   | FOR THE YEAR ENDED |  
|                                   |   | TO
      OCTOBER 16, 2018 |   |  |   | AUGUST 31, 2018    |  
|Operating activities               | $ | (35                       | ) |  | $ | (449               | )
|Investing activites                |   | -                         |   |  |   | (32                | )
|Cash used by discounted operations | $ | (35                       | ) |  | $ | (481               | )

On October 16, 2018, the Company sold THC to Harvest Medicine
  (HMED). HMED is a wholly-owned subsidiary of VIVO Cannabis Inc. (VIVO). The
  transaction resulted in HMED acquiring 100% of the issued and outstanding shares
  of THC from the Company. The total purchase price for the shares was $1,141
  which was satisfied by the issuance of 864,678 common shares in the capital of
  VIVO at a share price of $1.32. This non-cash investing activity has been
  excluded from the statement of cash flows as it did not use or provide any cash.
  The derecognized assets and liabilities on October 16, 2018 were as follows:

|CONSOLIDATED FINANCIAL STATEMENTS  |  FOR THE
      YEARS ENDED AUGUST 31, 2019 AND 2018 | 34
|---------------------------------------------------------------------------------------- | --

---

|Derecognized assets and liabilities  |   |       |  
|------------------------------------ | - | ----- | -
|Cash                                 | $ | 96    |  
|Accounts receivable                  |   | 140   |  
|Other current assets                 |   | 9     |  
|Property, plant and equipment        |   | 86    |  
|Goodwill                             |   | 880   |  
|Trade and other payables             |   | (70   | )
|Net assets disposed                  | $ | 1,141 |  
|                                     |   |       |  
|Fair value of consideration received | $ | 1,141 |  
|Gain/(loss) on disposal              |   | -     |  

26. PRIOR PERIOD RECLASSIFICATION

At the beginning of the 2019 fiscal year, the first fiscal year
  in which the Company completed sales to the adult-use recreational cannabis
  market, it was determined that the classification of shipping expenses is more
  accurately reflected as a component of cost of sales rather than sales and
  marketing expenses. As a result, shipping expenses of $866 have been
  reclassified from sales and marketing expenses to cost of sales for the year
  ended August 31, 2018 to conform to the current year presentation.

27. SUBSEQUENT EVENTS

(i) Issuance of stock options
  On September 30, 2019, the
  Company issued 220,000 employee options to purchase 220,000 common shares of the
  Company, to employees of OGI, at an exercise price of $5.05 per share. The
  options vest over a two-year period. Vested options may be exercised until 2029,
  subject to forfeiture provisions requiring the options to expire ninety days
  after termination of the individuals employment. The fair value is
  estimated at $549.

On October 7, 2019, the Company issued 218,370 RSUs and 142,187 PSUs of the Company, to certain employees and  directors of the Company.  The RSUs vest evenly over a three-year period  with the first tranche vesting on August 31, 2020 with a fair value estimated  at $937.  The PSUs vest based on the achievement of performance metrics  designed for each respective unit holder for the fiscal year ended August 31,  2020 with a fair value estimated at $305.

On October 24, 2019, the Company issued 200,000 employee
  options to purchase 200,000 common shares of the Company, to employees of OGI,
  at an exercise price of $4.71 per share. The options vest over a two-year
  period. Vested options may be exercised until 2029, subject to forfeiture
  provisions requiring the options to expire ninety days after termination of the
  individual’s employment. The fair value is estimated at $532.

(ii) 1812 Hemp loan advance
  During September 2019, the
  Company advanced an additional $2,100 to 1812 Hemp in connection with the
  advance payment agreement described in Note 6.

(iii) BMO Credit Facility
  During October 2019, the Company
  drew $15,000 against its BMO Term Loan credit facility, bringing the total
  balance outstanding on the Term Loan to $65,000 as of the date of these
  financial statements.

On November 15, 2019, the Company amended its Facilities with
  BMO to: i) extend the final draw deadline of the Term Loan from November 30,
  2019 to March 31, 2020; ii) postpone the commencement of scheduled principal
  repayments on the Term Loan to May 31, 2020; and iii) realign the financial
  covenants structure, effective November 30, 2019, to be more consistent with
  industry norms up to and including May 31, 2020, which will also provide the
  Company with greater flexibility around the timing and quantum of incremental
  draws. The financial covenants will revert back to the original structure on
  August 31, 2020. The interest rate margin will be fixed during this period. The
  Company incurred an amendment fee of $140 plus customary legal expenses in
  connection with the amendment.

|CONSOLIDATED FINANCIAL STATEMENTS  |  FOR THE
      YEARS ENDED AUGUST 31, 2019 AND 2018 | 35
|---------------------------------------------------------------------------------------- | --

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