Exhibit 99.2









Aphria Inc.



CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED MAY 31, 2019 AND MAY
31, 2018



(Expressed in Canadian Dollars, unless otherwise
noted)























Report of Independent Registered Public Accounting Firm



To the Board of Directors and Shareholders of Aphria Inc.



Opinion on the Financial Statements



We have audited the accompanying consolidated statements of
financial position of Aphria Inc. and its subsidiaries (together, the Company) as of May 31, 2019 and 2018, and the related consolidated
statements of income and comprehensive income, changes in equity and cash flows for the years then ended, including the related
notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements
present fairly, in all material respects, the financial position of the Company as of May 31, 2019 and 2018, and their financial
performance and their cash flows for the years then ended in conformity with International Financial Reporting Standards as issued
by the International Accounting Standards Board (IFRS).



Basis for Opinion



These consolidated financial statements are the responsibility
of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements
based on our audits. 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 audits of these consolidated financial statements
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 consolidated financial statements are free of material misstatement, whether due to error or fraud.



Our audits included performing procedures to assess the risks
of material misstatement of the consolidated 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 consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our
audits provide a reasonable basis for our opinion.



/s/ PricewaterhouseCoopers LLP



Chartered Professional Accountants, Licensed Public Accountants



|Toronto, Canada
        July 31, 2019
|-------------------------------------



We have served as the Company's auditor since 2017.















|
|
|
|
|

















Aphria Inc.

Consolidated Statements of Financial Position (In thousands of Canadian dollars)




|                                                |  | Note |  | May 31,  2019 |           |   | May 31,  2018 |  
|----------------------------------------------- |  | ---- |  | ------------- | --------- | - | ------------- | -
|Assets                                          |  |      |  |               |           |   |               |  
|Current assets                                  |  |      |  |               |           |   |               |  
|Cash and cash equivalents                       |  |      |  | $             | 550,797   |   |               | $
|Marketable securities                           |  | 4    |  |               | 20,199    |   |               |  
|Accounts receivable                             |  |      |  |               | 25,488    |   |               |  
|Prepaids and other


current assets             |  | 5    |  |               | 23,391    |   |               |  
|Inventory                                       |  | 6    |  |               | 91,529    |   |               |  
|Biological assets                               |  | 7    |  |               | 18,725    |   |               |  
|Assets held for sale                            |  |      |  |               | —         |   |               |  
|Promissory notes receivable                     |  | 15   |  |               | 39,200    |   |               |  
|Current portion of convertible notes receivable |  | 12   |  |               | 11,500    |   |               |  
|                                                |  |      |  |               | 780,829   |   |               |  
|Capital assets                                  |  | 9    |  |               | 503,898   |   |               |  
|Intangible assets                               |  | 10   |  |               | 392,056   |   |               |  
|Convertible notes receivable                    |  | 12   |  |               | 20,730    |   |               |  
|Interest in equity investees                    |  | 13   |  |               | 9,311     |   |               |  
|Long-term investments                           |  | 14   |  |               | 64,922    |   |               |  
|Goodwill                                        |  | 11   |  |               | 669,846   |   |               |  
|                                                |  |      |  | $             | 2,441,592 |   |               | $
|Liabilities                                     |  |      |  |               |           |   |               |  
|Current liabilities                             |  |      |  |               |           |   |               |  
|Accounts payable and accrued liabilities        |  |      |  | $             | 105,813   |   |               | $
|Income taxes payable                            |  |      |  |               | 2,722     |   |               |  
|Deferred revenue                                |  |      |  |               | 23,678    |   |               |  
|Current portion of promissory note payable      |  | 18   |  |               | —         |   |               |  
|Current portion of long-term debt               |  | 19   |  |               | 6,332     |   |               |  
|Current portion of derivative liability         |  |      |  |               | —         |   |               |  
|                                                |  |      |  |               | 138,545   |   |               |  
|Long-term liabilities                           |  |      |  |               |           |   |               |  
|Long-term debt                                  |  | 19   |  |               | 60,895    |   |               |  
|Convertible debentures                          |  | 20   |  |               | 421,366   |   |               |  
|Derivative liability                            |  |      |  |               | —         |   |               |  
|Deferred tax liability                          |  | 16   |  |               | 87,633    |   |               |  
|                                                |  |      |  |               | 708,439   |   |               |  
|Shareholders’ equity                            |  |      |  |               |           |   |               |  
|Share capital                                   |  | 21   |  |               | 1,655,273 |   |               |  
|Warrants                                        |  | 22   |  |               | 1,336     |   |               |  
|Share-based payment reserve                     |  |      |  |               | 36,151    |   |               |  
|Accumulated other comprehensive loss            |  |      |  |               | (119      | ) |               |  
|Non-controlling interest                        |  | 24   |  |               | 28,409    |   |               |  
|Retained earnings                               |  |      |  |               | 12,103    |   |               |  
|                                                |  |      |  |               | 1,733,153 |   |               |  
|                                                |  |      |  |               | 2,441,592 |   |               | $



Nature of operations (Note 1), Commitments
and contingencies (Note 32), Subsequent events (Note 34)



Approved on behalf of the Board:



|“John Herhalt”    |  | “Irwin Simon”    
|----------------- |  | -----------------
|Signed:  Director |  | Signed:  Director



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





2







Aphria Inc.

Consolidated Statements of Income and Comprehensive Income

(In thousands of Canadian
dollars, except share and per share amounts)



|                                                      |  |      |  | For the year ended  May 31, |            
|----------------------------------------------------- |  | ---- |  | --------------------------- | -----------
|                                                      |  | Note |  | 2019                        |            
|Revenue from cannabis produced                        |  |      |  | $                           | 86,348     
|Distribution revenue                                  |  |      |  |                             | 157,931    
|Other revenue                                         |  |      |  |                             | 3,035      
|Excise taxes                                          |  |      |  |                             | (10,204    
|                                                      |  |      |  |                             |            
|Net revenue                                           |  |      |  |                             | 237,110    
|                                                      |  |      |  |                             |            
|Production costs                                      |  | 6    |  |                             | 35,548     
|Cost of goods purchased                               |  |      |  |                             | 138,126    
|Other costs of sales                                  |  |      |  |                             | 898        
|                                                      |  |      |  |                             |            
|Gross profit before fair value adjustments            |  |      |  |                             | 62,538     
|                                                      |  |      |  |                             |            
|Fair value adjustment on sale of inventory            |  | 6    |  |                             | 27,724     
|Fair value adjustment on growth of biological assets  |  | 7    |  |                             | (40,607    
|                                                      |  |      |  |                             |            
|Gross profit                                          |  |      |  |                             | 75,421     
|Operating expenses:                                   |  |      |  |                             |            
|General and administrative                            |  | 25   |  |                             | 69,752     
|Share-based compensation                              |  | 26   |  |                             | 26,080     
|Selling, marketing and promotion                      |  |      |  |                             | 27,971     
|Amortization                                          |  |      |  |                             | 14,084     
|Research and development                              |  |      |  |                             | 1,391      
|Impairment                                            |  | 11   |  |                             | 58,039     
|Transaction costs                                     |  |      |  |                             | 23,259     
|                                                      |  |      |  |                             | 220,576    
|                                                      |  |      |  |                             |            
|Operating loss                                        |  |      |  |                             | (145,155   
|                                                      |  |      |  |                             |            
|Non-operating income                                  |  | 27   |  |                             | 129,510    
|                                                      |  |      |  |                             |            
|Income (loss) before income taxes                     |  |      |  |                             | (15,645    
|                                                      |  |      |  |                             |            
|Income taxes                                          |  | 16   |  |                             | 854        
|Net income (loss)                                     |  |      |  |                             | (16,499    
|                                                      |  |      |  |                             |            
|Other comprehensive loss                              |  |      |  |                             |            
|Other comprehensive loss                              |  |      |  |                             | (119       
|Net comprehensive income (loss)                       |  |      |  | $                           | (16,618    
|                                                      |  |      |  |                             |            
|Total comprehensive income (loss) is attributable to: |  |      |  |                             |            
|Shareholders of Aphria Inc.                           |  |      |  |                             | (14,667    
|Non-controlling interest                              |  | 24   |  |                             | (1,951     
|                                                      |  |      |  | $                           | (16,618    
|                                                      |  |      |  |                             |            
|Weighted average number of common shares - basic      |  |      |  |                             | 242,763,558
|Weighted average number of common shares - diluted    |  |      |  |                             | 242,763,558
|                                                      |  |      |  |                             |            
|Earnings (loss) per share - basic                     |  | 29   |  | $                           | (0.07      
|Earnings (loss) per share - diluted                   |  | 29   |  | $                           | (0.07      



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





3







Aphria Inc.

Consolidated Statements of Changes in Equity

(In thousands of Canadian
dollars, except share amounts)



|                                                  |  | Number
    ofcommon shares |             |  | Share
    capital(Note 21) |   |           | Warrants(Note 22) |  |   | Share-basedpaymentreserve |   |  | Accumulatedothercomprehensiveloss |        |   | Non-controllinginterest(Note 24) |   |      | Retainedearnings |  |   | Total |  
|------------------------------------------------- |  | -------------------------- | ----------- |  | -------------------------- | - | --------- | ----------------- |  | - | ------------------------- | - |  | --------------------------------- | ------ | - | -------------------------------- | - | ---- | ---------------- |  | - | ----- | -
|Balance at May 31, 2017                           |  |                            | 138,628,704 |  |                            | $ | 274,317   |                   |  | $ | 445                       |   |  | $                                 | 3,230  |   |                                  | $ | —    |                  |  | $ | —     |  
|Share issuance - November 2017 bought deal        |  |                            | 12,689,675  |  |                            |   | 86,661    |                   |  |   | —                         |   |  |                                   | —      |   |                                  |   | —    |                  |  |   | —     |  
|Share issuance - Broken Coast acquisition         |  |                            | 8,363,651   |  |                            |   | 109,000   |                   |  |   | —                         |   |  |                                   | —      |   |                                  |   | —    |                  |  |   | —     |  
|Share issuance - January 2018 bought deal         |  |                            | 14,373,675  |  |                            |   | 214,168   |                   |  |   | —                         |   |  |                                   | —      |   |                                  |   | —    |                  |  |   | —     |  
|Share issuance - Nuuvera acquisition              |  |                            | 31,226,910  |  |                            |   | 411,258   |                   |  |   | 1,015                     |   |  |                                   | 12,133 |   |                                  |   | —    |                  |  |   | —     |  
|Share issuance - warrants exercised               |  |                            | 2,388,636   |  |                            |   | 3,767     |                   |  |   | (85                       | ) |  |                                   | —      |   |                                  |   | —    |                  |  |   | —     |  
|Share issuance - options exercised                |  |                            | 2,493,623   |  |                            |   | 11,559    |                   |  |   | —                         |   |  |                                   | (7,230 | ) |                                  |   | —    |                  |  |   | —     |  
|Share issuance - deferred share units             |  |                            | 5,050       |  |                            |   | 62        |                   |  |   | —                         |   |  |                                   | —      |   |                                  |   | —    |                  |  |   | —     |  
|Share-based payments                              |  |                            | —           |  |                            |   | —         |                   |  |   | —                         |   |  |                                   | 15,780 |   |                                  |   | —    |                  |  |   | —     |  
|Income tax recovery on share issuance costs       |  |                            | —           |  |                            |   | 3,002     |                   |  |   | —                         |   |  |                                   | —      |   |                                  |   | —    |                  |  |   | —     |  
|Shares held in escrow for services not yet earned |  |                            | —           |  |                            |   | 187       |                   |  |   | —                         |   |  |                                   | —      |   |                                  |   | —    |                  |  |   | —     |  
|Share-based payments rescinded                    |  |                            | —           |  |                            |   | —         |                   |  |   | —                         |   |  |                                   | (1,907 | ) |                                  |   | —    |                  |  |   | —     |  
|Non-controlling interest                          |  |                            | —           |  |                            |   | —         |                   |  |   | —                         |   |  |                                   | —      |   |                                  |   | —    |                  |  |   | 9,800 |  
|Total comprehensive income for the year           |  |                            | —           |  |                            |   | —         |                   |  |   | —                         |   |  |                                   | —      |   |                                  |   | (801 | )                |  |   | (220  | )
|Balance at May 31, 2018                           |  |                            | 210,169,924 |  |                            | $ | 1,113,981 |                   |  | $ | 1,375                     |   |  | $                                 | 22,006 |   |                                  | $ | (801 | )                |  | $ | 9,580 |  



|                                                     |  | Number
    ofcommon shares |             |  | Share
    capital(Note 21) |   |           | Warrants(Note 22) |  |   | Share-basedpaymentreserve |   |  | Accumulatedothercomprehensiveloss |        |   | Non-controllinginterest(Note 24) |   |      | Retainedearnings |  |   | Total  |  
|---------------------------------------------------- |  | -------------------------- | ----------- |  | -------------------------- | - | --------- | ----------------- |  | - | ------------------------- | - |  | --------------------------------- | ------ | - | -------------------------------- | - | ---- | ---------------- |  | - | ------ | -
|Balance at May 31, 2018                              |  |                            | 210,169,924 |  |                            | $ | 1,113,981 |                   |  | $ | 1,375                     |   |  | $                                 | 22,006 |   |                                  | $ | (801 | )                |  | $ | 9,580  |  
|Share issuance - June 2018 bought deal               |  |                            | 21,835,510  |  |                            |   | 245,925   |                   |  |   | —                         |   |  |                                   | —      |   |                                  |   | —    |                  |  |   | —      |  
|Additional share issuance - Broken Coast acquisition |  |                            | 19,963      |  |                            |   | 297       |                   |  |   | —                         |   |  |                                   | —      |   |                                  |   | —    |                  |  |   | —      |  
|Share issuance - LATAM acquisition                   |  |                            | 15,678,310  |  |                            |   | 273,900   |                   |  |   | —                         |   |  |                                   | —      |   |                                  |   | —    |                  |  |   | 11,341 |  
|Share issuance - warrants exercised                  |  |                            | 550,335     |  |                            |   | 1,762     |                   |  |   | (39                       | ) |  |                                   | —      |   |                                  |   | —    |                  |  |   | —      |  
|Share issuance - options exercised                   |  |                            | 2,632,078   |  |                            |   | 15,029    |                   |  |   | —                         |   |  |                                   | (9,933 | ) |                                  |   | —    |                  |  |   | —      |  
|Share issuance - DSUs exercised                      |  |                            | 103,000     |  |                            |   | 953       |                   |  |   | —                         |   |  |                                   | —      |   |                                  |   | —    |                  |  |   | —      |  
|Income tax recovery on share issuance costs          |  |                            | —           |  |                            |   | 3,426     |                   |  |   | —                         |   |  |                                   | —      |   |                                  |   | —    |                  |  |   | —      |  
|Share-based payments                                 |  |                            | —           |  |                            |   | —         |                   |  |   | —                         |   |  |                                   | 24,078 |   |                                  |   | —    |                  |  |   | —      |  
|Elimination of CTA on disposal of equity investee    |  |                            | —           |  |                            |   | —         |                   |  |   | —                         |   |  |                                   | —      |   |                                  |   | 801  |                  |  |   | —      |  
|Non-controlling interest                             |  |                            | —           |  |                            |   | —         |                   |  |   | —                         |   |  |                                   | —      |   |                                  |   | —    |                  |  |   | 9,439  |  
|Total comprehensive loss for the year                |  |                            | —           |  |                            |   | —         |                   |  |   | —                         |   |  |                                   | —      |   |                                  |   | (119 | )                |  |   | (1,951 | )
|Balance at May 31, 2019                              |  |                            | 250,989,120 |  |                            | $ | 1,655,273 |                   |  | $ | 1,336                     |   |  | $                                 | 36,151 |   |                                  | $ | (119 | )                |  | $ | 28,409 |  



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



4







Aphria Inc.

Consolidated Statements of Cash Flows (In thousands of Canadian dollars)




|                                                                     |  |      |  | For the year ended  May 31, |         
|-------------------------------------------------------------------- |  | ---- |  | --------------------------- | --------
|                                                                     |  | Note |  | 2019                        |         
|Cash generated used in operating activities:                         |  |      |  |                             |         
|Net income (loss) for the year                                       |  |      |  | $                           | (16,499 
|Adjustments for:                                                     |  |      |  |                             |         
|Future income taxes                                                  |  | 16   |  |                             | (4,090  
|Fair value adjustment on sale of inventory                           |  | 6    |  |                             | 27,724  
|Fair value adjustment on growth of biological assets                 |  | 7    |  |                             | (40,607 
|Loss on marketable securities                                        |  | 4    |  |                             | 178     
|Unrealized foreign exchange gain                                     |  |      |  |                             | (256    
|Amortization                                                         |  | 9,10 |  |                             | 22,940  
|(Gain) loss on sale of capital assets                                |  |      |  |                             | (55     
|Impairment                                                           |  | 11   |  |                             | 58,039  
|Unrealized loss (gain) on convertible notes receivable               |  | 12   |  |                             | 3,399   
|Gain on equity investees                                             |  |      |  |                             | (58,438 
|Deferred gain recognized                                             |  |      |  |                             | (618    
|Consulting revenue                                                   |  |      |  |                             | —       
|Other non-cash items                                                 |  |      |  |                             | (566    
|Share-based compensation                                             |  | 26   |  |                             | 26,080  
|Gain on long-term investments                                        |  | 28   |  |                             | (19,651 
|Unrealized gain on convertible debentures                            |  |      |  |                             | (48,439 
|Unrealized loss on financial liabilities                             |  |      |  |                             | 1,326   
|Transaction costs                                                    |  |      |  |                             | 15,419  
|Change in non-cash working capital                                   |  | 30   |  |                             | (21,491 
|                                                                     |  |      |  |                             | (55,605 
|Cash provided by financing activities:                               |  |      |  |                             |         
|Share capital issued, net of cash issuance costs                     |  |      |  |                             | 245,925 
|Share capital issued on warrants, options and DSUs exercised         |  |      |  |                             | 7,772   
|Proceeds from convertible debentures                                 |  |      |  |                             | 454,386 
|Proceeds from non-controlling interest                               |  |      |  |                             | —       
|Advances from related parties                                        |  | 8    |  |                             | —       
|Repayment of amounts due to related parties                          |  | 8    |  |                             | —       
|Proceeds from long-term debt                                         |  |      |  |                             | 27,841  
|Repayment of long-term debt                                          |  |      |  |                             | (11,374 
|                                                                     |  |      |  |                             | 724,550 
|Cash used in investing activities:                                   |  |      |  |                             |         
|Investment in marketable securities                                  |  | 4    |  |                             | —       
|Proceeds from disposal of marketable securities                      |  | 4    |  |                             | 24,685  
|Investment in capital and intangible assets, net of shares issued    |  |      |  |                             | (205,965
|Proceeds from disposal of capital assets                             |  |      |  |                             | 55      
|Convertible notes advances                                           |  | 12   |  |                             | (19,500 
|Repayment of convertible and promissory notes receivable             |  |      |  |                             | 8,551   
|Investment in long-term investments and equity investees             |  |      |  |                             | (72,367 
|Proceeds from disposal of long-term investments and equity investees |  |      |  |                             | 110,213 
|Net cash paid on business acquisitions                               |  |      |  |                             | (23,557 
|                                                                     |  |      |  |                             | (177,885
|Net increase (decrease) in cash and cash equivalents                 |  |      |  |                             | 491,060 
|Cash and cash equivalents, beginning of year                         |  |      |  |                             | 59,737  
|Cash and cash equivalents, end of year                               |  |      |  | $                           | 550,797 
|Cash is comprised of:                                                |  |      |  |                             |         
|Cash in bank                                                         |  |      |  | $                           | 129,998 
|Short-term deposits                                                  |  |      |  |                             | 420,799 
|Cash and cash equivalents                                            |  |      |  | $                           | 550,797 



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





5







Aphria Inc.

Notes to the Consolidated Financial Statements

For the years ended May 31, 2019 and May 31, 2018 (In thousands of Canadian dollars, except share and per share
amounts)




| | 1. | Nature of operations
| | -- | --------------------



Aphria Inc. (the "Company"
or “Aphria”) existing under the laws of Business Corporations Act (Ontario) and is licensed to produce and sell cannabis
under The Cannabis Act.In February 2018, the Company acquired Broken Coast Cannabis Ltd. (“Broken Coast”) (Note
11). Broken Coast is licensed to produce and sell cannabis under The Cannabis Act. In March 2018, the Company acquired Nuuvera
Inc. (“Nuuvera”) (Note 11). Nuuvera is an international organization with a focus on building a global cannabis brand,
with operations in Germany, Italy, Malta, and Lesotho. In September 2018, the Company acquired LATAM Holdings Inc. (“LATAM”)
(Note 11). This purchase provides Aphria an early foothold into the Latin American cannabis market whereby LATAM holds licenses
and license applications presently in-process for production, import, export and sale of cannabis and cannabis derivatives in Colombia,
Argentina and Jamaica. In January 2019, Aphria through wholly-owned subsidiary Nuuvera Deutschland GmbH acquired CC Pharma GmbH
(“CC Pharma”) (Note 11). CC Pharma is a distributor of pharmaceutical products to pharmacies in Germany.



In July 2018, Aphria Inc. and
its wholly-owned subsidiary, Pure Natures Wellness Inc. (o/a Aphria) amalgamated.



1974568 Ontario Ltd. (“Aphria
Diamond”) is a 51% majority owned subsidiary of the Company, incorporated in November 2017. Aphria Diamond has applied for
its cultivation licence under the provisions of The Cannabis Act.



The registered office of the
Company is located at 1 Adelaide Street East Suite 2310, Toronto, Ontario.



The Company’s common
shares are listed under the symbol “APHA” on the Toronto Stock Exchange (“TSX”) in Canada and the New York
Stock Exchange (“NYSE”) in the United States.



These consolidated financial
statements were approved by the Company’s Board of Directors on July 31, 2019.



| | 2. | Basis of preparation
| | -- | --------------------



| | (a) | Statement of compliance
| | --- | -----------------------



The policies applied in these
consolidated financial statements are prepared in accordance with International Financial Reporting Standards (“IFRS”)
as issued by the International Accounting Standards Board (“IASB”) and Interpretations of the IFRS Interpretations
Committee (“IFRIC”).



| | (b) | Basis of measurement
| | --- | --------------------



These consolidated financial
statements have been prepared on the going concern basis, under the historical cost convention except for certain financial instruments
that are measured at fair value and biological assets that are measured at fair value less costs to sell, as detailed in the Company’s
accounting policies.



| | (c) | Functional currency
| | --- | -------------------



All figures presented in the
consolidated financial statements are reflected in Canadian dollars; however, the functional currency of the Company includes the
Canadian dollar and the Euro.



Foreign currency transactions
are translated to the respective functional currencies of the Company’s entities at the exchange rates in effect on the date
of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated to the functional currency
at the foreign exchange rate applicable at the statement of financial position date. Non-monetary items carried at historical cost
denominated in foreign currencies are translated to the functional currency at the date of the transactions. Non-monetary items
carried at fair value denominated in foreign currencies are translated to the functional currency at the date when the fair value
was determined. Realized and unrealized exchange gains and losses are recognized through profit and loss.



On consolidation, the assets
and liabilities of foreign operations reported in their functional currencies, including marketable securities, long-term investments
and promissory notes payable, are translated into Canadian dollars, the Group’s presentation currency, at period-end exchange
rates. Income and expenses, and cash flows of foreign operations are translated into Canadian dollars using average exchange rates.
Exchange differences resulting from translating foreign operations are recognized in other comprehensive income and accumulated
in equity. The Company and all of its subsidiaries functional currency is Canadian dollars, with the exception of CC Pharma GmbH
whose functional currency is the Euro.





6







Aphria Inc.

Notes to the Consolidated Financial Statements

For the years ended May 31, 2019 and May 31, 2018 (In thousands of Canadian dollars, except share and per share
amounts)




| | (d) | Basis of consolidation
| | --- | ----------------------



Subsidiaries are entities controlled
by the Company. Control exists when the Company has the power, directly and indirectly, to govern the financial and operating policies
of an entity and be exposed to the variable returns from its activities. The financial statements of subsidiaries are included
in the consolidated financial statements from the date that control commences until the date that control ceases.



|Subsidiaries                            |  | Jurisdiction of incorporation |  | Ownership interest(1) |    
|--------------------------------------- |  | ----------------------------- |  | --------------------- | ---
|Nuuvera Holdings Limited                |  | Ontario, Canada               |  |                       | 100
|ARA – Avanti Rx Analytics Inc.          |  | Ontario, Canada               |  |                       | 100
|Nuuvera Israel Ltd.(2)                  |  | Israel                        |  |                       | 100
|Nuuvera Deutschland GmbH                |  | Germany                       |  |                       | 100
|Aphria Deutschland GmbH                 |  | Germany                       |  |                       | 100
|FL-Group                                |  | Italy                         |  |                       | 100
|Broken Coast Cannabis Ltd.              |  | British Columbia, Canada      |  |                       | 100
|Goodfields Supply Co. Ltd.              |  | United Kingdom                |  |                       | 100
|LATAM Holdings Inc.                     |  | British Columbia, Canada      |  |                       | 100
|MMJ Colombia Partners Inc.              |  | Ontario, Canada               |  |                       | 100
|Marigold Acquisitions Inc.              |  | British Columbia, Canada      |  |                       | 100
|Hampstead Holdings Ltd.                 |  | Bermuda                       |  |                       | 100
|MMJ International Investments Inc.      |  | British Columbia, Canada      |  |                       | 100
|ABP, S.A.                               |  | Argentina                     |  |                       | 100
|CC Pharma GmbH                          |  | Germany                       |  |                       | 100
|CC Pharma Research and Development GmbH |  | Germany                       |  |                       | 100
|Aphria Handelsgesellschaft              |  | Germany                       |  |                       | 100
|Marigold Projects Jamaica Limited       |  | Jamaica                       |  |                       | 95 
|Nuuvera Malta Ltd.                      |  | Malta                         |  |                       | 90 
|ASG Pharma Ltd.                         |  | Malta                         |  |                       | 90 
|QSG Health Ltd.                         |  | Malta                         |  |                       | 90 
|ColCanna S.A.S.                         |  | Colombia                      |  |                       | 90 
|CC Pharma Nordic ApS                    |  | Denmark                       |  |                       | 75 
|1974568 Ontario Ltd.                    |  | Ontario, Canada               |  |                       | 51 
|Aphria Terra S.R.L.                     |  | Italy                         |  |                       | 51 
|Aphria Italy S.p.A.(2)                  |  | Italy                         |  |                       | 51 
|APL – Aphria Portugal, Lda.             |  | Portugal                      |  |                       | 51 
|CannInvest Africa Ltd.                  |  | South Africa                  |  |                       | 50 
|Verve Dynamics Incorporated (Pty) Ltd.  |  | Lesotho                       |  |                       | 30 








| | (1) | The Company defines ownership interest as the interest
in which the Company is entitled a proportionate share of net income. Legal ownership of some subsidiaries differ from ownership
interest shown above.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | Represents inactive subsidiaries, which have no operations
and do not own any assets, save and except for related party balances owing to the Company and is in the process of being dissolved.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (3) | The Company holds 49% of the issued and outstanding shares
of Marigold Projects Jamaica Limited, through wholly owned subsidiary Marigold Acquisitions Inc. The Company holds rights through
a licensing agreement to 95% of the results of operations of Marigold Projects Jamaica Limited.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (4) | The Company holds 100% of the issued and outstanding shares
of ASG Pharma Ltd., through 90% owned subsidiary Nuuvera Malta Ltd.
| | --- | -------------------------------------------------------------------------------------------------------------------------------

| | (5) | The Company holds 100% of the issued and outstanding shares
of QSG Health Ltd., through 90% owned subsidiary Nuuvera Malta Ltd.
| | --- | -------------------------------------------------------------------------------------------------------------------------------

| | (6) | The Company holds 60% of the issued and outstanding shares
of Verve Dynamics Incorporated (Pty) Ltd., through 50% owned subsidiary CannInvest Africa Ltd.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------



Intragroup balances, and any
unrealized gains and losses or income and expenses arising from transactions with jointly controlled entities are eliminated to
the extent of the Company’s interest in the entity.



7







Aphria Inc.

Notes to the Consolidated Financial Statements

For the years ended May 31, 2019 and May 31, 2018 (In thousands of Canadian dollars, except share and per share
amounts)




The Company treats transactions
with non-controlling interests that do not result in a loss of control as transactions with equity owners of the Company. A change
in ownership interest results in an adjustment between the carrying amounts of the controlling and non-controlling interests to
reflect their relative interests in the subsidiary. Any difference between the amount of the adjustment to non-controlling interests
and any consideration paid or received is recognized in a separate reserve within equity attributable to the owners of the Company.



| | (e) | Amalgamations and dissolutions
| | --- | ------------------------------



Effective June 1, 2017, CannWay
Pharmaceuticals Ltd. (“CannWay”), a wholly-owned subsidiary of the Company, was amalgamated with Pure Natures Wellness
Inc. (o/a Aphria). The Company has historically presented all balances and activities of CannWay as a fully consolidated entity
for financial statement presentation purposes. As of the date of amalgamation, CannWay did not have any assets or outstanding liabilities.
There were no material changes to be considered prospectively or to the comparative consolidated statements as a result of the
amalgamation.



Effective July 23, 2018, Pure
Natures Wellness Inc. (o/a Aphria). (“PNW”), a wholly-owned subsidiary of the Company, was amalgamated with Aphria
Inc. The Company had historically presented all balances and activities of PNW as a fully consolidated entity for financial statement
presentation purposes. There were no material changes to be considered prospectively or to the comparative consolidated statements
as a result of the amalgamation.



Effective February 1,
2019, 2589671 Ontario Inc. and 2589674 Ontario Inc., each a wholly-owned subsidiary of the Company, were amalgamated with
Avalon Pharmaceuticals Inc. The Company has historically presented all balances and activities of 2589671 Ontario Inc.,
2589674 Ontario Inc. and Avalon Pharmaceuticals Inc. as a fully consolidated entity for financial statement presentation
purposes. Effective April 15, the Company wound-up wholly owned subsidiary Avalon Pharmaceuticals into wholly owned
subsidiary Nuuvera holdings limited. There were no material changes to be considered prospectively or to the comparative
consolidated statements as a result of the amalgamation and wind-up.



Effective April 15, 2019, Nuuvera
Inc. and Cannan Growers Inc., each a wholly-owned subsidiary of the Company, were wound up into Aphria Inc. The Company had historically
presented all balances and activities of Nuuvera Inc. and Cannan Growers Inc. as a fully consolidated entity for financial statement
presentation purposes. There were no material changes to be considered prospectively or to the comparative consolidated statements
as a result of the wind-up.



Effective April 25, 2019, Aphria
(Arizona) Inc., a wholly-owned subsidiary of the Company, was dissolved. The Company had historically presented all balances and
activities of Aphria (Arizona) Inc. as a fully consolidated entity for financial statement presentation purposes. There were no
material changes to be considered prospectively or to the comparative consolidated statements as a result of the dissolution.



| | (f) | Interest in equity investees
| | --- | ----------------------------



The Company’s interest
in equity investees is comprised of its interest in Althea Company Pty Ltd. (“Althea”).



In accordance with IFRS 10,
associates are those in which the Company has significant influence, but not control or joint control over the financial and accounting
policies.



Interests in associates are
accounted for using the equity method in accordance with IAS 28. They are recognized initially at cost, which includes transaction
costs. After initial recognition, the consolidated financial statements include the Company’s share of the profit or loss
and other comprehensive income (“OCI”) of equity investees until the date on which significant influence ceases.



If the Company’s share
of losses in an equity investment equals or exceeds its interest in the entity, including any other unsecured long-term receivables,
the group does not recognize further losses, unless it has incurred obligations or made payments on behalf of the other entity.



Unrealized gains on transactions
between the Company and its associates are eliminated to the extent of the Company’s interest in these entities. Unrealized
losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.



8







Aphria Inc.

Notes to the Consolidated Financial Statements

For the years ended May 31, 2019 and May 31, 2018 (In thousands of Canadian dollars, except share and per share
amounts)




The carrying amount of
equity investments is tested for impairment in accordance with the policy described in Note 3(k).



| | 3. | Significant accounting
policies
| | -- | -------------------------------



The significant
accounting policies used by the Company are as follows:



| | a. | Revenue
| | -- | -------



Revenue is measured based on
the consideration that the Company expects to be entitled to in exchange for transferring promised goods. Revenue from the sale
of goods is recognized when control of the goods has transferred, which is determined by respective shipping terms and certain
additional considerations. Invoices are generally issued at the time of delivery (which is when the Company has satisfied its performance
obligation under the arrangement). The Company does not have performance obligations subsequent to delivery on the sale of goods
to customers and revenues from sale of goods are recognized upon passing of control to the customer.



Amounts disclosed as net revenue
are net of sales tax, duty tax, allowances, discounts and rebates.



| | c. | Cash and cash equivalents
| | -- | -------------------------



Cash and cash equivalents are
comprised of cash and highly liquid investments that are readily convertible into known amounts of cash and are subject to insignificant
risk of changes in value.



| | d. | Marketable securities
| | -- | ---------------------



Marketable securities are comprised
of liquid investments in federal, provincial and/or corporate bonds with maturities less than 3.5 years. Marketable securities
are recognized initially at fair value and subsequently adjusted to fair value through profit or loss (“FVTPL”).



| | e. | Inventory
| | -- | ---------



Inventory is valued at the lower
of cost and net realizable value. Cost is determined using the weighted average method. The capitalized cost of inventory includes
the direct and indirect costs initially capitalized to biological assets before the transfer to inventory. The capitalized cost
also includes subsequent costs such as materials, labour and amortization expense on equipment involved in packaging, labelling
and inspection. The total cost of inventory also includes a fair value adjustment which represents the fair value of the biological
asset at the time of harvest. All direct and indirect costs related to inventory are capitalized as they are incurred, and they
are subsequently recorded within ‘production costs’ on the statements of income and comprehensive income at the time
cannabis is sold, the realized fair value amounts included in inventory sold are recorded as a separate line on the statements
of income and comprehensive income.



| | f. | Biological assets
| | -- | -----------------



The Company’s biological
assets consist of cannabis plants which are not yet harvested. These biological assets are measured at fair value less costs to
sell. The Company capitalizes all related direct costs of growing materials as well as other indirect costs of production such
as utilities and supplies used in the growing process. Indirect labour for individuals involved in the growing and quality control
process is also included, as well as amortization on production equipment and overhead costs to the extent it is associated with
the growing space. All direct and indirect costs of biological assets are capitalized as they are incurred, and subsequently transferred
to inventory at the point of harvest. Unrealized fair value gains on growth of biological assets are recorded in a separate line
on the face of the statements of income and comprehensive income and subsequently transferred to inventory at the point of harvest.



9









Aphria Inc.

Notes to the Consolidated Financial Statements

For the years ended May 31, 2019 and May 31, 2018 (In thousands of Canadian dollars, except share and per share
amounts)




| | g. | Assets held for sale
| | -- | --------------------



Assets and liabilities held
for disposal are no longer amortized 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.



| | h. | Capital assets
| | -- | --------------



Capital assets are stated at
cost, net of accumulated amortization and accumulated impairment losses, if any.



Amortization is calculated using
the following terms and methods:



|Asset
    type           |  | Amortization
    method |  | Amortization
    term
|------------------------ |  | ----------------------- |  | ---------------------
|Land                     |  | Not amortized           |  | No term              
|Production facility      |  | Straight-line           |  | 15 – 20 years        
|Equipment                |  | Straight-line           |  | 3 – 10 years         
|Leasehold improvements   |  | Straight-line           |  | Over lease term      
|Construction in progress |  | Not amortized           |  | No term              



An item of equipment is derecognized
upon disposal or when no future economic benefits are expected from its use. Any gain or loss arising on derecognition of the asset
(calculated as the difference between the net disposal proceeds and the carrying value of the asset) is included in the consolidated
statements of income and comprehensive income in the year the asset is derecognized.



The assets’ residual values
and useful lives are reviewed at each financial year end and adjusted prospectively if appropriate.



| | i. | Intangible assets
| | -- | -----------------



Intangible assets are stated
at cost, net of accumulated amortization and accumulated impairment losses, if any.



Amortization is calculated using
the following terms and methods:



|Asset
    type                             |  | Amortization
    method |  | Amortization
    term   
|------------------------------------------ |  | ----------------------- |  | ------------------------
|Customer relationships                     |  | Straight-line           |  | 3 – 10 years            
|Corporate website                          |  | Straight-line           |  | 2 years                 
|Licences, permits & applications           |  | Straight-line           |  | 90 months – indefinite  
|Non-compete agreements                     |  | Straight-line           |  | Over term of non-compete
|Intellectual property, trademarks & brands |  | Straight-line           |  | 15 months – 20 years    



The estimated success of applications
and useful life are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for
on a prospective basis.



Following initial recognition,
intangible assets with indefinite useful lives are carried at cost less any accumulated impairment losses.



| | j. | Goodwill
| | -- | --------



Goodwill represents the excess
of the purchase price paid for the acquisition of subsidiaries over the fair value of the net tangible and intangible assets acquired.
Following initial recognition, goodwill is measured at cost less any accumulated impairment losses.



10







Aphria Inc.

Notes to the Consolidated Financial Statements

For the years ended May 31, 2019 and May 31, 2018 (In thousands of Canadian dollars, except share and per share
amounts)




| | k. | Impairment of non-financial assets
| | -- | ----------------------------------



Goodwill and intangible assets
that have an indefinite useful life are not subject to amortization and are tested annually for impairment, or more frequently
if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events
or changes in circumstances indicate that the carrying amount may not be recoverable.



For the purpose of testing impairment,
assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating unit, or “CGU”).
An impairment loss is recognized for the amount, if any, by which the asset’s carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of the asset’s fair value less cost to sell and the value in use (being the present
value of expected future cash flows of the asset or CGU). Where an impairment loss subsequently reverses, the carrying amount of
the asset is increased to the lesser of the revised estimate of recoverable amount and the carrying amount that would have been
recorded had no impairment loss been previously recognized, with the exception of goodwill and indefinite lived intangible assets.



| | l. | Income taxes
| | -- | ------------



Income tax expense consisting
of current and deferred tax expense is recognized in the consolidated statements of income and comprehensive income. Current tax
expense is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at year
end, adjusted for amendments to tax payable with regards to previous years.



Deferred tax assets and liabilities
and the related deferred income tax expense or recovery are recognized for deferred tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using the enacted or substantively enacted tax rates expected to apply when the asset is realized
or the liability settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in
the period that substantive enactment occurs.



A deferred tax asset is recognized
to the extent that it is probable that future taxable income will be available against which the asset can be utilized.



Deferred tax assets and liabilities
are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they
relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities
on a net basis.



| | m. | Earnings per share
| | -- | ------------------



Basic earnings per share is
calculated using the weighted average number of common shares outstanding during the year. The dilutive effect on earnings per
share is calculated presuming the exercise of outstanding options, warrants, convertible debentures and similar instruments. It
assumes that the proceeds of such exercise would be used to repurchase common shares at the average market price during the year.
However, the calculation of diluted loss per share excludes the effects of various conversions and exercise of options and warrants
that would be anti-dilutive.



| | n. | Share-based compensation
| | -- | ------------------------



The Company has an omnibus long-term
incentive plan which includes issuances of stock options, restricted share units and deferred share units in place. The Company
measures equity settled share-based payments based on their fair value at the grant date and recognizes compensation expense over
the vesting period based on the Company’s estimate of equity instruments that will eventually vest. Fair value is measured
using the Black-Scholes option pricing model. Expected forfeitures are estimated at the date of grant and subsequently adjusted
if further information indicates actual forfeitures may vary from the original estimate. Any revisions are recognized in the consolidated
statements of income and comprehensive income such that the cumulative expense reflects the revised estimate.



| | o. | Research and development
| | -- | ------------------------



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 that do not meet the above criteria
are recognized in the consolidated statements of income and comprehensive income as incurred.



11







Aphria Inc.

Notes to the Consolidated Financial Statements

For the years ended May 31, 2019 and May 31, 2018 (In thousands of Canadian dollars, except share and per share
amounts)




| | p. | Financial instruments
| | -- | ---------------------



Financial assets and financial
liabilities are recognized when the Company becomes a party to the contractual provision of the respective instrument.



Financial assets and financial
liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue
of financial assets and financial liabilities, other than financial assets and financial liabilities at FVTPL , are included in
the initial carrying value of the related instrument and are amortized using the effective interest method. Transaction costs directly
attributable to the acquisition of financial assets or financial liabilities at FVTPL are recognized immediately in profit or loss.



Fair value estimates are made
at the consolidated statement of financial position date based on relevant market information and information about the financial
instrument. The Company has made the following classifications:



|Financial
    assets/liabilities         |  | IFRS
    9 Classification  
|---------------------------------------- |  | ---------------------------
|Cash and cash equivalents                |  | FVTPL                      
|Marketable securities                    |  | FVTPL                      
|Accounts receivable                      |  | amortized cost             
|Other receivables                        |  | amortized cost             
|Convertible notes receivable             |  | FVTPL                      
|Long-term investments                    |  | FVTPL                      
|Promissory notes receivable              |  | amortized cost             
|Accounts payable and accrued liabilities |  | other financial liabilities
|Income taxes payable                     |  | other financial liabilities
|Promissory note payable                  |  | other financial liabilities
|Convertible debentures                   |  | FVTPL                      
|Long-term debt                           |  | other financial liabilities
|Derivative liability                     |  | FVTPL                      



| | (i) | FVTPL financial assets
| | --- | ----------------------



Financial assets are classified
as FVTPL when the financial asset is held for trading or it is designated as FVTPL. Financial assets classified as FVTPL are stated
at fair value with any resulting gain or loss recognized in the consolidated statements of income and comprehensive income. Transaction
costs are expensed as incurred.



| | (ii) | Amortized cost financial assets
| | ---- | -------------------------------



Financial assets at amortized
cost are non-derivative financial assets which are held within a business model whose objective is to hold assets to collect contractual
cash flows and its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest
on the principal amount outstanding. A financial asset is initially measured at fair value, including transaction costs and subsequently
at amortized cost.



| | (iii) | Impairment of financial assets
| | ----- | ------------------------------



Financial assets, other than
those at FVTPL, are assessed for indicators of impairment at the end of each reporting period. Financial assets are impaired when
there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial
asset, the estimated future cash flows of the investment have been impacted.



The carrying amount of all financial
assets, excluding trade receivables, is directly reduced by the impairment loss. The carrying amount of trade receivables is reduced
through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance
account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying
amount of the allowance account are recognized in the consolidated statements of income and comprehensive income. With the exception
of FVOCI equity instruments, if, in a subsequent period, the amount of the impairment loss decreases and the decrease relates to
an event occurring after the impairment was recognized; the previously recognized impairment loss is reversed through the consolidated
statements of income and comprehensive income.



12







Aphria Inc.

Notes to the Consolidated Financial Statements

For the years ended May 31, 2019 and May 31, 2018 (In thousands of Canadian dollars, except share and per share
amounts)




| | (iv) | Financial liabilities and other financial liabilities
| | ---- | -----------------------------------------------------



Financial liabilities are classified
as either financial liabilities at FVTPL or at amortized cost. Financial liabilities at FVTPL are stated at fair value, with changes
being recognized through the consolidated statements of income and comprehensive income. Other financial liabilities are initially
measured at fair value, net of transaction costs, and are subsequently measured at amortized cost using the effective interest
method, with interest expense recognized on an effective yield basis.



| | (v) | Embedded derivatives
| | --- | --------------------



Embedded derivatives are separated
from the host contract and accounted for separately if certain criteria are met. Derivatives are initially measured at fair value;
any directly attributable transaction costs are recognised in profit or loss as incurred. Subsequent to initial recognition, derivatives
are measured at fair value and changes therein are recognised in profit or loss.



| | (vi) | Determination on fair value of long-term investments
| | ---- | ----------------------------------------------------



All long-term investments (other
than Level 3 warrants) are initially recorded at the transaction price, being the fair value at the time of acquisition. Thereafter,
at each reporting period, the fair value of an investment is adjusted using one or more of the valuation indicators described below.



| | q. | Critical accounting estimates and judgments
| | -- | -------------------------------------------



The preparation of financial
statements requires management to make judgments, estimates and assumptions that affect the application of policies and reported
amounts of assets and liabilities, and revenue and expenses. Actual results may differ from these estimates. The estimates and
underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which
the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the review
affects both current and future periods.



Long-term investments and
convertible notes receivable



The determination of fair value
of the Company’s long-term investments and convertible notes receivable at other than initial cost is subject to certain
limitations. Financial information for private companies in which the Company has investments may not be available and, even if
available, that information may be limited and/or unreliable.



Use of the valuation approach
described below may involve uncertainties and determinations based on the Company’s judgment and any value estimated from
these techniques may not be realized or realizable.



Company-specific information
is considered when determining whether the fair value of a long-term investment or convertible notes receivable should be adjusted
upward or downward at the end of each reporting period. In addition to company-specific information, the Company will take into
account trends in general market conditions and the share performance of comparable publicly-traded companies when valuing long-term
investments and convertible notes receivable.



The fair value of long-term
investments and convertible notes receivable may be adjusted if:



| | · | There
has been a significant subsequent equity financing provided by outside investors at a valuation different than the current value
of the investee company, in which case the fair value of the investment is set to the value at which that financing took place;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | There
have been significant corporate, political, or operating events affecting the investee company that, in management’s opinion,
have a material impact on the investee company’s prospects and therefore its fair value. In these circumstances, the adjustment
to the fair value of the investment will be based on management’s judgment and any value estimated may not be realized or
realizable;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



13







Aphria Inc.

Notes to the Consolidated Financial Statements

For the years ended May 31, 2019 and May 31, 2018 (In thousands of Canadian dollars, except share and per share
amounts)




| | · | The
investee company is placed into receivership or bankruptcy;
| | - | ---------------------------------------------------------------

| | · | Based
on financial information received from the investee company, it is apparent to the Company that the investee company is unlikely
to be able to continue as a going concern;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Important
positive/negative management changes by the investee company that the Company’s management believes will have a positive/negative
impact on the investee company’s ability to achieve its objectives and build value for shareholders.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Adjustment to the fair value
of a long-term investment and convertible notes receivable will be based upon management’s judgment and any value estimated
may not be realized or realizable. The resulting values for non-publicly traded investments may differ from values that would be
realized if a ready market existed.



Biological assets and inventory



Management is required to make
a number of estimates in calculating the fair value less costs to sell of biological assets and harvested cannabis inventory. These
estimates include a number of assumptions such as estimating the stage of growth of the cannabis, harvesting costs, sales price,
and expected yields.



Estimated useful lives, impairment
considerations and amortization of capital and intangible assets



Amortization of capital and
intangible assets is dependent upon estimates of useful lives based on management’s judgment.



Goodwill and indefinite life
intangible asset impairment testing requires management to make estimates in the impairment testing model. On an annual basis,
the Company tests whether goodwill and indefinite life intangible assets are impaired.



Impairment of definite long-lived
assets is influenced by judgment in defining a CGU and determining the indicators of impairment, and estimates used to measure
impairment losses



The recoverable value of goodwill,
indefinite and definite long-lived assets is determined using discounted future cash flow models, which incorporate assumptions
regarding future events, specifically future cash flows, growth rates and discount rates.



Share-based compensation



The fair value of share-based
compensation expenses are estimated using the Black-Scholes option pricing model and rely on a number of estimates, such as the
expected life of the option, the volatility of the underlying share price, the risk free rate of return, and the estimated rate
of forfeiture of options granted.



Business combinations



Judgement is used in determining
whether an acquisition is a business combination or an asset acquisition. In determining the allocation of the purchase price in
a business combination, including any acquisition-related contingent consideration, estimates including market based and appraisal
values are used. The contingent consideration is measured at its acquisition-date fair value and included as part of the consideration
transferred in a business combination. Contingent consideration that is classified as equity is not remeasured at subsequent reporting
dates and its subsequent settlement is accounted for within equity. Contingent consideration that is classified as an asset or
liability is remeasured at subsequent reporting dates in accordance with IAS 39, or IAS 37, as appropriate, with the corresponding
gain or loss being recognized in profit or loss.



The Company measures all assets
acquired and liabilities assumed at their acquisition-date fair values. Non-controlling interests in the acquiree are measured
on the basis of the non-controlling interests’ proportionate share of this equity in the acquiree’s identifiable net
assets. Acquisition-related costs are recognized as expenses in the periods in which the costs are incurred and the services are
received (except for the costs to issue debt or equity securities which are recognized according to specific requirements). The
excess of the aggregate of (a) the consideration transferred to obtain control, the amount of any non-controlling interest in the
acquire over (b) the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed, is recognized
as goodwill as of the acquisition date.



14







Aphria Inc.

Notes to the Consolidated Financial Statements

For the years ended May 31, 2019 and May 31, 2018 (In thousands of Canadian dollars, except share and per share
amounts)




Convertible debentures



The fair value of the convertible
debentures is determined using the quoted price in the over-the-counter broker market. As the convertible debentures are classified
as FVTPL, the subsequent interest as well as change in the fair value will flow through the consolidated statements of comprehensive
income.



| | r. | New standards and interpretations applicable effective
June 1, 2018
| | -- | -------------------------------------------------------------------



IFRS 9 - Financial Instruments;
Classification and Measurement, effective for annual periods beginning on or after January 1, 2018, with early adoption permitted,
introduces new requirements for the classification, measurement and derecognition of financial instruments and introduces a new
impairment model for financial assets.



Under IFRS 9, financial instruments
are initially measured at fair value plus, in the case of a financial asset or financial liability not at fair value through profit
or loss, transaction costs. Subsequently, all assets within scope of IFRS 9 are measured at:

| | (i) | Amortized cost;
| | --- | ---------------

| | (ii) | Fair value through other comprehensive income (“FVOCI”);
or
| | ---- | -----------------------------------------------------------

| | (iii) | Fair value through profit or loss (“FVTPL”).
| | ----- | --------------------------------------------



The classification is based
on whether the contractual cash flows give rise to payments on specified dates that are solely payments of principal and interest
(the “SPPI test”), and the objective of the Company’s business model is to hold assets only to collect cash flows,
or to collect cash flows and to sell (the “Business Model test”). 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.



The impairment requirements
under IFRS 9 are based on an expected credit loss (“ECL”) model, replacing the IAS 39 incurred loss model. The expected
credit loss model applies to debt instruments recorded at amortized cost or at FVOCI, such as loans, debt, securities and trade
receivables, lease receivables and most loan commitments and financial guarantee contracts.



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:



|Financial assets/liabilities             |  | IAS 39 Classification            |  | IFRS 9 Classification      
|---------------------------------------- |  | -------------------------------- |  | ---------------------------
|Cash and cash equivalents                |  | FVTPL                            |  | FVTPL                      
|Marketable securities                    |  | FVTPL                            |  | FVTPL                      
|Accounts receivable                      |  | loans and receivables            |  | amortized cost             
|Other receivables                        |  | loans and receivables            |  | amortized cost             
|Convertible notes receivable             |  | AFS                              |  | FVTPL                      
|Long-term investments                    |  | FVTPL                            |  | FVTPL                      
|Accounts payable and accrued liabilities |  | other financial liabilities      |  | other financial liabilities
|Income taxes payable                     |  | other financial liabilities      |  | other financial liabilities
|Promissory note payable                  |  | other financial liabilities      |  | other financial liabilities
|Long-term debt                           |  | other financial liabilities      |  | other financial liabilities
|Derivative liability                     |  | derivative financial instruments |  | FVTPL                      



There were no other changes
on adoption aside from the above classification changes.



IFRS 15 - Revenue from Contracts
with Customers; effective for annual periods beginning on or after January 1, 2018, specifies how and when to recognize revenue,
based on five-step model, and enhances relevant disclosures to be applied to all contracts with customers.



The Company has applied IFRS
15 retrospectively and determined that there is no change to the comparative periods or transitional adjustments required as a
result of the adoption of this standard. The Company’s accounting policy for revenue recognition under IFRS 15 is as follows:



To recognize revenue under IFRS
15, the Company applies the following five steps:



| | 1. | Identify the contract(s) with a customer
| | -- | ----------------------------------------

| | 2. | Identify the performance obligations in the contract
| | -- | ----------------------------------------------------

| | 3. | Determine the transaction price
| | -- | -------------------------------

| | 4. | Allocate the transaction price to the performance obligations
in the contract
| | -- | -----------------------------------------------------------------------------

| | 5. | Recognize revenue when or as the Company satisfies a performance
obligation
| | -- | ---------------------------------------------------------------------------



Revenue from the direct sale
of goods to customers for a fixed price is recognized when the company transfers control of the good to the customer.



| | s. | New standards and interpretations issued but not yet adopted
| | -- | ------------------------------------------------------------



IFRS 16 – Leases; in January
2016, the IASB issued IFRS 16, which specifies how an IFRS reporter will recognise, measure, present and disclose leases. The standard
provides a single lessee accounting model, requiring lessees to recognise assets and liabilities for all leases unless the lease
term is 12 months or less or the underlying asset has a low value. Lessors continue to classify leases as operating or finance,
with IFRS 16’s approach to lessor accounting substantially unchanged from its predecessor, IAS 17. IFRS 16 is effective for
annual reporting periods beginning on or after January 1, 2019, and a lessee shall either apply IFRS 16 with full retrospective
effect or alternatively not restate comparative information but recognise the cumulative effect of initially applying IFRS 16 as
an adjustment to opening equity at the date of initial application. Based on its current assets, relationship with other entities
interests and investments, no significant impact is anticipated from the new standard.



15







Aphria Inc.

Notes to the Consolidated Financial Statements

For the years ended May 31, 2019 and May 31, 2018 (In thousands of Canadian dollars, except share and per share
amounts)




There are no other standards
that are not yet effective and that would be expected to have a material impact on the Company in the current or future reporting
periods and on foreseeable future transactions.



The Company has reclassified
certain immaterial items on the comparative consolidated statements of financial position, consolidated statements of income and
comprehensive income, and consolidated statements of cash flows to improve clarity.



| | 4. | Marketable securities
| | -- | ---------------------



Marketable securities are classified
as fair value through profit or loss, and are comprised of:



|                           |  | S&P rating at 
purchase |  | Interest
 rate |       |   | Maturity 
date |            | May 31,  2019 |   |        | May 31,  2018 | 
|-------------------------- |  | ----------------------- |  | -------------- | ----- | - | -------------- | ---------- | ------------- | - | ------ | ------------- | 
|Fixed Income:              |  |                         |  |                |       |   |                |            |               |   |        |               | 
|Ford Motor Credit Co. LLC  |  | BBB                     |  |                | 3.700 | % |                | 8/2/2018   |               | $ | —      |               | 
|Sobeys Inc.                |  | BB+                     |  |                | 3.520 | % |                | 8/8/2018   |               |   | —      |               | 
|Canadian Western Bank      |  | A-                      |  |                | 3.077 | % |                | 1/14/2019  |               |   | —      |               | 
|Sun Life Financial Inc.    |  | A                       |  |                | 2.770 | % |                | 5/13/2019  |               |   | —      |               | 
|Ford Motor Credit Co. LLC  |  | BBB                     |  |                | 3.140 | % |                | 6/14/2019  |               |   | 5,074  |               | 
|Canadian Western Bank      |  | A-                      |  |                | 3.463 | % |                | 12/17/2019 |               |   | 1,019  |               | 
|Laurentian Bank of Canada  |  | BBB                     |  |                | 2.500 | % |                | 1/23/2020  |               |   | —      |               | 
|Enercare Solutions Inc.    |  | BBB                     |  |                | 4.600 | % |                | 2/3/2020   |               |   | 3,907  |               | 
|Enbridge Inc.              |  | BBB+                    |  |                | 4.530 | % |                | 3/9/2020   |               |   | 5,137  |               | 
|Choice Properties REIT     |  | BBB                     |  |                | 3.600 | % |                | 4/20/2020  |               |   | 5,062  |               | 
|Westcoast Energy Inc.      |  | BBB+                    |  |                | 4.570 | % |                | 7/2/2020   |               |   | —      |               | 
|Citigroup Inc. (USD)       |  | BBB+                    |  |                | 2.050 | % |                | 12/17/2018 |               |   | —      |               | 
|Royal Bank of Canada (USD) |  | AA-                     |  |                | 1.625 | % |                | 4/15/2019  |               |   | —      |               | 
|                           |  |                         |  |                |       |   |                |            |               | $ | 20,199 |               | 



The cost of marketable securities
as at May 31, 2019 was $20,907 (May 31, 2018 – $45,863). During the year ended May 31, 2019, the company divested of certain
marketable securities for proceeds of $24,685 (2018 - $47,495), resulting in a gain (loss) on disposal of $18 (2018 - $(608)),
and re-invested $nil (2018 - $7,365). During the year ended May 31, 2019, the Company recognized a (loss) of $(178) (2018 - $(2,155))
on its marketable securities portfolio, of which $(196) (2018 - $(1,547)) represented unrealized fair value adjustments.



| | 5. | Prepaids and other current assets
| | -- | ---------------------------------



Prepaids and other current
assets are comprised of:



|                     |  | May 31,  2019 |        |  | May 31,  2018 |  
|-------------------- |  | ------------- | ------ |  | ------------- | -
|Sales tax receivable |  | $             | 7,583  |  |               | $
|Accrued interest     |  |               | 2,779  |  |               |  
|Prepaid assets       |  |               | 10,696 |  |               |  
|Other                |  |               | 2,333  |  |               |  
|                     |  | $             | 23,391 |  |               | $



16







Aphria Inc.

Notes to the Consolidated Financial Statements

For the years ended May 31, 2019 and May 31, 2018 (In thousands of Canadian dollars, except share and per share
amounts)




| | 6. | Inventory
| | -- | ---------



Inventory is comprised of:



|                        |  | Capitalized  cost |        |  | Fair value 
adjustment |   |        | May 31,  2019 |  |   | May 31,  2018 | 
|----------------------- |  | ----------------- | ------ |  | ---------------------- | - | ------ | ------------- |  | - | ------------- | 
|Harvested cannabis      |  | $                 | 10,039 |  |                        | $ | 13,214 |               |  | $ | 23,253        | 
|Harvested cannabis trim |  |                   | 2,830  |  |                        |   | 2,959  |               |  |   | 5,789         | 
|Cannabis oil            |  |                   | 11,300 |  |                        |   | 8,301  |               |  |   | 19,601        | 
|Softgel capsules        |  |                   | 422    |  |                        |   | 342    |               |  |   | 764           | 
|Distribution inventory  |  |                   | 32,944 |  |                        |   | —      |               |  |   | 32,944        | 
|Other inventory items   |  |                   | 9,178  |  |                        |   | —      |               |  |   | 9,178         | 
|                        |  | $                 | 66,713 |  |                        | $ | 24,816 |               |  | $ | 91,529        | 



During the year ended May 31,
2019, the Company recorded $35,548 (2018 - $8,692) of production costs. Included in production costs for the year ended May 31,
2019 is $1,682 of cannabis oil conversion costs (2018 - $241), $142 related to the cost of accessories (2018 - $236), and amortization
of $4,133 (2018 - $1,715). The Company also included $4,723 of amortization which remains in inventory for the year ended May 31,
2019 (2018 - $978) related to capital assets utilized in production. During the year ended May 31, 2019, the Company expensed $27,724
(2018 –$10,327) of fair value adjustments on the growth its biological assets included in inventory sold.



The Company holds 6,309.9 kilograms
of harvested cannabis (May 31, 2018 – 3,221.3 kgs), 1,908.0 kilograms of harvested cannabis trim (May 31, 2018 – 702.0
kgs) and 28,458.1 litres of cannabis oils or 4,949.2 kilograms equivalent in various stages of production (May 31, 2018 –
7,724.7 litres or 1,716.6 kilograms equivalent), 982.0 litres of cannabis oils used in softgel capsules or 218.2 kilograms equivalent
at May 31, 2019 (May 31, 2018 – nil).



| | 7. | Biological assets
| | -- | -----------------



Biological assets are comprised
of:



|                                                                          |  | Amount |        
|------------------------------------------------------------------------- |  | ------ | -------
|Balance at May 31, 2017                                                   |  | $      | 1,408  
|Changes in fair value less costs to sell due to biological transformation |  |        | 23,302 
|Purchased as part of business acquisition                                 |  |        | 826    
|Production costs capitalized                                              |  |        | 12,143 
|Transferred to inventory upon harvest                                     |  |        | (30,348
|Balance at May 31, 2018                                                   |  | $      | 7,331  
|Changes in fair value less costs to sell due to biological transformation |  |        | 40,607 
|Production costs capitalized                                              |  |        | 47,747 
|Transferred to inventory upon harvest                                     |  |        | (76,960
|Balance at May 31, 2019                                                   |  | $      | 18,725 



The Company values cannabis
plants at cost, which approximates fair value from the date of initial clipping from mother plants until half way through the flowering
cycle of the plants. Measurement of the biological transformation of the plant at fair value less costs to sell begins in the fourth
week prior to harvest and is recognized evenly until the point of harvest. The number of weeks in the growing cycle is between
twelve and sixteen weeks from propagation to harvest. The Company has determined the fair value less costs to sell of harvested
cannabis and harvested cannabis trim to be $3.50 and $2.75 per gram respectively, upon harvest for greenhouse produced cannabis
(May 31, 2018 – $3.75 and $3.00 per gram) and $4.00 and $3.25 per gram respectively (May 31, 2018 - $4.25 and $3.50 per gram),
upon harvest for indoor produced cannabis.



The effect of the fair value less
cost to sell over and above historical cost was an increase in non-cash value of biological assets and inventory of $40,607 during
the year ended May 31, 2019 (2018 – $23,302).



17







Aphria Inc.

Notes to the Consolidated Financial Statements

For the years ended May 31, 2019 and May 31, 2018 (In thousands of Canadian dollars, except share and per share
amounts)




The fair value of biological
assets is determined using a valuation model to estimate expected harvest yield per plant applied to the estimated price per gram
less processing and selling costs. Only when there is a material change from the expected fair value used for cannabis does the
Company make any adjustments to the fair value used. During the year, there was no material change to these inputs and therefore
there has been no change in the determined fair value per plant.



In determining the fair value
of biological assets, management has made the following estimates in this valuation model:

| | · | The
harvest yield is between 40 grams and 80 grams per plant;
| | - | -------------------------------------------------------------

| | · | The
selling price is between $3.00 and $7.00 per gram;
| | - | ------------------------------------------------------

| | · | Processing
costs include drying and curing, testing, post-harvest overhead allocation, packaging and labelling costs between $0.30 and $0.80
per gram;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Selling
costs include shipping, order fulfilment, patient acquisition and patient maintenance costs between $0.00 and $1.50 per gram;
| | - | -------------------------------------------------------------------------------------------------------------------------------------



Sales price used in the valuation
of biological assets is based on the average selling price of all cannabis products and can vary based on different strains being
grown as well as the proportion of sales derived from wholesale compared to retail. Selling costs vary depending on methods of
selling and are considered based on the expected method of selling and the determined additional costs which would be incurred.
Expected yields for the cannabis plant is also subject to a variety of factors, such as strains being grown, length of growing
cycle, and space allocated for growing. Management reviews all significant inputs based on historical information obtained as well
as based on planned production schedules.



Management has quantified the
sensitivity of the inputs and determined the following:

| | · | Selling
price per gram – a decrease in the average selling price per gram by 5% would result in the biological asset value decreasing
by $516 (2018 - $267) and inventory decreasing by $2,470 (2018 - $1,040)
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Harvest
yield per plant – a decrease in the harvest yield per plant of 5% would result in the biological asset value decreasing
by $266 (2018 - $179)
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------



These inputs are level 3 on the
fair value hierarchy and are subject to volatility in market prices and several uncontrollable factors, which could significantly
affect the fair value of biological assets in future periods.



| | 8. | Related party transactions
| | -- | --------------------------



During the prior quarter, the
Company disposed of its remaining shares in Liberty Health Sciences Inc. (“Liberty”) (Note 13).



The Company previously funded
a portion of the Canadian operating costs of Liberty, for which Liberty reimbursed the Company quarterly. Liberty was considered
a related party because certain officers and directors of Aphria were directors of Liberty. In January 2019, those directors resigned
from Liberty’s and the Company’s board and the Company ceased its relationship with Liberty.



The Company purchased
certain electrical generation equipment from and pays rent to a company owned by a former director. In March 2019, the director
resigned his officer and director position with the Company and was no longer considered a related party.



Key management personnel compensation
for the year ended May 31, 2019 and 2018 was comprised of:



|                                                                |  | For the year ended  May 31, |       
|--------------------------------------------------------------- |  | --------------------------- | ------
|                                                                |  | 2019                        |       
|Salaries                                                        |  | $                           | 5,024 
|Short-term employment benefits (included in office and general) |  |                             | 116   
|Share-based compensation                                        |  |                             | 11,854
|                                                                |  | $                           | 16,994



Directors and officers of the Company control 0.1%
or 135,942 of the voting shares of the company.





18







Aphria Inc.

Notes to the Consolidated Financial Statements

For the years ended May 31, 2019 and May 31, 2018 (In thousands of Canadian dollars, except share and per share
amounts)






During the year ended May 31, 2019, the Company
appointed Mr. Irwin Simon as Interim CEO and Chair of the Board. Mr. Simon’s compensation for the combined role is $1,100
annually, paid on a consultancy basis. On February 24, 2019, the Board of Aphria declared, in accordance with the Omnibus Incentive
Plan, 1,000,000 stock options and 25,000 restricted share units to Mr. Simon, which vested immediately.



During the year ended May 31, 2019 certain officers
and non-independent directors retired from the Company. No amounts were paid to the retired officers and directors as part of their
retirement. In addition, compensation for the Board of Directors were amended to a flat-fee $300 annually, with $150 paid in cash
and $150 in Deferred Share Units under the Company’s Omnibus Plan each, plus a one-time award of 7,500 Restricted Share Units
each.



| | 9. | Capital assets
| | -- | --------------



|                           |  | Land |        |  | Production Facility |   |         | Equipment |  |   | Leasehold
 improvements |  |  | Construction in
 process |        |   | Total capital 
assets |  
|-------------------------- |  | ---- | ------ |  | ------------------- | - | ------- | --------- |  | - | ----------------------- |  |  | ------------------------ | ------ | - | --------------------- | -
|Cost                       |  |      |        |  |                     |   |         |           |  |   |                         |  |  |                          |        |   |                       |  
|At May 31, 2017            |  | $    | 10,829 |  |                     | $ | 16,170  |           |  | $ | 5,340                   |  |  | $                        | 262    |   |                       | $
|Business acquisitions      |  |      | 854    |  |                     |   | 6,992   |           |  |   | 2,860                   |  |  |                          | 1,388  |   |                       |  
|Additions                  |  |      | 12,716 |  |                     |   | 47,149  |           |  |   | 4,759                   |  |  |                          | 15     |   |                       |  
|Transfers                  |  |      | 105    |  |                     |   | 29,338  |           |  |   | 2,990                   |  |  |                          | —      |   |                       |  
|Disposals                  |  |      | —      |  |                     |   | (207    | )         |  |   | —                       |  |  |                          | —      |   |                       |  
|At May 31, 2018            |  |      | 24,504 |  |                     |   | 99,442  |           |  |   | 15,949                  |  |  |                          | 1,665  |   |                       |  
|Business acquisitions      |  |      | 345    |  |                     |   | 4,524   |           |  |   | 1,662                   |  |  |                          | 182    |   |                       |  
|Additions                  |  |      | 8,109  |  |                     |   | 3,829   |           |  |   | 28,305                  |  |  |                          | 778    |   |                       |  
|Transfers                  |  |      | 192    |  |                     |   | 124,603 |           |  |   | 33,687                  |  |  |                          | (1,389 | ) |                       |  
|Effect of foreign exchange |  |      | 3      |  |                     |   | 70      |           |  |   | 24                      |  |  |                          | —      |   |                       |  
|At May 31, 2019            |  | $    | 33,153 |  |                     | $ | 232,468 |           |  | $ | 79,627                  |  |  | $                        | 1,236  |   |                       | $
|                           |  |      |        |  |                     |   |         |           |  |   |                         |  |  |                          |        |   |                       |  
|Accumulated depreciation   |  |      |        |  |                     |   |         |           |  |   |                         |  |  |                          |        |   |                       |  
|At May 31, 2017            |  | $    | —      |  |                     | $ | 983     |           |  | $ | 1,260                   |  |  | $                        | 62     |   |                       | $
|Amortization               |  |      | —      |  |                     |   | 1,517   |           |  |   | 1,697                   |  |  |                          | 47     |   |                       |  
|At May 31, 2018            |  |      | —      |  |                     |   | 2,500   |           |  |   | 2,957                   |  |  |                          | 109    |   |                       |  
|Amortization               |  |      | —      |  |                     |   | 5,160   |           |  |   | 5,962                   |  |  |                          | 80     |   |                       |  
|At May 31, 2019            |  | $    | —      |  |                     | $ | 7,660   |           |  | $ | 8,919                   |  |  | $                        | 189    |   |                       | $
|                           |  |      |        |  |                     |   |         |           |  |   |                         |  |  |                          |        |   |                       |  
|Net book value             |  |      |        |  |                     |   |         |           |  |   |                         |  |  |                          |        |   |                       |  
|At May 31, 2017            |  | $    | 10,829 |  |                     | $ | 15,187  |           |  | $ | 4,080                   |  |  | $                        | 200    |   |                       | $
|At May 31, 2018            |  | $    | 24,504 |  |                     | $ | 96,942  |           |  | $ | 12,992                  |  |  | $                        | 1,556  |   |                       | $
|At May 31, 2019            |  | $    | 33,153 |  |                     | $ | 224,808 |           |  | $ | 70,708                  |  |  | $                        | 1,047  |   |                       | $



19







Aphria Inc.

Notes to the Consolidated Financial Statements

For the years ended May 31, 2019 and May 31, 2018 (In thousands of Canadian dollars, except share and per share
amounts)




| | 10. | Intangible assets
| | --- | -----------------



|                         |  | Customer
 relationships |        |  | Corporate
 website |   |     | Licences, permits
 & applications |  |   | Non-compete
 agreements |  |  | Intellectual 
property,
 trademarks & 
brands |       |  | Total
 intangible
 assets |  
|------------------------ |  | ----------------------- | ------ |  | ------------------ | - | --- | --------------------------------- |  | - | ----------------------- |  |  | --------------------------------------------- | ----- |  | ------------------------- | -
|Cost                     |  |                         |        |  |                    |   |     |                                   |  |   |                         |  |  |                                               |       |  |                           |  
|At May 31, 2017          |  | $                       | —      |  |                    | $ | 218 |                                   |  | $ | 1,250                   |  |  | $                                             | —     |  |                           | $
|Business acquisitions    |  |                         | 11,730 |  |                    |   | 39  |                                   |  |   | 137,920                 |  |  |                                               | 1,930 |  |                           |  
|Additions                |  |                         | —      |  |                    |   | 152 |                                   |  |   | —                       |  |  |                                               | -     |  |                           |  
|At May 31, 2018          |  |                         | 11,730 |  |                    |   | 409 |                                   |  |   | 139,170                 |  |  |                                               | 1,930 |  |                           |  
|Business acquisitions    |  |                         | 21,300 |  |                    |   | —   |                                   |  |   | 123,956                 |  |  |                                               | 1,400 |  |                           |  
|Additions                |  |                         | —      |  |                    |   | 496 |                                   |  |   | 12,754                  |  |  |                                               | —     |  |                           |  
|At May 31, 2019          |  | $                       | 33,030 |  |                    | $ | 905 |                                   |  | $ | 275,880                 |  |  | $                                             | 3,330 |  |                           | $
|                         |  |                         |        |  |                    |   |     |                                   |  |   |                         |  |  |                                               |       |  |                           |  
|Accumulated depreciation |  |                         |        |  |                    |   |     |                                   |  |   |                         |  |  |                                               |       |  |                           |  
|At May 31, 2017          |  | $                       | —      |  |                    | $ | 156 |                                   |  | $ | 153                     |  |  | $                                             | —     |  |                           | $
|Amortization             |  |                         | 1,274  |  |                    |   | 100 |                                   |  |   | 124                     |  |  |                                               | 314   |  |                           |  
|At May 31, 2018          |  |                         | 1,274  |  |                    |   | 256 |                                   |  |   | 277                     |  |  |                                               | 314   |  |                           |  
|Amortization             |  |                         | 4,729  |  |                    |   | 161 |                                   |  |   | 582                     |  |  |                                               | 1,176 |  |                           |  
|At May 31, 2019          |  | $                       | 6,003  |  |                    | $ | 417 |                                   |  | $ | 859                     |  |  | $                                             | 1,490 |  |                           | $
|                         |  |                         |        |  |                    |   |     |                                   |  |   |                         |  |  |                                               |       |  |                           |  
|Net book value           |  |                         |        |  |                    |   |     |                                   |  |   |                         |  |  |                                               |       |  |                           |  
|At May 31, 2017          |  | $                       | —      |  |                    | $ | 62  |                                   |  | $ | 1,097                   |  |  | $                                             | —     |  |                           | $
|At May 31, 2018          |  | $                       | 10,456 |  |                    | $ | 153 |                                   |  | $ | 138,893                 |  |  | $                                             | 1,616 |  |                           | $
|At May 31, 2019          |  | $                       | 27,027 |  |                    | $ | 488 |                                   |  | $ | 275,021                 |  |  | $                                             | 1,840 |  |                           | $



Included in Licences, permits & applications
is $273,579 of indefinite lived intangible assets.



| | 11. | Business Acquisitions
| | --- | ---------------------



Acquisition of Broken Coast Cannabis Ltd.



On February 13, 2018, the Company entered into a
share purchase agreement to purchase all of the shares of Cannan Growers Inc. (“Cannan”), a holding company owning
shares of Broken Coast Cannabis Ltd. (“Broken Coast”), and to acquire the remaining shares for a combined total of
99.86% of the issued and outstanding shares of Broken Coast. The combined purchase price was $214,168 satisfied through the issuance
of an aggregate 14,373,675 common shares. The share purchase agreement entitled the Company to control over Broken Coast on February
1, 2018, which became the effective acquisition date. In August 2018, the Company came to terms with the holder of the remaining
0.14% of the issued and outstanding shares of Broken Coast. In exchange for purchasing the remaining shares, the Company issued
19,963 shares to the holder.



20







Aphria Inc.

Notes to the Consolidated Financial Statements

For the years ended May 31, 2019 and May 31, 2018 (In thousands of Canadian dollars, except share and per share
amounts)




The table below summarizes the fair value of the
assets acquired and the liabilities assumed at the acquisition date:



|                                           |  | Note |  | Number of shares |            |  | Share price |   |       | Amount | 
|------------------------------------------ |  | ---- |  | ---------------- | ---------- |  | ----------- | - | ----- | ------ | 
|Consideration paid                         |  |      |  |                  |            |  |             |   |       |        | 
|Shares issued                              |  | (i)  |  |                  | 14,393,638 |  |             | $ | 14.90 |        | 
|Total consideration paid                   |  |      |  |                  |            |  |             |   |       |        | 
|                                           |  |      |  |                  |            |  |             |   |       |        | 
|Net assets acquired                        |  |      |  |                  |            |  |             |   |       |        | 
|Current assets                             |  |      |  |                  |            |  |             |   |       |        | 
|Cash and cash equivalents                  |  |      |  |                  |            |  |             |   |       |        | 
|Accounts receivable                        |  |      |  |                  |            |  |             |   |       |        | 
|Prepaids and other current assets          |  |      |  |                  |            |  |             |   |       |        | 
|Inventory                                  |  |      |  |                  |            |  |             |   |       |        | 
|Biological assets                          |  |      |  |                  |            |  |             |   |       |        | 
|Long-term assets                           |  |      |  |                  |            |  |             |   |       |        | 
|Capital assets                             |  |      |  |                  |            |  |             |   |       |        | 
|Customer relationships                     |  |      |  |                  |            |  |             |   |       |        | 
|Corporate website                          |  |      |  |                  |            |  |             |   |       |        | 
|Licences, permits & applications           |  |      |  |                  |            |  |             |   |       |        | 
|Non-competition agreements                 |  |      |  |                  |            |  |             |   |       |        | 
|Intellectual property, trademarks & brands |  |      |  |                  |            |  |             |   |       |        | 
|Goodwill                                   |  |      |  |                  |            |  |             |   |       |        | 
|Total assets                               |  |      |  |                  |            |  |             |   |       |        | 
|Current liabilities                        |  |      |  |                  |            |  |             |   |       |        | 
|Accounts payable and accrued liabilities   |  |      |  |                  |            |  |             |   |       |        | 
|Income taxes payable                       |  |      |  |                  |            |  |             |   |       |        | 
|Long-term liabilities                      |  |      |  |                  |            |  |             |   |       |        | 
|Deferred tax liability                     |  |      |  |                  |            |  |             |   |       |        | 
|Long-term debt                             |  |      |  |                  |            |  |             |   |       |        | 
|Total liabilities                          |  |      |  |                  |            |  |             |   |       |        | 
|                                           |  |      |  |                  |            |  |             |   |       |        | 
|Total net assets acquired                  |  |      |  |                  |            |  |             |   |       |        | 



| | (i) | Share price based on the price of the shares on February
1, 2018.
| | --- | -----------------------------------------------------------------



Net income and comprehensive
net income within the prior year for the Company would have been higher by approximately $2,268 if the acquisition had taken place
on June 1, 2017. In connection with this transaction, the Company expensed transaction costs of $1,643.



Acquisition of Nuuvera Corp.



On March 23, 2018, the Company
completed a definitive arrangement agreement (the “Arrangement Agreement”) pursuant to which the Company acquired Nuuvera,
by way of a court-approved plan of arrangement, under the Business Corporations Act (Ontario). The Company acquired 100% of the
issued and outstanding common shares (on a fully diluted basis) of Nuuvera for a total consideration of $0.62 in cash plus 0.3546
of an Aphria share for each Nuuvera share held. All of Nuuvera’s outstanding options were exchanged for an equivalent option
granted pursuant to Aphria’s stock option plan (each, a “Replacement Option”) to purchase from Aphria the number
of common shares (rounded to the nearest whole share) equal to: (i) the exchange ratio multiplied by (ii) the number of Nuuvera
shares subject to such Nuuvera Option. Each such Replacement Option shall provide for an exercise price per common share (rounded
to the nearest whole cent) equal to: (i) the exercise price per Nuuvera share purchasable pursuant to such Nuuvera Option; divided
by (ii) the exchange ratio.



21







Aphria Inc.

Notes to the Consolidated Financial Statements

For the years ended May 31, 2019 and May 31, 2018 (In thousands of Canadian dollars, except share and per share
amounts)




The table below summarizes the fair value of the
assets acquired and the liabilities assumed at the effective acquisition date:



|                                           |  | Note |  | Number of shares |            |  | Share price |   |       | Amount | 
|------------------------------------------ |  | ---- |  | ---------------- | ---------- |  | ----------- | - | ----- | ------ | 
|Consideration paid                         |  |      |  |                  |            |  |             |   |       |        | 
|Cash                                       |  |      |  |                  |            |  |             |   |       |        | 
|Shares issued                              |  | (i)  |  |                  | 31,226,910 |  |             | $ | 13.17 |        | 
|Warrants outstanding                       |  | (ii) |  |                  | 1,345,866  |  |             |   |       |        | 
|Replacement options issued                 |  | (ii) |  |                  | 1,280,330  |  |             |   |       |        | 
|                                           |  |      |  |                  |            |  |             |   |       |        | 
|                                           |  |      |  |                  |            |  |             |   |       |        | 
|Fair value of previously held investment   |  |      |  |                  |            |  |             |   |       |        | 
|Shares held by Aphria                      |  | (i)  |  |                  | 1,878,738  |  |             | $ | 14.92 |        | 
|Warrants held by Aphria                    |  | (ii) |  |                  | 322,365    |  |             |   |       |        | 
|                                           |  |      |  |                  |            |  |             |   |       |        | 
|                                           |  |      |  |                  |            |  |             |   |       |        | 
|Total fair value of consideration          |  |      |  |                  |            |  |             |   |       |        | 
|                                           |  |      |  |                  |            |  |             |   |       |        | 
|Net assets acquired                        |  |      |  |                  |            |  |             |   |       |        | 
|Current assets                             |  |      |  |                  |            |  |             |   |       |        | 
|Cash and cash equivalents                  |  |      |  |                  |            |  |             |   |       |        | 
|Accounts receivable                        |  |      |  |                  |            |  |             |   |       |        | 
|Prepaids and other current assets          |  |      |  |                  |            |  |             |   |       |        | 
|Inventory                                  |  |      |  |                  |            |  |             |   |       |        | 
|Long-term assets                           |  |      |  |                  |            |  |             |   |       |        | 
|Capital assets                             |  |      |  |                  |            |  |             |   |       |        | 
|Intellectual property, trademarks & brands |  |      |  |                  |            |  |             |   |       |        | 
|Licences, permits & applications           |  |      |  |                  |            |  |             |   |       |        | 
|Goodwill                                   |  |      |  |                  |            |  |             |   |       |        | 
|Total assets                               |  |      |  |                  |            |  |             |   |       |        | 
|Current liabilities                        |  |      |  |                  |            |  |             |   |       |        | 
|Accounts payable and accrued liabilities   |  |      |  |                  |            |  |             |   |       |        | 
|Long-term liabilities                      |  |      |  |                  |            |  |             |   |       |        | 
|Deferred tax liability                     |  |      |  |                  |            |  |             |   |       |        | 
|Total liabilities                          |  |      |  |                  |            |  |             |   |       |        | 
|                                           |  |      |  |                  |            |  |             |   |       |        | 
|Total net assets acquired                  |  |      |  |                  |            |  |             |   |       |        | 



| | (i) | Share price based on the price of the shares on March 23,
2018; shares held by Aphria include the cash consideration paid.
| | --- | --------------------------------------------------------------------------------------------------------------------------



| | (ii) | Options and warrants are valued using the Black-Scholes
option pricing model using the following assumptions: the risk-free rate of 2.19%; expected life of 1- 10 years; volatility of
30% based on volatility used for similar instruments on the open market; forfeiture rate of nil; dividend yield of nil; and the
exercise price of $2.52 - $20.30.
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Net income and comprehensive
net income within the prior year for the Company would have been lower by approximately $19,611 if the acquisition had taken place
on June 1, 2017. In connection with this transaction, the Company expensed transaction costs  of $3,439.



Acquisition of LATAM Holdings Inc.



On July 17, 2018, the Company
signed a share purchase agreement with Scythian Biosciences Corp. (“Scythian”) to purchase 100% of the issued and
outstanding shares of LATAM Holdings Inc. (“LATAM Holdings”); a direct wholly-owned subsidiary of Scythian. As outlined
in the share purchase agreement, the negotiated purchase price was to be settled with the issuance of 15,678,310 shares of the
Company valued on July 17, 2018 at $193,000 and the assumption of $1,000 USD ($1,310 CAD) short-term liabilities. The acquisition
of LATAM Holdings closed on September 27, 2018. Therefore, in accordance with IFRS 3 - Business Combinations, the equity consideration
transferred was measured at fair value at the acquisition date, which is the date control was obtained, which in this case was
determined to be September 27, 2018. The fair value of the consideration shares on September 27, 2018 was $273,900.



22







Aphria Inc.

Notes to the Consolidated Financial Statements

For the years ended May 31, 2019 and May 31, 2018

(In thousands of Canadian dollars, except share and per share
amounts)








LATAM Holdings, through other
subsidiaries, provides the Company with access to the emerging cannabis markets in Latin America and the Caribbean. Through this
acquisition, the Company secured key licenses in Colombia, Argentina and Jamaica which is anticipated to provide first mover advantage
in these countries. In addition, the Company acquired an option and rights of first refusal to purchase a Brazilian incorporated
entity, with the option and right of first refusal vesting only upon the entity obtaining a licence to cultivate and distribute
cannabis lawfully in Brazil.



The Company is in the process
of assessing the fair value of the net assets acquired and, as a result, the fair value of the net assets acquired may be subject
to adjustments pending completion of final valuations and post-closing adjustments. The table below summarizes the preliminary
estimated fair value of the assets acquired and the liabilities assumed at the effective acquisition date:



|                                         |  | Note |     |  | Number of shares |  |            | Share price |  |   | Amount | 
|---------------------------------------- |  | ---- | --- |  | ---------------- |  | ---------- | ----------- |  | - | ------ | 
|Consideration paid                       |  |      |     |  |                  |  |            |             |  |   |        | 
|Shares issued                            |  |      | (i) |  |                  |  | 15,678,310 |             |  | $ | 17.47  | 
|Total consideration paid                 |  |      |     |  |                  |  |            |             |  |   |        | 
|Net assets acquired                      |  |      |     |  |                  |  |            |             |  |   |        | 
|Current assets                           |  |      |     |  |                  |  |            |             |  |   |        | 
|Cash and cash equivalents                |  |      |     |  |                  |  |            |             |  |   |        | 
|Accounts receivable                      |  |      |     |  |                  |  |            |             |  |   |        | 
|Prepaids and other current assets        |  |      |     |  |                  |  |            |             |  |   |        | 
|Inventory                                |  |      |     |  |                  |  |            |             |  |   |        | 
|Long-term assets                         |  |      |     |  |                  |  |            |             |  |   |        | 
|Capital assets                           |  |      |     |  |                  |  |            |             |  |   |        | 
|Licences, permits & applications         |  |      |     |  |                  |  |            |             |  |   |        | 
|Goodwill                                 |  |      |     |  |                  |  |            |             |  |   |        | 
|Total assets                             |  |      |     |  |                  |  |            |             |  |   |        | 
|Current liabilities                      |  |      |     |  |                  |  |            |             |  |   |        | 
|Accounts payable and accrued liabilities |  |      |     |  |                  |  |            |             |  |   |        | 
|Income taxes payable                     |  |      |     |  |                  |  |            |             |  |   |        | 
|Long-term liabilities                    |  |      |     |  |                  |  |            |             |  |   |        | 
|Deferred tax liability                   |  |      |     |  |                  |  |            |             |  |   |        | 
|Total liabilities                        |  |      |     |  |                  |  |            |             |  |   |        | 
|Non-controlling interest                 |  |      |     |  |                  |  |            |             |  |   |        | 
|                                         |  |      |     |  |                  |  |            |             |  |   |        | 
|Total net assets acquired                |  |      |     |  |                  |  |            |             |  |   |        | 



| | (i) | Share price based on the price of the shares on September
27th, 2018.
| | --- | ---------------------------------------------------------------------



Net income and comprehensive
net income for the Company would have been lower by approximately $4,556 for the year ended May 31, 2019, if the acquisition had
taken place on June 1, 2018. In connection with this transaction, the Company expensed transaction costs of $1,133.



Acquisition of CC Pharma GmbH



On November 7 ,2018, the Company
signed a share purchase agreement to acquire 100% of the issued and outstanding shares of CC Pharma. The purchase price was cash
consideration of €18,920 ($28,775 CAD) and additional cash consideration of up to €23,500 ($35,741 CAD) contingent on
CC Pharma obtaining a specified EBITDA target. The acquisition of CC Pharma closed on January 9, 2019.



CC Pharma is a leading distributor
of pharmaceutical products to pharmacies in Germany as well as throughout Europe. The acquisition of CC Pharma provides the Company
access to the cannabis markets in Germany and ultimately pan-European platforms.



The Company is in the process
of assessing the fair value of the net assets acquired and, as a result, the fair value of the net assets acquired may be subject
to adjustments pending completion of final valuations and post-closing adjustments. The table below summarizes the preliminary
estimated fair value of the assets acquired and the liabilities assumed at the effective acquisition date:



23







Aphria Inc.

Notes to the Consolidated Financial Statements

For the years ended May 31, 2019 and May 31, 2018

(In thousands of Canadian dollars, except share and per share
amounts)








|                                           |  | Amount |        
|------------------------------------------ |  | ------ | -------
|Consideration                              |  |        |        
|Cash                                       |  | $      | 28,775 
|Contingent consideration                   |  |        | 35,741 
|Total consideration                        |  | $      | 64,516 
|                                           |  |        |        
|Net assets acquired                        |  |        |        
|Current assets                             |  |        |        
|Cash and cash equivalents                  |  |        | 7,237  
|Accounts receivable                        |  |        | 33,989 
|Prepaids and other current assets          |  |        | 14,616 
|Inventory                                  |  |        | 28,352 
|Long-term assets                           |  |        |        
|Capital assets                             |  |        | 6,373  
|Customer relationships                     |  |        | 21,300 
|Non-compete agreements                     |  |        | 1,400  
|Intellectual property, trademarks & brands |  |        | 16,200 
|Goodwill                                   |  |        | 6,146  
|Total assets                               |  |        | 135,613
|Current liabilities                        |  |        |        
|Bank loans and overdrafts                  |  |        | 20,255 
|Accounts payable and accrued liabilities   |  |        | 44,111 
|Income taxes payable                       |  |        | 672    
|Long-term liabilities                      |  |        |        
|Deferred tax liability                     |  |        | 6,059  
|Total liabilities                          |  |        | 71,097 
|                                           |  |        |        
|Total net assets acquired                  |  | $      | 64,516 



Revenue and net income and
comprehensive net income for the Company would have been higher by approximately $367,200 and $9,955 respectively, for the year
ended May 31, 2019, if the acquisition had taken place on June 1, 2018. In connection with this transaction, the Company expensed
transaction costs of $595.



Goodwill is comprised of:



|                      |  | May 31,  2019 |         |  | May 31,  2018 |  
|--------------------- |  | ------------- | ------- |  | ------------- | -
|CannWay goodwill      |  | $             | 1,200   |  |               | $
|Broken Coast goodwill |  |               | 146,091 |  |               |  
|Nuuvera goodwill      |  |               | 377,221 |  |               |  
|LATAM goodwill        |  |               | 139,188 |  |               |  
|CC Pharma goodwill    |  |               | 6,146   |  |               |  
|                      |  | $             | 669,846 |  |               | $



During the year ended May 31,
2019, an independent third party completed their review of the LATAM acquisition, which provided the Company with new information.
In accordance with IAS 36, the Company completed an impairment analysis and determined the fair value of the assets based on a
discounted cash flow approach for the three operating entities acquired in the transaction; Colcanna S.A.S (“Colcanna”),
ABP, S.A. (“ABP”) and Marigold Projects Jamaica Limited (“Marigold”).



As a result of new information
obtained from the independent third party’s review, the Company determined some changes in the projected cashflows were appropriate
and adjusted the discount rates used in the discounted cash flow approach from 31.0%, 21.3%, and 36.5% to 33.0%, 23.3%, and 38.5%
for Colcanna, ABP and Marigold respectively. Based on the determined fair value, the Company recognized $50,000 in impairment of
goodwill. Also included in impairment is £4,600 GBP ($8,039 CAD) related to uncollectible promissory notes receivable (Note
15) for a total impairment of $58,039.



24







Aphria Inc.

Notes to the Consolidated Financial Statements

For the years ended May 31, 2019 and May 31, 2018

(In thousands of Canadian dollars, except share and per share
amounts)








| | 12. | Convertible notes receivable
| | --- | ----------------------------



|                                         |  | May 31,  2019 |         |   | May 31,  2018 |  
|---------------------------------------- |  | ------------- | ------- | - | ------------- | -
|Copperstate
Farms Investors, LLC         |  | $             | —       |   |               | $
|HydRx Farms Ltd. (d/b/a
Scientus Pharma) |  |               | 11,500  |   |               |  
|Fire & Flower Inc.                       |  |               | 11,166  |   |               |  
|10330698 Canada Ltd.
(d/b/a Starbuds)    |  |               | 5,204   |   |               |  
|High
Tide Inc.                           |  |               | 4,360   |   |               |  
|                                         |  |               | 32,230  |   |               |  
|Deduct
- current portion                 |  |               | (11,500 | ) |               |  
|                                         |  | $             | 20,730  |   |               | $



Copperstate Farms Investors,
LLC



On May 15, 2018, the Company
entered into an amendment agreement with CSF which extended the maturity date and automatic conversion date to June 30, 2018, which
was subsequently extended into July. As at May 31, 2019, this note was paid in full.



HydRx Farms Ltd. (d/b/a
Scientus Pharma)



On August 14, 2017, Aphria purchased $11,500 in secured convertible debentures of Scientus Pharma (“SP”). The convertible
debenture bears interest at 8%, paid semi-annually, matures in two years and includes the right to convert the debenture into common
shares of SP at $2.75 per common share at any time before maturity. SP maintains the option of forced conversion of the convertible
debenture if the common shares of SP trade on a stock exchange at a value of $3.02 or more for 30 consecutive days. The Company
maintains a first charge on all assets of SP. In October 2018, the Company agreed to share its first charge on all assets of SP
with a third party on a pari passu basis. The Company understands that the third party has not completed a transaction with SP.
As at May 31, 2019, the third party has not completed its investment.



As at May 31, 2019, the fair
value of the Company’s secured convertible debenture was $11,500, which resulted in a fair value loss for the year ended
May 31, 2019 of $4,629.



Fire & Flower Inc.



On July 26, 2018, Aphria purchased
$10,000 in unsecured convertible debentures of Fire & Flower Inc. (“F&F”). The convertible debentures bear
interest at 8% per annum compounded, accrued and paid semi-annually in arrears. The debentures mature on July 31, 2020, at which
point, they automatically convert into common shares of F&F at the lower of $1.15 and the share price on July 31, 2020. The
debentures may also be converted into a loan on July 31, 2020 bearing interest at 12%, at the holder’s option.





As at May 31, 2019, the fair value of the unsecured convertible
debenture was $11,166, which resulted in a fair value loss for the year ended May 31, 2019 of $1,166.





10330698 Canada Ltd. (d/b/a Starbuds)



On December 28, 2018, Aphria
purchased $5,000 in secured convertible debentures of Starbuds. The convertible debentures bear interest at 8.5% per annum accruing
daily due on the December 28, 2020. The debentures are secured against the assets of Starbuds. The debentures and any accrued and
unpaid interest are convertible into common shares for $0.50 per common share and mature on December 28, 2020.



As at May 31, 2019, the fair
value of the Company’s secured convertible debenture was $5,204, which resulted in a fair value loss for the year ended May
31, 2019 of $204.



High Tide Inc.



On April 10, 2019, Aphria purchased
$4,500 in unsecured convertible debentures of High Tide Inc. (“High Tide”). The convertible debentures bear interest
at 10% per annum, payable annually up front in common shares of High Tide based on the 10-day volume weighted average price (the
“Debentures”). The debentures mature on April 10, 2021, they are convertible into common shares of High Tide at a price
of $0.75 at the option of the holder. In addition to the debentures the Company received 6,000,000 warrants in High Tide as part
of the purchase of the unsecured convertible debentures (Note 15).



25







Aphria Inc.

Notes to the Consolidated Financial Statements

For the years ended May 31, 2019 and May 31, 2018

(In thousands of Canadian dollars, except share and per share
amounts)








As at May 31, 2019, the fair value of the unsecured
convertible debenture was $4,360, which resulted in a fair value loss for the year ended May 31, 2019 of $140.



Convertible notes receivable



During the year ended May 31,
2019, the Company purchased a total of $19,500 (2018 - $14,001) in convertible notes. The unrealized (loss) gain on convertible
notes receivable recognized in the results of operations amounts to $(3,399) for the year ended May 31, 2019 (2018 - $5,943).



The fair value was determined
using the Black-Scholes option pricing model using the following assumptions: the risk-free rate of 0.85- 1.51%; expected life
of the convertible note; volatility of 70% based on comparable companies; forfeiture rate of nil; dividend yield of nil; and, the
exercise price of the respective conversion feature.



| | 13. | Interest in equity investees
| | --- | ----------------------------



|                        |  | May 31,  2019 |       |  | May 31,  2018 |  
|----------------------- |  | ------------- | ----- |  | ------------- | -
|Associated company      |  |               |       |  |               |  
|Althea Company Pty Ltd. |  | $             | 9,311 |  |               | $
|                        |  | $             | 9,311 |  |               | $



Althea Company Pty
Ltd. (“Althea”)



As at May 31, 2019 the Company
held 50,750,000 common shares of Althea (May 31, 2018 - 4,500) representing an ownership interest of 25% (May 31, 2018 - 37.5%).



The following table summarizes
the financial of the Company’s associate and reflects the amounts presented in the financial statements of Althea, amended
to reflect adjustments made by the Company when using the equity method, including fair value adjustments and modifications for
differences in accounting policy.



|                        |  | March 31, 2019 |        |   | March 31,  2018 |  
|----------------------- |  | -------------- | ------ | - | --------------- | -
|Current assets          |  | $              | 18,210 |   |                 | $
|Non-current assets      |  |                | 1,125  |   |                 |  
|Current liabilities     |  |                | (655   | ) |                 |  
|Non-current liabilities |  |                | —      |   |                 |  
|Net assets              |  | $              | 18,680 |   |                 | $



For the period from April 1,
2018 to March 31, 2019 the investee, Althea, reported a net loss of $4,368 AUD on its financial statements. In accordance with
the equity method, the Company recorded a loss of $1,123, for the year ended May 31, 2019, from its investee relative to its ownership
of the outstanding common shares at the time.





During the year, Althea completed
a share split of 7,500 shares for each existing share. Althea also issued 101,310,000 common shares for total proceeds of $19,650
AUD. The Company participated in the financing of Althea contributing $3,400 AUD ($3,258 CAD) of the total $19,650 AUD raised.
This additional raise reduced the Company’s ownership interest in Althea from 37.5% to 25% and accordingly, the Company
recognized a gain on dilution of $2,210. The fair value of the shares as at May 31, 2019 is $36,032 AUD ($33,776 CAD) based on
the closing share price of Althea.



26







Aphria Inc.

Notes to the Consolidated Financial Statements

For the years ended May 31, 2019 and May 31, 2018

(In thousands of Canadian dollars, except share and per share
amounts)








|                                                |  | May 31,  2019 |        |   | May 31,  2018 |  
|----------------------------------------------- |  | ------------- | ------ | - | ------------- | -
|Reconciliation to carrying amount:              |  |               |        |   |               |  
|Opening balance                                 |  | $             | 4,966  |   |               | $
|Transfer from long-term investments             |  |               | —      |   |               |  
|Cash contributions, net of share issuance costs |  |               | 3,258  |   |               |  
|Gain on account of dilution of ownership        |  |               | 2,210  |   |               |  
|Share of reported net loss                      |  |               | (1,123 | ) |               |  
|Closing balance                                 |  | $             | 9,311  |   |               | $



Liberty Health Sciences
Inc.



In February 2018, the Company
entered into a call/put obligation (“Obligation Agreement”) for the remaining shares held in Liberty, which were subject
to CSE mandatory escrow requirements. As each new tranche of shares became freely trading, the Obligation Agreement resulted in
the buyers acquiring the newly freely trading shares at an 18% discount to the market price of Liberty, based on Liberty’s
10-day volume weighted trading price.



The Obligation Agreement included
an opt-out for Aphria’s benefit, in the event that the Toronto Stock Exchange amended their regulations such that it permitted
investments by Canadian companies in U.S. based cannabis businesses, and in such instance, the Obligation Agreement would be automatically
terminated. In exchange for the opt-out, the Company agreed to pay the buyers a $2,500 termination fee.



Based on the terms of the Obligation
Agreement, the Company determined that the remaining shares held in Liberty met the requirements under IFRS 5 and were reclassified
from interest in equity investees to assets held for sale. The Company ceased accounting for the investment as an equity investment
as of November 30, 2017 and transferred the carrying value to assets held for sale.



In July 2018, 16,029,615 shares
were released from escrow and sold as part of the Obligation Agreement. The Company received gross proceeds of $11,514 and recognized
a gain on sale of equity investee of $9,880. As part of the transaction, the Company paid $480 in exchange for an option to buy
back the shares at $1.00 a share, subject to certain downside risk protection which results in the purchaser sharing a portion
of the difference between the share price on the day the option is exercised and the exercise price, provided the share price exceeds
$1.25. The option to repurchase the shares was subject to the following conditions (collectively, the enumerated conditions (1)
through (5), the “Conditions”):



| | (1) | Cannabis becoming legalized federally in the United States; and
| | --- | ---------------------------------------------------------------

One or more of the following
conditions have been satisfied:

| | (2) | The TSX has provided its approval for the purchase of the U.S. cannabis assets;
| | --- | -------------------------------------------------------------------------------

| | (3) | The TSX revises its rules such that it no longer has a prohibition against its listed companies
having an interest in US assets which are involved in the cannabis business;
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (4) | The common shares of the Company are voluntarily or involuntarily delisted from the TSX; and/or
| | --- | -----------------------------------------------------------------------------------------------

| | (5) | The Company is acquired by another entity, provided that the common shares of the Company will
be delisted from the TSX upon the change of control.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------



This option was initially included
in long-term investments (Note 14).



During the prior quarter, the
Company and the third party agreed to terminate the Obligation Agreement, in exchange for a $1,000 termination fee. The Company
then entered into a share purchase agreement to divest of the remaining 64,118,462 Liberty shares in exchange for consideration
in the form of a promissory note in the amount of $59,098, bearing interest at a rate of 12% due in 5 years (Note 15). As a security
for the promissory note, the Liberty shares were placed in trust with an escrow agent. The purchaser was able to remove the Liberty
shares from the escrow at any time by paying off the promissory note. In the event that the Company enforces the security, the
escrow agent was to return the shares to the Company, provided that the Conditions were met. In the event they were not met, the
escrow agent was to transfer the securities to a third-party investment bank for liquidation, with the proceeds of liquidation
delivered to the Company. Simultaneously with this sale, the Company entered into an option agreement to repurchase the Liberty
shares for the amount of the promissory note (Note 14). The Company agreed to pay an annual fee equal to 12.975% of the face value
of the promissory note to maintain this option (Note 20). The option to repurchase the shares was subject to the Conditions described
above. During the year ended May 31, 2019, the Company reported a gain on sale of equity investee of $57,351.



On February 19, 2019, the Company
and the third party agreed to liquidate the promissory note, security agreement and the option in exchange for a cash payment of
$47,448 and a contingent payment up to $10,000, in the event the third party monetizes the assets held under the option within
six (6) months of the transaction date. As the satisfaction of these conditions require actions outside of the Company’s
control, the Company has not allocated any value to the contingent consideration.



For the year ended May 31,
2018, the Company reported a total gain on dilution of ownership in equity investee of $7,535. Prior to the Company no longer recording
Liberty as an equity investee, Liberty reported a net loss of $24,671 and a net comprehensive loss of $26,798. In accordance with
the equity method, the Company recorded a loss of $9,281 and other comprehensive loss of $801.



27







Aphria Inc.

Notes to the Consolidated Financial Statements

For the years ended May 31, 2019 and May 31, 2018

(In thousands of Canadian dollars, except share and per share
amounts)








| | 14. | Long-term investments
| | --- | ---------------------



|                                 |  | Cost
    May 31,
 2018 |         |   | Fair
    value
    May 31,
    2018 |   |         | Investment |  |   | Divesture/
    Transfer |  |  | Subtotal
     May 31,
    2019 |          |   | Change
    in
    fair value |   |        | Fair
    value
    May 31,
    2019 | 
|-------------------------------- |  | ---------------------- | ------- | - | ----------------------------------- | - | ------- | ---------- |  | - | ----------------------- |  |  | ------------------------------ | -------- | - | ---------------------------- | - | ------ | ----------------------------------- | 
|Level 1 on fair value hierarchy  |  |                        |         |   |                                     |   |         |            |  |   |                         |  |  |                                |          |   |                              |   |        |                                     | 
|CannaRoyalty Corp.               |  | $                      | 1,500   |   |                                     | $ | 3,765   |            |  | $ | —                       |  |  | $                              | (3,765   | ) |                              | $ | —      |                                     | 
|MassRoots, Inc.                  |  |                        | 304     |   |                                     |   | 164     |            |  |   | —                       |  |  |                                | (164     | ) |                              |   | —      |                                     | 
|Tetra Bio-Pharma Inc.            |  |                        | 2,300   |   |                                     |   | 6,800   |            |  |   | 16,757                  |  |  |                                | —        |   |                              |   | 23,557 |                                     | 
|Hiku Brands Company Ltd.         |  |                        | 9,775   |   |                                     |   | 13,558  |            |  |   | —                       |  |  |                                | (13,558  | ) |                              |   | —      |                                     | 
|Scythian Biosciences Corp.       |  |                        | 9,349   |   |                                     |   | 8,603   |            |  |   | 298                     |  |  |                                | (8,901   | ) |                              |   | —      |                                     | 
|National Access Cannabis Corp.   |  |                        | 1,093   |   |                                     |   | 710     |            |  |   | 10,481                  |  |  |                                | —        |   |                              |   | 11,191 |                                     | 
|Aleafia Health Inc.              |  |                        | —       |   |                                     |   | —       |            |  |   | 10,000                  |  |  |                                | —        |   |                              |   | 10,000 |                                     | 
|Rapid Dose Therapeutics Inc.     |  |                        | —       |   |                                     |   | —       |            |  |   | 5,400                   |  |  |                                | —        |   |                              |   | 5,400  |                                     | 
|Fire & Flower Inc.               |  |                        | —       |   |                                     |   | —       |            |  |   | 3,416                   |  |  |                                | —        |   |                              |   | 3,416  |                                     | 
|High Tide Inc.                   |  |                        | —       |   |                                     |   | —       |            |  |   | 450                     |  |  |                                | —        |   |                              |   | 450    |                                     | 
|                                 |  |                        | 24,321  |   |                                     |   | 33,600  |            |  |   | 46,802                  |  |  |                                | (26,388  | ) |                              |   | 54,014 |                                     | 
|Level 2 on fair value hierarchy  |  |                        |         |   |                                     |   |         |            |  |   |                         |  |  |                                |          |   |                              |   |        |                                     | 
|Hiku Brands Company Ltd.         |  |                        | 2,336   |   |                                     |   | 1,906   |            |  |   | 16,787                  |  |  |                                | (18,693  | ) |                              |   | —      |                                     | 
|Scythian Biosciences Corp.       |  |                        | 3,153   |   |                                     |   | 661     |            |  |   | —                       |  |  |                                | (661     | ) |                              |   | —      |                                     | 
|                                 |  |                        | 5,489   |   |                                     |   | 2,567   |            |  |   | 16,787                  |  |  |                                | (19,354  | ) |                              |   | —      |                                     | 
|Level 3 on fair value hierarchy  |  |                        |         |   |                                     |   |         |            |  |   |                         |  |  |                                |          |   |                              |   |        |                                     | 
|Copperstate Farms, LLC           |  |                        | 1,755   |   |                                     |   | 5,300   |            |  |   | —                       |  |  |                                | (5,300   | ) |                              |   | —      |                                     | 
|Copperstate Farms Investors, LLC |  |                        | 9,407   |   |                                     |   | 14,700  |            |  |   | —                       |  |  |                                | (14,700  | ) |                              |   | —      |                                     | 
|Resolve Digital Health Inc.      |  |                        | 718     |   |                                     |   | 3,300   |            |  |   | —                       |  |  |                                | —        |   |                              |   | 3,300  |                                     | 
|Resolve Digital Health Inc.      |  |                        | 282     |   |                                     |   | 1,916   |            |  |   | —                       |  |  |                                | —        |   |                              |   | 1,916  |                                     | 
|Green Acre Capital Fund I        |  |                        | 1,600   |   |                                     |   | 2,042   |            |  |   | 400                     |  |  |                                | —        |   |                              |   | 2,442  |                                     | 
|Green Acre Capital Fund II       |  |                        | —       |   |                                     |   | —       |            |  |   | 3,000                   |  |  |                                | (3,000   | ) |                              |   | —      |                                     | 
|Green Tank Holdings Corp.        |  |                        | 650     |   |                                     |   | 647     |            |  |   | 1,240                   |  |  |                                | —        |   |                              |   | 1,887  |                                     | 
|IBBZ Krankenhaus GmbH            |  |                        | 1,956   |   |                                     |   | 1,956   |            |  |   | —                       |  |  |                                | —        |   |                              |   | 1,956  |                                     | 
|Greenwell Brands GmbH            |  |                        | —       |   |                                     |   | —       |            |  |   | 152                     |  |  |                                | —        |   |                              |   | 152    |                                     | 
|HighArchy Ventures Ltd.          |  |                        | —       |   |                                     |   | —       |            |  |   | 9,995                   |  |  |                                | —        |   |                              |   | 9,995  |                                     | 
|US legalization options          |  |                        | —       |   |                                     |   | —       |            |  |   | 54,762                  |  |  |                                | (54,762  | ) |                              |   | —      |                                     | 
|                                 |  |                        | 16,368  |   |                                     |   | 29,861  |            |  |   | 69,549                  |  |  |                                | (77,762  | ) |                              |   | 21,648 |                                     | 
|Deduct - assets held for sale    |  |                        | (11,162 | ) |                                     |   | (20,000 | )          |  |   | —                       |  |  |                                | 20,000   |   |                              |   | —      |                                     | 
|                                 |  | $                      | 35,016  |   |                                     | $ | 46,028  |            |  | $ | 133,138                 |  |  | $                              | (103,504 | ) |                              | $ | 75,662 |                                     | 



The fair value attached to
warrants in both Level 2 and Level 3 were determined using the Black-Scholes option pricing model using the following assumptions:
risk-free rate of 0.75-1.70% on the date of grant; expected life of 1 and 2 years; volatility of 70% based on comparable companies;
forfeiture rate of 0%; dividend yield of nil; and, the exercise price of the respective warrant.



28







Aphria Inc.

Notes to the Consolidated Financial Statements

For the years ended May 31, 2019 and May 31, 2018

(In thousands of Canadian dollars, except share and per share
amounts)








CannaRoyalty Corp. (“CR”)

During the year ended May 31,
2019, the Company sold its remaining 750,000 shares of CR for proceeds of $4,111, resulting in an accounting gain of $346 (Note
28).



MassRoots, Inc.

During the year ended May 31,
2019, the Company sold its remaining 500,000 common shares in MassRoots, Inc. for proceeds of $1, resulting in a loss of $163 (Note
28).



Tetra Bio-Pharma Inc.

During the year ended May 31,
2019, the Company purchased an additional 6,900,000 units of Tetra Bio-Pharma Inc. at a total cost of $7,107. Each unit is comprised
of one Class A common share and one common share purchase warrant with an exercise price of $1.29 expiring November 2021.



During the year, the Company
purchased 10,000,000 common shares of Tetra Bio-Pharma Inc. at a total cost of $9,650.



The Company owns 26,900,000
common shares and 6,900,000 warrants at a cost of $19,057, with a fair value of $17,216 as at May 31, 2019.



Hiku Brands Company Ltd
(formerly TS BrandCo Holdings Inc.)

During the year ended May 31,
2019, the Company exercised its 7,993,605 warrants at $2.10 per warrant. Subsequent to exercising its warrants the Company sold
all of its shares of Hiku in exchange for $48,153, resulting in a gain on disposal of $15,902 (Note 28).



As part of the purchase of Hiku
by a third party, the third party terminated the Hiku supply agreement with the Company. The third party purported to terminate
the Tokyo Smoke supply agreement with the Company at approximately the same time.



Scythian Biosciences Inc.

During the year ended May 31,
2019, the Company purchased 123,800 common shares of Scythian at a total cost of $298. During the year, the Company sold its 2,812,300
common shares and 672,125 common share purchase warrants in Scythian in exchange for $6,609, resulting in a loss on disposal of
$2,953 (Note 28).



National Access Cannabis

During the year ended May 31,
2019, the Company purchased 10,344,505 common shares of National Access Cannabis Corp. at a total cost of $10,481. The Company
owns 11,344,505 common shares in NAC at a cost of $11,574, with a fair value of $7,941 as at May 31, 2019.



Aleafia Health Inc. (formerly
Emblem Corp.) (“Aleafia”)

During the year end May 31,
2019, the Company entered into a 5-year supply agreement with Emblem Corp. As part of the supply agreement the Company received
6,952,169 common shares to satisfy a deposit valued at $10,000. During the year, Emblem Corp. was purchased by a third party, Aleafia
Health Inc. (“Aleafia”). The Company’s shares in Emblem Corp. translated into 5,823,831 shares of Aleafia. The
Company owns 5,823,831 common shares in Aleafia at a cost of $10,000, with a fair value of $8,445 as at May 31, 2019. The shares
are subject to various hold restrictions tied to terms within the supply agreement.



Rapid Dose Therapeutics Inc. (“RDT”)

In August 2018, the Company
entered into a subscription agreement with RDT for the purchase of 7,200,000 common shares, for a total cost of $5,400, with a
fair value of $5,832 as at May 31, 2019. During the year, RDT’s common shares began trading on the Canadian Stock Exchange.
The Company reclassified this investment from level 3 on fair value hierarchy to level 1 during the year.



Fire & Flower Inc.

In October 2018, the Company
entered into a subscription agreement with Fire & Flower Inc. for the purchase of 2,277,000 common shares, for a total cost
of $3,416 with a fair value of $2,823 as at May 31, 2019. During the year, Fire & Flower Inc.’s common shares began trading
on the Toronto Stock Exchange Venture.



29







Aphria Inc.

Notes to the Consolidated Financial Statements

For the years ended May 31, 2019 and May 31, 2018

(In thousands of Canadian dollars, except share and per share
amounts)








High Tide Inc.

During the year ended May 31,
2019, the Company received 6,000,000 warrants in High Tide as part of the purchase of convertible debentures (Note 12), and 943,396
common shares of High Tide Inc. as a payment for interest on the convertible notes receivable (Note 12). The Company owns 943,396
common shares and 6,000,000 warrants in High Tide Inc. at a cost of $450, with a fair value of $340 as at May 31, 2019. Each warrant
is exercisable at $0.85 per warrant expiring April 18, 2021.



US legalization options

During the year ended May 31,
2019, the Company purchased an option to acquire 16,029,615 Liberty shares at $1.00 a share, expiring January 23, 2020. This option
includes specific downside risk protection in which the purchaser will share a portion of the difference between the share price
on the day the option is exercised and the exercise price, provided the share price exceeds $1.25. The cost of the option was $480.
The option to repurchase the shares was subject to the Conditions described in note 13.



During the year, the Company
entered into an option agreement to repurchase 64,118,462 Liberty shares in exchange for settlement of a promissory note receivable,
expiring September 6, 2023 (Note 13). The cost of this option was a gross annual fee of $7,668, however the Company also received
$7,092 of interest income associated with the promissory note receivable, resulting in a net annual cost to the Company of $576.
The option to repurchase the shares was subject to the Conditions described in note 13.



During the year, the Company
liquidated the option and promissory note for cash proceeds of $47,448, with a contingent fee owing of up to $10,000 upon satisfaction
of certain conditions. As the satisfaction of these conditions require actions outside of the Company’s control, the Company
has not allocated any value to the contingent consideration.



During the year, the Company
contributed assets with a fair value of $55,000 to GA Opportunities Corp. Simultaneously, the Company entered into an option agreement
to purchase all of the assets owned by GA Opportunities Corp. at a cost of $55,000, expiring September 24, 2023. The cost of this
option is a gross fee of $6,765, however the Company also receives $6,600 of interest income associated with the promissory note
receivable, resulting in a net annual cost to the Company of $165. In the event the securities in the fund represent direct or
indirect ownership of, or investment in, entities engaging in activities related to the cultivation, distribution or possession
of cannabis in the United States, the option to purchase the securities was subject to the Conditions described in note 13.



During the year, the Company
liquidated the option and promissory note for cash proceeds of $89,000, with $39,000 of the proceeds due within six months (Note
28 and Note 15).



Copperstate Farms, LLC (“Copperstate”)
and Copperstate Farms Investors, LLC (“CSF”)

During the year, the Company
received $20,000 from the sale of the shares of Copperstate and CSF, which were previously held as available for sale.



Resolve Digital Health Inc.
(“Resolve”)

The Company owns 2,200,026
common shares and 2,200,026 warrants in Resolve at a total cost of $1,000, with a fair value of $1,382 as at May 31, 2019. The
Company determined the fair value of its investment based on its net realizable value. Each warrant is exercisable at $0.65 per
warrant expiring December 1, 2021.



Green Acre Capital Fund
I

The Company committed and invested
$2,000 to Green Acre Capital Fund I. The Company determined the fair value of its investment, based on its proportionate share
of net assets, to be $4,290 as at May 31, 2019. During the year, the Company received a return of capital of $700 from this investment.



Green Acre Capital Fund II

During the year, the Company
committed to a $15,000 investment in Green Acre Capital Fund II, and as of the balance sheet date, has funded $3,000. During the
current quarter, the Company and Green Acre Capital Fund II agreed to end the Company’s involvement with the fund. The Company
and Green Acre Capital Fund II agreed that the Company would no longer be committed to fund the remaining amount of its investment
and in exchange, the Company agreed to sell its interest in the fund to the limited partners for $500, resulting in a loss of 2,500
(Note 28).



30







Aphria Inc.

Notes to the Consolidated Financial Statements

For the years ended May 31, 2019 and May 31, 2018

(In thousands of Canadian dollars, except share and per share
amounts)








Green Tank Holdings Corp.
(“Green Tank”)

During the year Green Tank
completed a 12:1 share split, which resulted in the Company obtaining an additional 1,082,675 shares at no additional cost. The
Company purchased an additional 359,208 shares of Green Tank for a cost of $920 USD ($1,240 CAD). The Company owns 1,540,308 preferred
shares in Green Tank for a total cost of $1,420 USD ($1,890 CAD), with a fair value of $3,943 USD ($5,334 CAD). The Company determined
the fair value of its investment, based on Green Tank’s most recent financing.



IBBZ Krankenhaus GmbH Klinik
Hygiea (“Krankenhaus”)

The Company owns 25.1% of Krankenhaus,
which is the owner and operator of Berlin-based Schöneberg Hospital, for €1,294 ($1,956 CAD). Through this investment,
the Company is entitled to 5% of the net income (loss) for the years 2018 to 2021, and 10% of the net income (loss) for the period
thereafter. The Company determined that the fair value of its investment, based on Krankenhaus’ most recent financing at
the same price, is equal to its carrying value. The Company recognized a loss from the change in fair value of $(5) due to changes
in the foreign exchange rate.



Greenwell Brands GmbH (“Greenwell”)

In September 2018, the Company
entered into an investment and shareholder agreement with Greenwell for the purchase of 1,250 common shares, for a total cost of
€100 ($152 CAD). The Company determined that the fair value of its investment, based on the most recent financing at the same
price, is equal to its carrying value.



HighArchy Ventures Ltd.

In October 2018, the Company
entered into a subscription agreement with HighArchy Ventures Ltd. for the purchase of 1,999 Class A shares and 1,999 Class B shares,
for a total cost of $9,995. During the year HighArchy Ventures Ltd. completed a share split of 10,000 to 1. The Company determined
that the fair value of its investment, based on the most recent financing at the same price, is equal to its carrying value.



| | 15. | Promissory notes receivable
| | --- | ---------------------------



|                                                            |  |  | May 31,  2018 |   |  | Additions |   |         | Disposal/ Impairment |  |   | May 31,  2019 |  
|----------------------------------------------------------- |  |  | ------------- | - |  | --------- | - | ------- | -------------------- |  | - | ------------- | -
|September 6, 2018 - $59,098 - 12%, due September 6, 2023    |  |  | $             | — |  |           | $ | 59,098  |                      |  | $ | (59,098       | )
|September 24, 2018 - $55,000 - 12%, due September 24, 2023  |  |  |               | — |  |           |   | 55,000  |                      |  |   | (55,000       | )
|May 15, 2019 - $39,000 - 3%, due October 15, 2019           |  |  |               | — |  |           |   | 39,000  |                      |  |   | —             |  
|October 11, 2018 - GBP £4,600 - 3.25%, due October 11, 2021 |  |  |               | — |  |           |   | 7,952   |                      |  |   | (7,952        | )
|October 31, 2018 - $6,609 - 12%, due October 31, 2023       |  |  |               | — |  |           |   | 6,609   |                      |  |   | (6,609        | )
|November 1, 2018 - $200 - interest free, due May 1, 2020    |  |  |               | — |  |           |   | 200     |                      |  |   | —             |  
|                                                            |  |  | $             | — |  |           | $ | 167,859 |                      |  | $ | (128,659      | )



During the year, the Company impaired the promissory
note receivable of £4,600 GBP to $nil (Note 11).



31







Aphria Inc.

Notes to the Consolidated Financial Statements

For the years ended May 31, 2019 and May 31, 2018

(In thousands of Canadian dollars, except share and per share
amounts)








| | 16. | Income taxes and deferred income taxes
| | --- | --------------------------------------



A reconciliation of income taxes
at the statutory rate with the reported taxes is as follows:



|                                                                                         |  | For the year ended  May 31, |        
|---------------------------------------------------------------------------------------- |  | --------------------------- | -------
|                                                                                         |  | 2019                        |        
|Income (loss) before income taxes (recovery)                                             |  | $                           | (15,645
|Statutory rate                                                                           |  |                             | 26.5   
|                                                                                         |  |                             |        
|Expected income tax expense (recovery) at combined basic federal and provincial tax rate |  |                             | (4,146 
|                                                                                         |  |                             |        
|Effect on income taxes of:                                                               |  |                             |        
|Foreign tax differential                                                                 |  |                             | (539   
|Permanent differences                                                                    |  |                             | 1,137  
|Non-deductible share-based compensation and other expenses                               |  |                             | 20,161 
|Non-taxable portion of losses (gains)                                                    |  |                             | (15,504
|Other                                                                                    |  |                             | (648   
|Tax assets not recognized                                                                |  |                             | 393    
|                                                                                         |  | $                           | 854    
|                                                                                         |  |                             |        
|Income tax expense (recovery) is comprised of:                                           |  |                             |        
|Current                                                                                  |  | $                           | 4,944  
|Future                                                                                   |  |                             | (4,090 
|                                                                                         |  | $                           | 854    



The following table summarizes
the components of deferred tax:



|                                                       |  | May 31,  2019 |          |   | May 31,  2018 |  
|------------------------------------------------------ |  | ------------- | -------- | - | ------------- | -
|Deferred tax assets                                    |  |               |          |   |               |  
|Non-capital loss carry forward                         |  | $             | 20,133   |   |               | $
|Capital loss carry forward                             |  |               | —        |   |               |  
|Share issuance and financing fees                      |  |               | 9,689    |   |               |  
|Unrealized loss                                        |  |               | —        |   |               |  
|Other                                                  |  |               | 1,102    |   |               |  
|Deferred tax liabilities                               |  |               |          |   |               |  
|Net book value in excess of undepreciated capital cost |  |               | (2,751   | ) |               |  
|Intangible assets in excess of tax costs               |  |               | (101,271 | ) |               |  
|Unrealized gain                                        |  |               | (6,534   | ) |               |  
|Biological assets and inventory in excess of tax costs |  |               | (8,001   | ) |               |  
|Net deferred tax assets (liabilities)                  |  | $             | (87,633  | ) |               | $



| | 17. | Bank indebtedness
| | --- | -----------------



The Company secured an operating
line of credit in the amount of $1,000 which bears interest at the lender’s prime rate plus 75 basis points. As of the May
31, 2019, the Company has not drawn on the line of credit. The operating line of credit is secured by a first charge on the property
at 265 Talbot St. West, Leamington, Ontario and a first ranking position on a general security agreement.



32







Aphria Inc.

Notes to the Consolidated Financial Statements

For the years ended May 31, 2019 and May 31, 2018

(In thousands of Canadian dollars, except share and per share
amounts)








| | 18. | Promissory note payable
| | --- | -----------------------



During the prior year, the
Company entered into a promissory note with Althea for $700 AUD ($686), as part of the purchase of Althea common shares (Note 14),
the note is due and payable on December 31, 2020. The Company reached an agreement with Althea where the promissory note amount
will be used by Althea to purchase products from the Company in connection with a supply agreement entered into in September 2017.



|                                                                                                                                      |  | May 31,  2019 |      |   | May 31,  2018 |  
|------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ---- | - | ------------- | -
|Note payable to Althea Company Pty Ltd - $700 AUD ($686), opening balance, non-interest bearing, due and payable on December 31, 2020 |  | $             | 610  |   |               | $
|Reduction of Promissory note payable balance with respect to products provided                                                        |  |               | (581 | ) |               |  
|Foreign exchange (gain) loss                                                                                                          |  |               | (29  | ) |               |  
|Balance remaining                                                                                                                     |  |               | —    |   |               |  
|Deduct - principal portion included in current liabilities                                                                            |  |               | —    |   |               |  
|                                                                                                                                      |  | $             | —    |   |               | $



| | 19. | Long-term debt
| | --- | --------------



|                                                                                                                                                                                               |  | May 31,  2019 |        |   | May 31,  2018 |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ------ | - | ------------- | -
|Term loan - $25,000 - Canadian Five Year Bond interest rate plus 2.73% with a minimum 4.50%, 5 year term, with a 15-year amortization, repayable in blended monthly payments, due in July 2023 |  | $             | 24,022 |   |               | $
|Term loan - $25,000 - 3.95%, compounded monthly, 5 year term with a 15-year amortization, repayable in equal monthly instalments of $188 including interest, due in April 2022                 |  |               | 23,352 |   |               |  
|Term loan - $1,250 - 3.99%, 5-year term, with a 10-year amortization, repayable in equal monthly instalments of $13 including interest, due in July 2021                                       |  |               | 946    |   |               |  
|Mortgage payable - $3,750 - 3.95%, 5-year term, with a 20-year amortization, repayable in equal monthly instalments of $23 including interest, due in July 2021                                |  |               | 3,380  |   |               |  
|Vendor take-back mortgage owed to related party - $2,850 - 6.75%, 5-year term, repayable in equal monthly instalments of $56 including interest, due in June 2021                              |  |               | 1,305  |   |               |  
|Term loan - €5,000 - Euro Interbank Offered Rate + 1.79%, 5-year term, repayable in quarterly instalments of €250 plus interest, due in December 2023                                          |  |               | 7,169  |   |               |  
|Term loan - €5,000 - Euro Interbank Offered Rate + 2.68%, 5-year term, repayable in quarterly instalments of €250 plus interest, due in December 2023                                          |  |               | 7,169  |   |               |  
|                                                                                                                                                                                               |  |               | 67,343 |   |               |  
|Deduct   - unamortized financing fees                                                                                                                                                          |  |               | (116   | ) |               |  
|- principal portion included in current liabilities                                                                                                                                            |  |               | (6,332 | ) |               |  
|                                                                                                                                                                                               |  | $             | 60,895 |   |               | $



Total long-term debt repayments
are as follows:





|Next 12 months        |  |  | $ | 6,332  | 
|--------------------- |  |  | - | ------ | 
|2 years               |  |  |   | 6,499  | 
|3 years               |  |  |   | 6,039  | 
|4 years               |  |  |   | 6,119  | 
|5 years               |  |  |   | 6,259  | 
|Thereafter            |  |  |   | 36,095 | 
|Balance of obligation |  |  | $ | 67,343 | 



33







Aphria Inc.

Notes to the Consolidated Financial Statements

For the years ended May 31, 2019 and May 31, 2018

(In thousands of Canadian dollars, except share and per share
amounts)








The term loan of $24,022 was
entered into on July 27, 2018 and is secured by a first charge on the property at 223, 231, 239, 265, 269, 271 and 275 Talbot Street
West, Leamington Ontario, a first position on a general security agreement, and an assignment of fire insurance to the lender.
Principal payments started on the term loan in August 2018. The effective interest rate during the year was 4.68%.



The term loan of $23,352 was
entered into on May 9, 2017 and is secured by a first charge on the property at 265 Talbot Street West, Leamington Ontario, a first
position on a general security agreement, and an assignment of fire insurance to the lender. Principal payments started on the
term loan in March 2018.



The term loan of $946 and mortgage
payable of $3,380 were entered into on July 22, 2016 and are secured by a first charge on the property at 265 Talbot Street West,
Leamington, Ontario and a first position on a general security agreement.



The vendor take-back mortgage
payable of $1,305, owed to a former director of the Company, was entered into on June 30, 2016 in conjunction with the acquisition
of the property at 265 Talbot Street West. The mortgage is secured by a second charge on the property at 265 Talbot Street West,
Leamington, Ontario.



The Company acquired term loans
of $3,000 and $1,201, and a mortgage payable of $1,713 as part of the acquisition of Broken Coast (Note 11). These loans and mortgages
were paid in full during the prior year.



The Company acquired term loans
initially up to €17,000 ($25,460 CAD) as part of the acquisition of CC Pharma (Note 11). As at May 31, 2019, the Company had
amounts outstanding of €9,500 ($14,338 CAD). These term loans are secured against the distribution inventory held by CC Pharma.



| | 20. | Convertible debentures
| | --- | ----------------------



|                        |  | May 31,  2019 |         |   | May 31,  2018 |  
|----------------------- |  | ------------- | ------- | - | ------------- | -
|Opening balance         |  | $             | —       |   |               | $
|Principal amount issued |  |               | 469,805 |   |               |  
|Fair value adjustment   |  |               | (48,439 | ) |               |  
|Closing balance         |  | $             | 421,366 |   |               | $



The convertible debentures
were entered into in April 2019, the unsecured convertible debentures in the principal amount of $350,000 USD are due in five years
from issuance (the “Notes”). The Notes bear interest at a rate of 5.25% per annum, payable semi-annually in arrears
on June 1 and December 1 of each year, beginning on December 1, 2019. The Notes are an unsecured obligation and ranked senior in
right of payment to all indebtedness that is expressly subordinated in right of payment to the Notes. The Notes will rank equal
in right of payment with all liabilities that are not subordinated. The Notes are effectively junior to any secured indebtedness
to the extent of the value of the assets securing such indebtedness.



Holders of the Notes may convert
all or any portion of their Notes, in multiples of $1 principal amount, at their option at any time between December 1, 2023 to
the maturity date. The initial conversion rate for the Notes will be 106.5644 common shares of Aphria per $1 USD principal amount
of Notes, which will be settled in cash, common shares of Aphria or a combination thereof, at Aphria’s election. This is
equivalent to an initial conversion price of approximately $9.38 per common share, subject to adjustments in certain events. In
addition, holders of the Notes may convert all or any portion of their Notes, in multiples of $1 principal amount, at their option
at any time preceding December 1, 2023, if:

(a) the last reported
sales price of the common shares for at least 20 trading days during a period of 30 consecutive trading days immediately
preceding fiscal quarter is greater than or equal to 130% of the conversion price on each applicable trading day;

(b) during the five business
day period after any five consecutive trading day period (the “measurement period”) in which the trading price per
$1 principal amount of the Notes for each trading day of the measurement period is less than 98% of the product of the last reported
sale price of the Company’s common shares and the conversion rate on each such trading day;

(c) the Company call any or all
of the Notes for redemption or;

(d) upon occurrence of specified
corporate event.



34







Aphria Inc.

Notes to the Consolidated Financial Statements

For the years ended May 31, 2019 and May 31, 2018

(In thousands of Canadian dollars, except share and per share
amounts)








The Company may not redeem
the Notes prior to June 6, 2022, except upon the occurrence of certain changes in tax laws. On or after June 6, 2022, the Company
may redeem for cash all or part of the Notes, at its option, if the last reported sale price of the Company’s common shares
has been at least 130% of the conversion price then in effect for at least 20 trading days during any 30 consecutive trading day
period ending on and including trading day immediately preceding the date won which the Company provide notice of redemption. The
redemption of Notes will be equal to 100% of the principal amount plus accrued and unpaid interest to, but excluding, the redemption
date.



| | 21. | Share capital
| | --- | -------------



The Company is authorized to issue
an unlimited number of common shares. As at May 31, 2019, the Company has issued 250,989,120 shares, of which 600,000 shares were
held and subject to various escrow agreements.



|Common Shares                                     |  | Number of  shares |             |  | Amount |  
|------------------------------------------------- |  | ----------------- | ----------- |  | ------ | -
|Balance at May 31, 2018                           |  |                   | 210,169,924 |  |        | $
|June 2018 bought deal, net of cash issuance costs |  |                   | 21,835,510  |  |        |  
|Broken Coast acquisition                          |  |                   | 19,963      |  |        |  
|LATAM acquisition                                 |  |                   | 15,678,310  |  |        |  
|Warrants exercised                                |  |                   | 550,335     |  |        |  
|Options exercised                                 |  |                   | 2,632,078   |  |        |  
|DSUs exercised                                    |  |                   | 103,000     |  |        |  
|Income tax recovery on share issuance costs       |  |                   | —           |  |        |  
|                                                  |  |                   | 250,989,120 |  |        | $



| | a) | Throughout the year, 550,335 warrants with exercise prices ranging from $1.50 to $20.30 were exercised
for a value of $1,762 including any cash consideration.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b) | Throughout the year, 2,632,078 shares were issued from the exercise of stock options with exercise
prices ranging from $0.60 to $20.19 for a value of $15,029, including any cash consideration.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c) | Throughout the year, 103,000 shares were issued in accordance with the deferred share unit plan
to former directors of the Company.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------



| | d) | In June 2018, the Company closed a bought deal financing in which it issued 21,835,510 common shares
at a purchase price of $11.85 per share for $245,925 net of cash issuance costs.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | e) | During the year, the Company agreed to terms to acquire the remaining 0.14% of Broken Coast (Note
11) and accordingly, the Company agreed to issue 19,963 shares.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



| | f) | In September 2018, the Company completed the acquisition of LATAM (Note 11) in which it issued
15,678,310 common shares at a purchase price of $17.47 per share for $273,900.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | g) | During the year, the Company recognized a $3,426 income tax recovery on share issuance costs.
| | -- | ---------------------------------------------------------------------------------------------



| | 22. | Warrants
| | --- | --------



The warrant details of the Company
are as follows:



|Type of warrant |  | Expiry date        |  | Number of 
warrants |           |  | Weighted 
average price |   |       | Amount | 
|--------------- |  | ------------------ |  | ------------------- | --------- |  | ----------------------- | - | ----- | ------ | 
|Warrant         |  | December 2, 2019   |  |                     | 798,997   |  |                         |   | 1.50  |        | 
|Warrant         |  | September 26, 2021 |  |                     | 200,000   |  |                         |   | 3.14  |        | 
|Nuuvera warrant |  | February 14, 2020  |  |                     | 1,293,803 |  |                         |   | 20.30 |        | 
|                |  |                    |  |                     | 2,292,800 |  |                         | $ | 12.25 |        | 



35







Aphria Inc.

Notes to the Consolidated Financial Statements

For the years ended May 31, 2019 and May 31, 2018

(In thousands of Canadian dollars, except share and per share
amounts)








|                                   |  | May
31, 2019               |           |   | May 31, 2018               |  
|---------------------------------- |  | -------------------------- | --------- | - | -------------------------- | -
|                                   |  | Number
    of
    warrants |           |   | Weighted
    average price |  
|Outstanding, beginning of the year |  |                            | 2,843,138 |   |                            | $
|Issued during the year             |  |                            | —         |   |                            |  
|Exercised during the year          |  |                            | (550,335  | ) |                            |  
|Cancelled during the year          |  |                            | (3        | ) |                            |  
|Outstanding,
    end of the year   |  |                            | 2,292,800 |   |                            | $



In March 2018, the Company
completed the acquisition of Nuuvera (Note 11) in which it reserved 1,345,866 common shares for issuance to the holders of certain
common share purchase warrants of Nuuvera (“Nuuvera Warrants”). There are 3,795,450 Nuuvera Warrants, exercisable for
Nuuvera shares at an exercise price of $7.20 per share, the Nuuvera shares would convert to 0.3546 Aphria shares and $0.62 cash.



| | 23. | Stock options
| | --- | -------------



The Company adopted a stock
option plan under which it is authorized to grant options to officers, directors, employees and consultants enabling them to acquire
common shares of the Company. The maximum number of common shares reserved for issuance of stock options that can be granted under
the plan is 10% of the issued and outstanding common shares of the Company. The options granted can be exercised for up to a maximum
of 10 years and vest as determined by the Board of Directors. The exercise price of each option can not be less than the market
price of the common shares on the date of grant.



The Company recognized a share-based
compensation expense of $24,078 during the year ended May 31, 2019 (2018 - $15,780). The total fair value of options granted during
the year was $21,952 (2018 - $28,912).



|                                   |  | May 31, 2019          |            |   | May 31, 2018               |  
|---------------------------------- |  | --------------------- | ---------- | - | -------------------------- | -
|                                   |  | Number of
    options |            |   | Weighted
    average price |  
|Outstanding, beginning of the year |  |                       | 8,956,195  |   |                            | $
|Exercised during the year          |  |                       | (3,164,174 | ) |                            |  
|Issued during the year             |  |                       | 3,005,000  |   |                            |  
|Cancelled during the year          |  |                       | (982,025   | ) |                            |  
|Outstanding, end of the year       |  |                       | 7,814,996  |   |                            | $
|Exercisable, end of the year       |  |                       | 4,474,966  |   |                            | $



In June 2018, the Company issued
250,000 stock options at an exercise price of $11.78 per share, exercisable for 3 years to officers of the Company. 83,331 vested
immediately and the remainder vest over 2 years. As at May 31, 2019 133,335 of these options have been cancelled.



In July 2018, the Company issued
820,000 stock options at an exercise price between $11.51 and $11.85 per share, exercisable for 5 years to employees of the Company.
50,000 vested immediately and the remainder vest over 3 years. As at May 31, 2019 50,000 of these options have been cancelled.



In September 2018, the Company
issued 250,000 stock options at an exercise price of $19.38, exercisable for 5 years to employees of the Company. Nil vested immediately
and the remainder vest over 3 years. As at May 31, 2019 33,334 of these options have been cancelled.



In October 2018, the Company issued 80,000 stock
options at an exercise price of $19.70, exercisable for 5 years to employees of the Company. Nil vested immediately and the remainder
vest over 3 years.



In February 2019, the Company issued 1,525,000 stock
options at an exercise price between $9.92 and $13.31, exercisable for 3 to 5 years to officers and employees of the Company. 1,100,000
vested immediately and the remainder vest over 3 years. As at May 31, 2019 30,000 of these options have been cancelled.



36







Aphria Inc.

Notes to the Consolidated Financial Statements

For the years ended May 31, 2019 and May 31, 2018

(In thousands of Canadian dollars, except share and per share
amounts)








In April 2019, the Company issued 80,000 stock options
at an exercise price of $11.45, exercisable for 5 years to employees of the Company. Nil vested immediately and the remainder
vest over 3 years.



The outstanding option details
of the Company are as follows:



|Expiry date                  |  | Weighted average exercise price |       |  | Number of options |  |           | Vested and exercisable | 
|---------------------------- |  | ------------------------------- | ----- |  | ----------------- |  | --------- | ---------------------- | 
|September 2019               |  | $                               | 3.00  |  |                   |  | 42,365    |                        | 
|November 2019                |  | $                               | 3.90  |  |                   |  | 591,318   |                        | 
|December 2019                |  | $                               | 5.25  |  |                   |  | 400,000   |                        | 
|January 2020                 |  | $                               | 5.72  |  |                   |  | 1,834     |                        | 
|April 2020                   |  | $                               | 7.92  |  |                   |  | 38,334    |                        | 
|June 2020                    |  | $                               | 5.44  |  |                   |  | 133,334   |                        | 
|July 2020                    |  | $                               | 5.24  |  |                   |  | 538,660   |                        | 
|September 2020               |  | $                               | 0.85  |  |                   |  | 185,000   |                        | 
|October 2020                 |  | $                               | 6.90  |  |                   |  | 156,667   |                        | 
|November 2020                |  | $                               | 9.05  |  |                   |  | 136,667   |                        | 
|November 2020                |  | $                               | 9.28  |  |                   |  | 50,000    |                        | 
|December 2020                |  | $                               | 14.06 |  |                   |  | 100,000   |                        | 
|January 2021                 |  | $                               | 21.70 |  |                   |  | 10,000    |                        | 
|January 2021                 |  | $                               | 22.89 |  |                   |  | 143,333   |                        | 
|January 2021                 |  | $                               | 22.08 |  |                   |  | 50,000    |                        | 
|March 2021                   |  | $                               | 14.39 |  |                   |  | 20,000    |                        | 
|March 2021                   |  | $                               | 9.98  |  |                   |  | 200,000   |                        | 
|March 2021                   |  | $                               | 12.39 |  |                   |  | 50,000    |                        | 
|April 2021                   |  | $                               | 11.40 |  |                   |  | 380,000   |                        | 
|April 2021                   |  | $                               | 9.92  |  |                   |  | 400,000   |                        | 
|April 2021                   |  | $                               | 11.45 |  |                   |  | 66,667    |                        | 
|May 2021                     |  | $                               | 20.19 |  |                   |  | 908,500   |                        | 
|June 2021                    |  | $                               | 1.40  |  |                   |  | 168,335   |                        | 
|June 2021                    |  | $                               | 11.78 |  |                   |  | 116,665   |                        | 
|July 2021                    |  | $                               | 11.85 |  |                   |  | 150,000   |                        | 
|August 2021                  |  | $                               | 1.64  |  |                   |  | 65,000    |                        | 
|September 2021               |  | $                               | 19.38 |  |                   |  | 66,666    |                        | 
|October 2022                 |  | $                               | 6.90  |  |                   |  | 74,000    |                        | 
|July 2023                    |  | $                               | 11.51 |  |                   |  | 80,000    |                        | 
|July 2023                    |  | $                               | 11.85 |  |                   |  | 528,000   |                        | 
|September 2023               |  | $                               | 19.38 |  |                   |  | 150,000   |                        | 
|October 2023                 |  | $                               | 19.70 |  |                   |  | 80,000    |                        | 
|February 2024                |  | $                               | 12.77 |  |                   |  | 395,000   |                        | 
|February 2024                |  | $                               | 13.31 |  |                   |  | 1,000,000 |                        | 
|April 2024                   |  | $                               | 11.45 |  |                   |  | 80,000    |                        | 
|July 2027                    |  | $                               | 2.52  |  |                   |  | 59,689    |                        | 
|November 2027                |  | $                               | 6.29  |  |                   |  | 39,792    |                        | 
|March 2028                   |  | $                               | 12.29 |  |                   |  | 119,378   |                        | 
|March 2028                   |  | $                               | 14.38 |  |                   |  | 39,792    |                        | 
|Outstanding, end of the year |  | $                               | 11.05 |  |                   |  | 7,814,996 |                        | 



The Company used the Black-Scholes
option pricing model to determine the fair value of options granted using the following assumptions: risk-free rate of 2.00-2.08%
on the date of grant; expected life of 3 – 5 years; volatility of 70% based on comparable companies; forfeiture rate of 0%;
dividend yield of nil; and, the exercise price of the respective option.



37







Aphria Inc.

Notes to the Consolidated Financial Statements

For the years ended May 31, 2019 and May 31, 2018

(In thousands of Canadian dollars, except share and per share
amounts)








| | 24. | Non-controlling interest
| | --- | ------------------------



The following tables summarise
the information relating to the Company’s subsidiaries, 1974568 Ontario Ltd. (“Aphria Diamond”), CannInvest Africa
Ltd., Verve Dynamics Incorporated (Pty) Ltd. (“Verve Dynamics”), Nuuvera Malta Ltd., Marigold, and ColCanna S.A.S.
before intercompany eliminations.



|                           |  | Aphria
    Diamond |          |   | CannInvest
    Africa Ltd. |   |     | Verve
    Dynamics |  |   | Nuuvera
    Malta Ltd. |   |  | Marigold |        |   | ColCanna
    S.A.S. |   |        | May
    31,  2019 | 
|-------------------------- |  | ------------------ | -------- | - | -------------------------- | - | --- | ------------------ |  | - | ---------------------- | - |  | -------- | ------ | - | ------------------- | - | ------ | ----------------- | 
|Current assets             |  | $                  | 2,598    |   |                            | $ | 2   |                    |  | $ | 185                    |   |  | $        | 1,813  |   |                     | $ | 441    |                   | 
|Non-current assets         |  |                    | 171,314  |   |                            |   | —   |                    |  | $ | 14,635                 |   |  | $        | 741    |   |                     | $ | 7,872  |                   | 
|Current liabilities        |  |                    | (5,743   | ) |                            |   | (3  | )                  |  | $ | (2,155                 | ) |  |          | (178   | ) |                     | $ | (16    | )                 | 
|Non-current liabilities    |  |                    | (150,892 | ) |                            |   | (9  | )                  |  | $ | —                      |   |  |          | (3,196 | ) |                     | $ | (1,654 | )                 | 
|Net assets                 |  |                    | 17,277   |   |                            |   | (10 | )                  |  |   | 12,665                 |   |  |          | (820   | ) |                     |   | 6,643  |                   | 
|                           |  |                    |          |   |                            |   |     |                    |  |   |                        |   |  |          |        |   |                     |   |        |                   | 
|Non-controlling interest % |  |                    | 49       | % |                            |   | 50  | %                  |  |   | 70                     | % |  |          | 10     | % |                     |   | 5      | %                 | 
|Non-controlling interest   |  | $                  | 8,466    |   |                            | $ | (5  | )                  |  | $ | 8,866                  |   |  | $        | (82    | ) |                     | $ | 332    |                   | 



|                                |  | Aphria
    Diamond |        |   | CannInvest
    Africa Ltd. |   |     | Verve
    Dynamics |  |   | Nuuvera
    Malta Ltd. |   |  | Marigold |       |   | ColCanna
    S.A.S. |   |      | May 31,  2019 | 
|------------------------------- |  | ------------------ | ------ | - | -------------------------- | - | --- | ------------------ |  | - | ---------------------- | - |  | -------- | ----- | - | ------------------- | - | ---- | ------------- | 
|Revenue                         |  | $                  | —      |   |                            | $ | —   |                    |  | $ | —                      |   |  | $        | 230   |   |                     | $ | —    |               | 
|Total expenses                  |  |                    | 2,274  |   |                            | $ | 10  |                    |  | $ | 839                    |   |  | $        | 1,046 |   |                     | $ | 757  |               | 
|Net loss and comprehensive loss |  |                    | (2,274 | ) |                            |   | (10 | )                  |  |   | (839                   | ) |  |          | (816  | ) |                     |   | (757 | )             | 
|                                |  |                    |        |   |                            |   |     |                    |  |   |                        |   |  |          |       |   |                     |   |      |               | 
|Non-controlling interest %      |  |                    | 49     | % |                            |   | 50  | %                  |  |   | 70                     | % |  |          | 10    | % |                     |   | 5    | %             | 
|                                |  | $                  | (1,114 | ) |                            | $ | (5  | )                  |  | $ | (587                   | ) |  | $        | (82   | ) |                     | $ | (38  | )             | 



|                           |  | Aphria
    Diamond |         |   | CannInvest
    Africa Ltd. |   |   | Verve
    Dynamics |  |   | Nuuvera
    Malta Ltd. |   |  | Marigold |   |   | ColCanna
    S.A.S. |   |   | May 31,  2018 | 
|-------------------------- |  | ------------------ | ------- | - | -------------------------- | - | - | ------------------ |  | - | ---------------------- | - |  | -------- | - | - | ------------------- | - | - | ------------- | 
|Current assets             |  | $                  | 7,313   |   |                            | $ | — |                    |  | $ | —                      |   |  | $        | — |   |                     | $ | — |               | 
|Non-current assets         |  |                    | 83,207  |   |                            |   | — |                    |  |   | —                      |   |  |          | — |   |                     |   | — |               | 
|Current liabilities        |  |                    | (10,085 | ) |                            |   | — |                    |  |   | —                      |   |  |          | — |   |                     |   | — |               | 
|Non-current liabilities    |  |                    | (60,884 | ) |                            |   | — |                    |  |   | —                      |   |  |          | — |   |                     |   | — |               | 
|Net assets                 |  |                    | 19,551  |   |                            |   | — |                    |  |   | —                      |   |  |          | — |   |                     |   | — |               | 
|                           |  |                    |         |   |                            |   |   |                    |  |   |                        |   |  |          |   |   |                     |   |   |               | 
|Non-controlling interest % |  |                    | 49      | % |                            |   | 0 | %                  |  |   | 0                      | % |  |          | 0 | % |                     |   | 0 | %             | 
|Non-controlling interest   |  | $                  | 9,580   |   |                            | $ | — |                    |  | $ | —                      |   |  | $        | — |   |                     | $ | — |               | 



25.General and administrative expenses


|                         |  | For the year ended  May 31, |       
|------------------------ |  | --------------------------- | ------
|                         |  | 2019                        |       
|Executive compensation   |  | $                           | 5,821 
|Consulting fees          |  |                             | 6,517 
|Office and general       |  |                             | 16,511
|Professional fees        |  |                             | 11,790
|Salaries and wages       |  |                             | 19,627
|Insurance                |  |                             | 5,356 
|Travel and accommodation |  |                             | 3,116 
|Rent                     |  |                             | 1,014 
|                         |  | $                           | 69,752



38







Aphria Inc.

Notes to the Consolidated Financial Statements

For the years ended May 31, 2019 and May 31, 2018

(In thousands of Canadian dollars, except share and per share
amounts)








| | 26. | Share-based compensation
| | --- | ------------------------



Share-based compensation is
comprised of:



|                                                                                      |  | For the year ended  May 31, |       
|------------------------------------------------------------------------------------- |  | --------------------------- | ------
|                                                                                      |  | 2019                        |       
|Amounts charged to share-based payment reserve in respect of
share-based compensation |  | $                           | 24,078
|Share-based compensation accrued                                                      |  |                             | 187   
|Share-based compensation issued on behalf of a related party                          |  |                             | —     
|Shares for services compensation                                                      |  |                             | —     
|Deferred share units expensed in the period                                           |  |                             | 588   
|Restricted share units expensed in the period                                         |  |                             | 1,227 
|                                                                                      |  | $                           | 26,080



During the year, the Company issued 96,833 deferred
share units to certain directors of the Company, under the terms of the Company’s Omnibus Long-Term Incentive Plan. In May
2018, directors and officers of the Company forfeited 312,000 deferred share units which were granted during the prior year.



During the year, the Company issued 197,600 restricted
share units to employees, officers and directors.



As at May 31, 2019, the Company had 136,958 deferred
share units and 197,600 restricted share units outstanding. As at May 31, 2019 114,550 restricted share units were vested.



| | 27. | Non-operating income (loss)
| | --- | ---------------------------



Non-operating income (loss)
is comprised of:



|                                                 |  | For the year ended  May 31, |        
|------------------------------------------------ |  | --------------------------- | -------
|                                                 |  | 2019                        |        
|Non-operating income:                            |  |                             |        
|Consulting revenue                               |  | $                           | —      
|Foreign exchange gain                            |  |                             | 915    
|Loss on marketable securities                    |  |                             | (178   
|Gain (loss) on sale of capital assets            |  |                             | 55     
|Gain on dilution of ownership in equity investee |  |                             | 2,210  
|Loss from equity investees                       |  |                             | (1,123 
|Gain on sale of equity investee                  |  |                             | 57,351 
|Deferred gain on sale of intellectual property   |  |                             | 340    
|Interest income                                  |  |                             | 14,350 
|Interest expense                                 |  |                             | (7,775 
|Unrealized (loss) gain on convertible notes      |  |                             | (3,399 
|Gain on long-term investments                    |  |                             | 19,651 
|Unrealized gain on convertible debentures        |  |                             | 48,439 
|Unrealized loss on financial liabilities         |  |                             | (1,326 
|                                                 |  | $                           | 129,510



39







Aphria Inc.

Notes to the Consolidated Financial Statements

For the years ended May 31, 2019 and May 31, 2018

(In thousands of Canadian dollars, except share and per share
amounts)








| | 28. | Gain on long-term investments
| | --- | -----------------------------



Gain on long-term investments
for the year ended May 31, 2019 is comprised of:



|Investment                                |  | Proceeds |         |  | Opening fair
value / cost |   |         | Gain (loss) on
disposal |  |   | Change in fair
value |   |  | Total |        
|----------------------------------------- |  | -------- | ------- |  | ------------------------- | - | ------- | ----------------------- |  | - | -------------------- | - |  | ----- | -------
|Level 1 on fair value hierarchy           |  |          |         |  |                           |   |         |                         |  |   |                      |   |  |       |        
|CannaRoyalty Corp. - shares               |  | $        | 4,111   |  |                           | $ | 3,765   |                         |  | $ | 346                  |   |  | $     | —      
|MassRoots, Inc. - shares                  |  |          | 1       |  |                           |   | 164     |                         |  |   | (163                 | ) |  |       | —      
|North Bud Farms Inc. - shares             |  |          | 373     |  |                           |   | 253     |                         |  |   | 120                  |   |  |       | —      
|Hiku Brands Company Ltd. - shares         |  |          | 30,542  |  |                           |   | 13,558  |                         |  |   | 16,984               |   |  |       | —      
|Scythian Biosciences Corp. - shares       |  |          | 6,609   |  |                           |   | 8,901   |                         |  |   | (2,292               | ) |  |       | —      
|Level 2 on fair value hierarchy           |  |          |         |  |                           |   |         |                         |  |   |                      |   |  |       |        
|Hiku Brands Company Ltd. - warrants       |  |          | 17,611  |  |                           |   | 18,693  |                         |  |   | (1,082               | ) |  |       | —      
|Scythian Biosciences Corp. - warrants     |  |          | —       |  |                           |   | 661     |                         |  |   | (661                 | ) |  |       | —      
|Level 3 on fair value hierarchy           |  |          |         |  |                           |   |         |                         |  |   |                      |   |  |       |        
|Copperstate Farms, LLC - shares           |  |          | 5,300   |  |                           |   | 5,300   |                         |  |   | —                    |   |  |       | —      
|Copperstate Farms Investors, LLC - shares |  |          | 14,700  |  |                           |   | 14,700  |                         |  |   | —                    |   |  |       | —      
|US legalization options                   |  |          | 136,448 |  |                           |   | 116,809 |                         |  |   | 19,639               |   |  |       | —      
|Green Acre Capital Fund II                |  |          | 500     |  |                           |   | 3,000   |                         |  |   | (2,500               | ) |  |       | —      
|Long-term investments (Note 14)           |  |          | —       |  |                           |   | —       |                         |  |   | —                    |   |  |       | (10,740
|Year ended May 31, 2019                   |  | $        | 216,195 |  |                           | $ | 185,804 |                         |  | $ | 30,391               |   |  | $     | (10,740



| | 29. | Earnings (loss) per share
| | --- | -------------------------



The calculation of earnings
(loss) per share for the year ended May 31, 2019 was based on the net income (loss) attributable to common shareholders of $(16,499)
(2018 – $29,448) and a weighted average number of common shares outstanding of 242,763,558 (2018 – 161,026,463) calculated
as follows:



|                                                            |  | 2019 |             |   | 2018 |  
|----------------------------------------------------------- |  | ---- | ----------- | - | ---- | -
|Basic earnings (loss) per share:                            |  |      |             |   |      |  
|Net income (loss) for the year                              |  | $    | (16,499     | ) |      | $
|Average number of common shares outstanding during the year |  |      | 242,763,558 |   |      |  
|Earnings (loss) per share - basic                           |  | $    | (0.07       | ) |      | $



|                                                            |  | 2019 |             |   | 2018 |  
|----------------------------------------------------------- |  | ---- | ----------- | - | ---- | -
|Diluted earnings per share:                                 |  |      |             |   |      |  
|Net income (loss) for the year                              |  | $    | (16,499     | ) |      | $
|                                                            |  |      |             |   |      |  
|Average number of common shares outstanding during the year |  |      | 242,763,558 |   |      |  
|"In the money" warrants outstanding during the year         |  |      | —           |   |      |  
|"In the money" options outstanding during the year          |  |      | —           |   |      |  
|                                                            |  |      | 242,763,558 |   |      |  
|Earnings (loss) per share - diluted                         |  | $    | (0.07       | ) |      | $



40







Aphria Inc.

Notes to the Consolidated Financial Statements

For the years ended May 31, 2019 and May 31, 2018

(In thousands of Canadian dollars, except share and per share
amounts)








| | 30. | Change in non-cash working capital
| | --- | ----------------------------------



Change in non-cash working capital
is comprised of:



|                                                                       |  | For the year ended  May 31, |        
|---------------------------------------------------------------------- |  | --------------------------- | -------
|                                                                       |  | 2019                        |        
|Decrease (increase) in accounts receivable                             |  | $                           | 12,458 
|Decrease (increase) in other current assets                            |  |                             | 5,715  
|Decrease (increase) in inventory, net of fair value adjustment         |  |                             | (22,151
|Decrease (increase) in biological assets, net of fair value adjustment |  |                             | (17,322
|Increase (decrease) in accounts payable and accrued liabilities        |  |                             | (10,998
|Increase (decrease) in income taxes payable                            |  |                             | (882   
|Increase (decrease) in deferred revenue                                |  |                             | 11,689 
|                                                                       |  | $                           | (21,491



| | 31. | Financial risk management and financial instruments
| | --- | ---------------------------------------------------



Financial instruments



The Company has classified its
cash and cash equivalents, marketable securities, long-term investments, and convertible notes receivable as FVTPL, accounts receivable,
prepaids and other current assets and promissory notes receivable as loans and receivables, and accounts payable and accrued liabilities,
promissory notes payable, long-term debt and convertible debentures as FVTPL or amortized cost.



The carrying values of accounts
receivable, prepaids and other current assets, accounts payable and accrued liabilities, and promissory notes payable approximate
their fair values due to their short periods to maturity.



The Company’s long-term
debt of $28,982 is subject to fixed interest rates. The Company’s long-term debt is valued based on discounting the future
cash outflows associated with the long-term debt. The discount rate is based on the incremental premium above market rates for
Government of Canada securities of similar duration. In each period thereafter, the incremental premium is held constant while
the Government of Canada security is based on the then current market value to derive the discount rate. The fair value of the
Company’s long-term debt in repayment as at May 31, 2019 was $28,377.



Fair value hierarchy



Financial instruments recorded
at fair value are classified using a fair value hierarchy that reflects the significance of inputs used in making the measurements.
Cash and cash equivalents are Level 1. The hierarchy is summarized as follows:



|Level 1 | quoted prices (unadjusted) in active markets for identical assets and liabilities                                                              
|------- | -----------------------------------------------------------------------------------------------------------------------------------------------
|Level 2 | inputs that are observable for the asset or liability, either directly (prices) or indirectly (derived from prices) from observable market data
|Level 3 | inputs for assets and liabilities not based upon observable market data                                                                        



|                             |  | Level 1 |         |  | Level 2 |   |   | Level 3 |  |   | May 31,  2019 | 
|---------------------------- |  | ------- | ------- |  | ------- | - | - | ------- |  | - | ------------- | 
|Financial assets at FVTPL    |  |         |         |  |         |   |   |         |  |   |               | 
|Cash and cash equivalents    |  | $       | 550,797 |  |         | $ | — |         |  | $ | —             | 
|Marketable securities        |  |         | 20,199  |  |         |   | — |         |  |   | —             | 
|Convertible notes receivable |  |         | —       |  |         |   | — |         |  |   | 32,230        | 
|Long-term investments        |  |         | 41,803  |  |         |   | — |         |  |   | 23,119        | 
|Outstanding, end of the year |  | $       | 612,799 |  |         | $ | — |         |  | $ | 55,349        | 



41







Aphria Inc.

Notes to the Consolidated Financial Statements

For the years ended May 31, 2019 and May 31, 2018

(In thousands of Canadian dollars, except share and per share
amounts)








|                             |  | Level 1 |         |  | Level 2 |   |       | Level 3 |  |   | May 31,  2018 | 
|---------------------------- |  | ------- | ------- |  | ------- | - | ----- | ------- |  | - | ------------- | 
|Financial assets at FVTPL    |  |         |         |  |         |   |       |         |  |   |               | 
|Cash and cash equivalents    |  | $       | 59,737  |  |         | $ | —     |         |  | $ | —             | 
|Marketable securities        |  |         | 45,062  |  |         |   | —     |         |  |   | —             | 
|Convertible notes receivable |  |         | —       |  |         |   | —     |         |  |   | 18,071        | 
|Long-term investments        |  |         | 33,600  |  |         |   | 2,567 |         |  |   | 29,861        | 
|Outstanding, end of the year |  | $       | 138,399 |  |         | $ | 2,567 |         |  | $ | 47,932        | 



The following table presents
the changes in level 3 items for the years ended May 31, 2019 and May 31, 2018:



|                              |  | Unlisted equity securities |         |   | Trading derivatives |   |        | Total | 
|----------------------------- |  | -------------------------- | ------- | - | ------------------- | - | ------ | ----- | 
|Closing balance May 31, 2018  |  | $                          | 29,861  |   |                     | $ | 18,071 |       | 
|Acquisitions                  |  |                            | 69,549  |   |                     |   | 19,500 |       | 
|Disposals                     |  |                            | (77,762 | ) |                     |   | (1,942 | )     | 
|Unrealized gain on fair value |  |                            | 1,471   |   |                     |   | (3,399 | )     | 
|Closing balance May 31, 2019  |  | $                          | 23,119  |   |                     | $ | 32,230 |       | 



Financial risk management



The Company has exposure to
the following risks from its use of financial instruments: credit; liquidity; currency rate; and, interest rate price.



| | (a) | Credit risk
| | --- | -----------



The maximum credit exposure
at May 31, 2019 is the carrying amount of cash and cash equivalents, marketable securities, accounts receivable, prepaids and other
current assets and promissory notes receivable. The Company does not have significant credit risk with respect to customers. All
cash and cash equivalents are placed with major financial institutions. Marketable securities are placed with major investment
banks and are represented by investment grade corporate bonds.



The Company mitigates its credit
risk and volatility on its marketable securities through its investment policy, which permits investments in Federal or Provincial
government securities, Provincial utilities or bank institutions and Investment grade corporate bonds.



|                  |  | Total |        |  | 0-30 days |   |        | 31-60 days |  |   | 61-90 days |   |  | 90+ days |    
|----------------- |  | ----- | ------ |  | --------- | - | ------ | ---------- |  | - | ---------- | - |  | -------- | ---
|Trade receivables |  | $     | 25,488 |  |           | $ | 20,777 |            |  | $ | 3,333      |   |  | $        | 237
|                  |  |       |        |  |           |   | 82     | %          |  |   | 13         | % |  |          | 1  



| | (b) | Liquidity risk
| | --- | --------------



As at May 31, 2019, the Company’s
financial liabilities consist of accounts payable and accrued liabilities, which has contractual maturity dates within one year,
promissory note payable, which has a contractual maturity within 15 months and long-term debt, and convertible debentures which
has contractual maturities over the next five years. The Company manages its liquidity risk by reviewing its capital requirements
on an ongoing basis. Based on the Company’s working capital position at May 31, 2019, management regards liquidity risk to
be low.



| | (c) | Currency rate risk
| | --- | ------------------



As at May 31, 2019, a portion
of the Company’s financial assets and liabilities held in United States Dollars (“USD”) and Euros consist of
cash and cash equivalents, marketable securities, convertible notes receivable, long-term investments and a promissory note payable.
The Company’s objective in managing its foreign currency risk is to minimize its net exposure to foreign currency cash flows
by transacting, to the greatest extent possible, with third parties in the functional currency. The Company is exposed to currency
rate risk in other comprehensive income, relating to foreign subsidiaries which operate in a foreign currency. The Company does
not currently use foreign exchange contracts to hedge its exposure of its foreign currency cash flows as management has determined
that this risk is not significant at this point in time.



42







Aphria Inc.

Notes to the Consolidated Financial Statements

For the years ended May 31, 2019 and May 31, 2018

(In thousands of Canadian dollars, except share and per share
amounts)








The Company is exposed to unrealized
foreign exchange risk through its cash and cash equivalents. As at May 31, 2019, the majority of the Company’s cash and cash
equivalents was in United States dollars. A 1% change in the foreign exchange rate would result in an unrealized gain or loss of
approximately $4,000.



| | (d) | Interest rate price risk
| | --- | ------------------------



The Company manages interest
rate risk by restricting the type of investments and varying the terms of maturity and issuers of marketable securities. Varying
the terms to maturity reduces the sensitivity of the portfolio to the impact of interest rate fluctuations.



| | (e) | Capital management
| | --- | ------------------



The Company’s objectives
when managing its capital are to safeguard its ability to continue as a going concern, to meet its capital expenditures for its
continued operations, and to maintain a flexible capital structure which optimizes the cost of capital within a framework of acceptable
risk. The Company manages its capital structure and adjusts it in light of changes in economic conditions and the risk characteristics
of the underlying assets. To maintain or adjust its capital structure, the Company may issue new shares, issue new debt, or acquire
or dispose of assets. The Company is not subject to externally imposed capital requirements.



Management reviews its capital
management approach on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable.
There have been no changes to the Company’s capital management approach in the year. The Company considers its cash and cash
equivalents and marketable securities as capital.



| | 32. | Commitments and contingencies
| | --- | -----------------------------



The Company has a lease for
rental office space from December 2018 to November 30, 2028. The Company has committed purchase orders outstanding at May 31, 2019
related to capital asset expansion of $49,364, all of which are expected to be paid within the next year. Minimum payments payable
over the next five years are as follows:



|           |  |  | Years ending May
    31, |       
|---------- |  |  | ------------------------ | ------
|2020       |  |  | $                        | 50,689
|2021       |  |  |                          | 942   
|2022       |  |  |                          | 752   
|2023       |  |  |                          | 711   
|2024       |  |  |                          | 656   
|Thereafter |  |  |                          | 1,724 
|           |  |  | $                        | 55,474



From time to time, the Company
and/or its subsidiaries may become defendants in legal actions arising out of the ordinary course and conduct of its business.



As of May 31, 2019, the Company
was served statements of claims in class action lawsuits against the Company and certain of its officers and former officers. These
claims relate to alleged misconduct in connection with the Company’s acquisitions of LATAM Holdings Inc. (“LATAM”)
and Nuuvera Inc., and the Company’s June 2018 securities offering. At the present time, the representative claimants have
been identified and selected in both the U.S. and Canada. The U.S. claims include alleged violations of Section 10(b) of the Exchange
Act, Rule 10b-5 under the Exchange Act and Section 20(a) of the Exchange Act. The Canadian claims include alleged statutory and
common law misrepresentation and oppression. The Company intends to vigorously defend itself in each of these actions. With respect
to the cases commenced in the United States, the Company is self-insured for the costs associated with any award or damages arising
from such actions and has entered into indemnity agreements with each of the directors and officers and, subject to certain exemptions,
will cover any costs incurred by them in connection with any of the class action claims. With respect to the cases commenced in
Canada, the Company’s insurance policies may not be sufficient to cover any judgments against the Company. As at May 31,
2019, the Company has not recorded any uninsured amount related to this contingency.



43







Aphria Inc.

Notes to the Consolidated Financial Statements

For the years ended May 31, 2019 and May 31, 2018

(In thousands of Canadian dollars, except share and per share
amounts)








| | 33. | Segment reporting
| | --- | -----------------



Information reported to the
Chief Operating Decision Maker (“CODM”) for the purpose of resource allocation and assessment of segment performance
focuses on the nature of the operations. The Company operates in three segments. 1) cannabis operations, which encompasses the
production, distribution and sale of both medical and adult-use cannabis, 2) distribution operations, which encompasses the purchase
and resale of products to customers. The distribution operations are carried out through the Company’s wholly owned subsidiaries
ABP, FL Group and CC Pharma, and 3) businesses under development which encompasses operations in which the Company has not received
final licensing or has not commenced commercial sales from operations. Factors considered in determining the operating segments
include the Company’s business activities, the management structure directly accountable to the CODM, availability of discrete
financial information and strategic priorities within the organizational structure.



Segment information for the
year ended May 31, 2019:





|                                  |  | Cannabis
    operations |        |  | Distribution
    operations |   |         | Businesses
    under
    development |  |   | Total   |  
|--------------------------------- |  | ----------------------- | ------ |  | --------------------------- | - | ------- | ------------------------------------ |  | - | ------- | -
|Revenue                           |  | $                       | 78,853 |  |                             | $ | 157,931 |                                      |  | $ | 326     |  
|Income (loss) before income taxes |  |                         | 726    |  |                             |   | 2,914   |                                      |  |   | (19,285 | )





Included in the net loss
from cannabis operations is the $58,039 of impairment (Note 11).



Segment information for the
year ended May 31, 2018:



|                                  |  | Cannabis
    operations |        |  | Distribution
    operations |   |      | Businesses
    under
    development |  |   | Total  |  
|--------------------------------- |  | ----------------------- | ------ |  | --------------------------- | - | ---- | ------------------------------------ |  | - | ------ | -
|Revenue                           |  | $                       | 36,917 |  |                             | $ | —    |                                      |  | $ | —      |  
|Income (loss) before income taxes |  |                         | 39,128 |  |                             |   | (119 | )                                    |  |   | (3,153 | )



Geographic information for
the year ended May 31, 2019:



|               |  | North America |         |  | Europe |   |         | Latin America |  |   | Africa |  |  | Total |      
|-------------- |  | ------------- | ------- |  | ------ | - | ------- | ------------- |  | - | ------ |  |  | ----- | -----
|Revenue        |  | $             | 78,853  |  |        | $ | 154,163 |               |  | $ | 4,094  |  |  | $     | —    
|Capital assets |  |               | 471,391 |  |        |   | 25,817  |               |  |   | 3,758  |  |  |       | 2,932



Geographic information for
the year ended May 31, 2018:



|               |  | North America |         |  | Europe |   |       | Latin America |  |   | Africa |  |  | Total |  
|-------------- |  | ------------- | ------- |  | ------ | - | ----- | ------------- |  | - | ------ |  |  | ----- | -
|Revenue        |  | $             | 36,618  |  |        | $ | 299   |               |  | $ | —      |  |  | $     | —
|Capital assets |  |               | 296,438 |  |        |   | 6,713 |               |  |   | —      |  |  |       | —



Major customers are defined
as customers that each individually account for greater than 10% of the Company’s annual revenues and greater than 10% of
accounts receivable. For the year ended May 31, 2019, the Company had no one customer that accounted for greater than 10% of the
Company’s revenue (2018 – nil). For the year ended May 31, 2019, the Company had no one customer that accounted for
greater than 10% of the Company’s accounts receivable (2018 – nil).



| | 34. | Subsequent events
| | --- | -----------------



Subsequent to year-end the Company’s
subsidiary Marigold Projects Jamaica Limited received a retail Herb House licence from Jamaica’s Cannabis Licensing Authority
to open its first store at the Peter Tosh Square, Unit 51, Pulse Center, 38a Trafalgar Road, overlooking the Peter Tosh Museum
in New Kingston, Jamaica.



44