Document:

EX-4.20

 Exhibit 4.20 
  

 
  
  

Management’s Discussion and Analysis of the 

Financial Condition and Results of Operations 

(In thousands of Canadian dollars) 

MEDRELEAF CORP. 
 For
the Year Ended March 31, 2018 
  
  

 MANAGEMENT’S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND RESULTS OF
OPERATIONS 
 The following management’s discussion and analysis of the financial condition and results of operations (“MD&A”) should
be read in conjunction with MedReleaf Corp.’s (“MedReleaf” or the “Company”) audited consolidated financial statements for the years ended March 31, 2018 and 2017 (the “Financial Statements”), including the
notes thereto, and which have been prepared in accordance with International Financial Reporting Standards (“IFRS”). 
 This MD&A is dated
June 18, 2018. 
 Other than per share and per gram amounts, all dollar amounts in this MD&A are in thousands of Canadian dollars unless otherwise
stated. All percentages are calculated using the rounded numbers as they appear in the tables. 
 On June 7, 2017, the Company completed an initial
public offering (the “IPO”) of common shares of the Company (“Common Shares”) and, prior to and in connection with the completion of the IPO, the Company also completed a capital reorganization (the “Capital
Reorganization”) to simplify the Company’s capital structure. This MD&A represents a discussion of operations and financial condition after the completion of the IPO and the Capital Reorganization. All historically presented share and
per share amounts are presented at their post-Capital Reorganization converted amounts for comparability. 
 On May 14, 2018, Aurora Cannabis Inc.
(“Aurora”) and the Company entered into an arrangement agreement (the “Original Agreement” and, as amended by an amending agreement dated May 24, 2018, the “Arrangement Agreement”) pursuant to which Aurora will
acquire all of the outstanding common shares of the Company and each shareholder of the Company will be entitled to receive 3.575 common shares of Aurora and $0.000001 in cash in exchange for each Common Share held. 

FORWARD-LOOKING INFORMATION 

This MD&A includes forward-looking information within the meaning of applicable Canadian securities legislation, which are statements other than statements
of historical fact and which can be identified by the use of forward-looking terminology such as “expect”, “likely”, “may”, “will”, “should”, “intend”, “anticipate”,
“potential”, “proposed”, “estimate” and other similar words, including negative and grammatical variations thereof, or statements that certain events or conditions “may”, “would”, “could”
or “will” happen, or by discussions of strategy. Statements in this MD&A containing forward-looking information includes statements with respect to: the expected performance of the Company’s business and operations; the
Company’s expectations regarding revenues, expenses and anticipated cash needs; the intention to grow the Company’s business and operations; the build-out of the Bradford Facility (as defined herein)
and the respective costs and timing associated therewith; the renewal of the Licences (as defined herein); and the expected legalization of cannabis for recreational use in Canada and the timing thereof. Statements containing forward-looking
information are based upon the expectations, estimates, projections, assumptions and views of future events of management at the date hereof and that management believes to be reasonable in the circumstances, including those relating to: general
economic conditions, the expected timing and cost of expanding the Company’s production capacity, the expected timing of the implementation of the Canadian recreational cannabis market, future growth of the Company’s business and
international opportunities, the development of new products and product formats, the Company’s ability to retain key personnel, the Company’s ability to continue investing in its infrastructure to support growth, the impact of
competition, trends in the Canadian medical cannabis industry and changes in laws, rules and regulations. Statements containing forward-looking information should not be read as guarantees of future events, performance or results, and will not
necessarily be accurate indications as to whether, or the times at which, such events, performance or results will occur or be achieved. The forward-looking information contained in this MD&A is subject to known and unknown risks and
uncertainties, including but not limited to those risks and uncertainties described in this MD&A under the heading “Risk and Uncertainties” as well as those discussed under the heading “Risk Factors” in the Company’s
annual information form dated June 18, 2018 in respect of the financial year completed March 31, 2018 (the “AIF”), any of which could cause actual results to differ materially from those expressed or implied by the
forward-looking information disclosed herein. Accordingly, readers are cautioned not to place undue reliance on such forward-looking information. Statements in this MD&A containing forward-looking information speak only as of the date on which
they are made and MedReleaf does not undertake any obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by applicable securities laws. 

  
 2 

 NON-IFRS MEASURES 

This MD&A refers to certain non-IFRS financial measures. These measures are not recognized measures under IFRS, do
not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by
providing additional information regarding the Company’s results of operations from management’s perspective. Accordingly, non-IFRS measures should not be considered in isolation nor as a substitute
for analysis of the Company’s financial information reported under IFRS. All non-IFRS measures presented in this MD&A are reconciled to their closest reported IFRS measure. 

(A) ADJUSTED EARNINGS BEFORE INTEREST, TAX,
DEPRECIATION AND AMORTIZATION (“ADJUSTED EBITDA”) 
 Adjusted EBITDA
is used by management as a supplemental measure to review and assess operating performance and trends on a comparable basis. The Company defines Adjusted EBITDA as EBITDA adjusted for the impact of any unrealized expenses or gains, stock based
compensation, fair value gains or costs arising from biological assets, expenses related to readying the Company for its initial public offering and other non-recurring costs the Company deems unrelated to
current operations. 
 The Company believes that Adjusted EBITDA provides a useful tool for assessing the comparability between periods of its ability to
generate cash from operations. Adjusted EBITDA is presented in order to provide supplemental information to the Financial Statements included elsewhere in this MD&A, and such information is not meant to replace or supersede IFRS measures. 

(B) EQUIVALENT GRAMS AND KILOGRAMS 

Equivalent grams or kilograms refers to the equivalent number of dried grams or kilograms of cannabis required to produce extracted cannabis in the form of
cannabis oil. The Company estimates and converts its cannabis oil inventory to equivalent grams using the combined Tetrahydrocannabinol (“THC”) and Cannabidiol (“CBD”) content in extracted cannabis products. Any reference to
(“total grams” or “grams” or “adjusted total grams” or “adjusted grams”) in this document includes both equivalent grams and dried grams, unless otherwise noted and identified as dried grams or equivalent
grams for extracts. 
 On January 1, 2018, the Company changed its estimated conversion rate for extracts from 10 grams per 1,250 mg of THC/CBD to 10
grams per 960 mg of THC/CBD. Equivalent grams are estimated based on the expected yields of extracted plants and are dependent on the efficiency and output of the Company’s extraction processes. 

The revised conversion factor resulted in a change to the calculation of equivalent grams sold during the year ended March 31, 2017, as well as the nine
months ended December 31, 2017. Equivalent grams sold for the three months ended March 31, 2018 was calculated with the revised conversion rate and has been reflected in this MD&A. The revised conversion factor represents a change in
the calculation method of equivalent grams sold relating to extract sales and does not represent a change in the physical sales volume. 

  
 3 

 (C) CASH COST PER GRAM
SOLD 
 The cash cost per gram sold is used by management to measure the estimated amount of direct production costs, on a per gram sold
basis, that are required to produce dried cannabis and cannabis oil extracts. Management uses this measure to track production cost trends and assess the sensitivity and tolerance for pricing changes. Management believes this measure provides useful
information by removing non-cash and post production costs and provides a benchmark of the Company against its competitors. The metric is calculated by: removing from production costs incurred during the
period, all non-cash based costs (including amortization and inventory write-downs or impairments) and all post production costs; and dividing such amount by the approximate number of grams of cannabis sold
during the period. Post production costs include indirect overhead expenses such as: equipment rentals, payment processing fees, indirect labour expenses, shipping and packaging expenses, cost of accessories sold, quality control expenses, and other
order fulfillment costs included in production costs. 
 (D) ADJUSTED PRODUCT CONTRIBUTION
MARGIN 
 Management makes use of an “Adjusted Product Contribution Margin” measure to provide a better representation of
performance in the period by excluding non-cash fair value measurements as required by IFRS. Management believes this measure provides useful information as it represents the gross margin for management
purposes based on the Company’s complete cost to produce inventory sold, exclusive of any fair value measurements as required by IFRS. The metric is calculated by removing all amounts related to biological asset fair value accounting under IFRS
including gains on transformation of biological assets and the cost of finished harvest inventory sold, which represents the fair value measured portion of inventory cost (“fair value cost adjustment”) recognized as cost of goods sold.

 COMPANY OVERVIEW 
 MedReleaf sets The Medical Grade
StandardTM for cannabis in Canada and around the world with global recognized best-practice standards including ICH-GMP (Good Manufacturing Practices) and ISO 9001 (Quality Management System) certified
producer of cannabis-based pharmaceutical products in North America. MedReleaf is a Research and Development driven company dedicated to patient care, scientific innovation, research and advancing the understanding of the therapeutic benefits of
cannabis. Sourced from around the world and cultivated in two state of the art facilities in Ontario, MedReleaf delivers a variety of premium products to patients seeking safe, consistent and effective medical cannabis. 

MedReleaf Corp. was incorporated February 28, 2013 under the Business Corporations Act (Ontario). The principal activities of the Company are the
production and sale of cannabis for medical purposes as regulated by the Access to Cannabis for Medical Purposes Regulations (Canada) (the “ACMPR”), pursuant to: (i) a licence issued by Health Canada to the Company pursuant to the
ACMPR in respect of the Company’s facility located in Markham, Ontario (the “Markham Facility”, and such licence is referred to as the “Markham Commercial Licence” or “Markham Licence”); and (ii) a licence
issued by Health Canada to the Company pursuant to the ACMPR in respect of the Company’s facility located in Bradford, Ontario (the “Bradford Facility”, and such licence is referred to as the “Bradford Cultivation Licence”
or “Bradford Licence” and, together with the Markham Commercial Licence, the “Licences”). Prior to the expiry of the term of each Licence, the Company must submit an application for renewal to Health Canada which contains
information prescribed by the ACMPR. The Company has renewed the Markham Commercial Licence and its current term will expire on February 14, 2020. The current term of the Bradford Cultivation Licence expires on April 10, 2020. 

MedReleaf cultivates and produces its cannabis-based pharmaceutical products for direct sale to its patients across Canada. The Company interacts with its
patients via its e-commerce platform as well as by phone and email correspondence directed to its patient-care team. Currently, the Company sells dried cannabis, cannabis oils and cannabis oil capsules to its
patients from its Markham Facility. MedReleaf’s sales are supported by a variety of initiatives, including health conference sponsorships, as well as through its cannabis education and outreach team of employees. The Company expects both its
portfolio of products and the jurisdictions outside of Canada in which it operates to expand as local laws allow, resources permit, and where market research indicates opportunity. 

  
 4 

 MedReleaf uses quality management and environmental management systems that are certified to the
internationally recognized standards of ICH-GMP, ISO 9001 and ISO 14001 (Environmental Management System) respectively, as well as an occupational health and safety management system certified to the
internationally recognized standards of OHSAS 18001 (Occupational Health and Safety Assessment), which collectively cover research and development, production, processing, distribution, selling and destruction of cannabis for medical purposes. These
certified systems provide the framework to optimize management control, reduce product risks, increase staff safety and reduce environmental impact. Moreover, the Company’s ISO 9001 certified quality management system has been designed to
maintain the consistency and quality of the Company’s products. The Company’s systems mandate regular, in-process controls, testing and analysis to ensure the consistency of our cannabis-based
pharmaceutical products and that our products meet stringent specifications during production and until delivery to our patients. 
 SELECTED QUARTERLY
AND ANNUAL INFORMATION 
 The following table sets out a summary of results of operations for the financial periods specified below, as well as specific
balance sheet data as at the end of each such period: 
  

																																									
	 	 	 	 	 	 	 	 	Three months ended	 	 	 	 	 	 	 	 	 	 	 	Three months ended	 	 	 	 
	 	 	Year ended
Mar. 31
2018	 	 	Mar. 31,
2018	 	 	Dec. 31,
2017	 	 	Sep. 30,
2017	 	 	Jun. 30,
2017	 	 	Year ended
Mar. 31
2017	 	 	Mar. 31,
2017	 	 	Dec. 31,
2016	 	 	Sep. 30,
2016	 	 	Jun. 30,
2016	 
	 Sales
	 	 	43,646	 	 	 	12,014	 	 	 	11,350	 	 	 	9,821	 	 	 	10,461	 	 	 	40,339	 	 	 	10,360	 	 	 	10,426	 	 	 	10,749	 	 	 	8,804	 
	 Gross profit 1 
	 	 	46,670	 	 	 	13,309	 	 	 	9,985	 	 	 	11,747	 	 	 	11,629	 	 	 	37,939	 	 	 	10,316	 	 	 	9,714	 	 	 	9,634	 	 	 	8,275	 
	 Gross profit %
	 	 	107	% 	 	 	111	% 	 	 	88	% 	 	 	120	% 	 	 	111	% 	 	 	94	% 	 	 	100	% 	 	 	93	% 	 	 	90	% 	 	 	94	% 
	 Expenses
	 	 	52,317	 	 	 	16,481	 	 	 	13,243	 	 	 	11,694	 	 	 	10,899	 	 	 	22,297	 	 	 	7,425	 	 	 	7,187	 	 	 	4,197	 	 	 	3,488	 
	 Income (loss) before taxes
	 	 	(5,647	) 	 	 	(3,172	) 	 	 	(3,258	) 	 	 	53	 	 	 	730	 	 	 	15,642	 	 	 	2,891	 	 	 	2,527	 	 	 	5,437	 	 	 	4,787	 
	 Net and comprehensive income
	 	 	(7,538	) 	 	 	(819	) 	 	 	(5,001	) 	 	 	(2,126	) 	 	 	408	 	 	 	10,958	 	 	 	2,187	 	 	 	1,738	 	 	 	3,740	 	 	 	3,293	 
		 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Net (loss) income per share – basic
	 	 	($0.08	) 	 	 	($0.01)	 	 	 	($0.05)	 	 	 	($0.02)	 	 	$	0.00	 	 	$	0.14	 	 	$	0.03	 	 	$	0.02	 	 	$	0.05	 	 	$	0.05	 
	 Weighted average shares – basic 2

	 	 	91,119,745	 	 	 	91,119,745	 	 	 	91,746,531	 	 	 	90,399,748	 	 	 	84,051,204	 	 	 	77,789,726	 	 	 	82,338,400	 	 	 	82,074,293	 	 	 	74,847,518	 	 	 	71,915,552	 
	 Net (loss) income per share – diluted
	 	 	($0.08	) 	 	 	($0.01)	 	 	 	($0.05)	 	 	 	($0.02)	 	 	$	0.00	 	 	$	0.13	 	 	$	0.03	 	 	$	0.02	 	 	$	0.05	 	 	$	0.04	 
	 Weighted average shares – diluted 2

	 	 	93,676,996	 	 	 	93,676,996	 	 	 	98,982,218	 	 	 	93,492,818	 	 	 	91,100,349	 	 	 	81,701,757	 	 	 	85,708,983	 	 	 	85,440,116	 	 	 	79,119,895	 	 	 	76,359,362	 
		 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Cash and cash equivalents
	 	 	215,868	 	 	 	215,868	 	 	 	114,581	 	 	 	73,955	 	 	 	86,314	 	 	 	12,899	 	 	 	12,899	 	 	 	25,503	 	 	 	20,679	 	 	 	1,594	 
	 Inventories
	 	 	32,856	 	 	 	32,856	 	 	 	24,862	 	 	 	21,647	 	 	 	12,765	 	 	 	9,511	 	 	 	9,511	 	 	 	6,002	 	 	 	4,567	 	 	 	3,317	 
	 Biological assets
	 	 	3,202	 	 	 	3,202	 	 	 	3,797	 	 	 	2,916	 	 	 	4,742	 	 	 	2,809	 	 	 	2,809	 	 	 	3,024	 	 	 	2,338	 	 	 	2,178	 
	 Total assets
	 	 	357,990	 	 	 	357,990	 	 	 	229,403	 	 	 	157,992	 	 	 	153,622	 	 	 	74,885	 	 	 	74,885	 	 	 	70,134	 	 	 	58,335	 	 	 	24,385	 
	 Total non-current financial liabilities
	 	 	11,112	 	 	 	11,112	 	 	 	12,839	 	 	 	3,193	 	 	 	12,589	 	 	 	10,718	 	 	 	10,718	 	 	 	9,614	 	 	 	9,479	 	 	 	1,831	 
	 Shareholders’ equity
	 	 	328,044	 	 	 	328,044	 	 	 	199,004	 	 	 	135,473	 	 	 	131,887	 	 	 	52,320	 	 	 	52,320	 	 	 	49,528	 	 	 	40,530	 	 	 	17,005	 
		 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 

  

	1	 Gross profit includes fair value adjustments on biological assets, inventory sold, and carrying amount of
inventory. 

	2	 Weighted average number of shares, basic and diluted, for the year ended March 31, 2017 are presented on a
converted basis of 116.0909:1 to reflect the capital reorganization. 

 The table below summarizes quarterly and annual non-financial and non-IFRS metrics for the years ended March 31, 2018 and 2017: 
  

																																									
	 	 	 	 	 	 	 	 	Three months ended	 	 	 	 	 	 	 	 	 	 	 	Three months
ended	 	 	 	 
	 	 	Year ended
Mar. 31
2018	 	 	Mar. 31,
2018	 	 	Dec. 31,
2017	 	 	Sep. 30,
2017	 	 	Jun. 30,
2017	 	 	Year ended
Mar. 31
2017	 	 	Mar. 31,
2017	 	 	Dec. 31,
2016	 	 	Sep. 30,
2016	 	 	Jun. 30,
2016	 
	 Adjusted EBITDA
	 	 	(2,294	) 	 	 	(4,685	) 	 	 	(233	) 	 	 	685	 	 	 	1,939	 	 	 	13,851	 	 	 	1,622	 	 	 	4,093	 	 	 	4,650	 	 	 	3,486	 
	 Total grams sold
	 	 	4,896,213	 	 	 	1,424,643	 	 	 	1,263,490	 	 	 	1,051,151	 	 	 	1,156,929	 	 	 	3,668,104	 	 	 	1,167,325	 	 	 	993,259	 	 	 	852,245	 	 	 	655,275	 
	 Adjusted total grams sold 1 
	 	 	5,034,406	 	 	 	1,424,643	 	 	 	1,323,488	 	 	 	1,089,200	 	 	 	1,197,075	 	 	 	3,697,736	 	 	 	1,196,957	 	 	 	993,259	 	 	 	852,245	 	 	 	655,275	 
	 Average selling price per total gram
	 	$	8.91	 	 	$	8.43	 	 	$	8.98	 	 	$	9.34	 	 	$	9.04	 	 	$	11.00	 	 	$	8.87	 	 	$	10.50	 	 	$	12.61	 	 	$	13.44	 
	 Average selling price per adjusted total gram
	 	$	8.67	 	 	$	8.43	 	 	$	8.58	 	 	$	9.02	 	 	$	8.74	 	 	$	10.91	 	 	$	8.66	 	 	$	10.50	 	 	$	12.61	 	 	$	13.44	 
	 Cash cost per total gram sold
	 	$	1.55	 	 	$	1.40	 	 	$	1.83	 	 	$	1.46	 	 	$	1.49	 	 	$	1.73	 	 	$	1.53	 	 	$	1.55	 	 	$	1.49	 	 	$	2.67	 
	 Cash cost per adjusted total gram sold
	 	$	1.51	 	 	$	1.40	 	 	$	1.75	 	 	$	1.42	 	 	$	1.44	 	 	$	1.72	 	 	$	1.49	 	 	$	1.55	 	 	$	1.49	 	 	$	2.67	 
	 Adjusted product contribution per total gram sold
	 	$	6.22	 	 	$	5.94	 	 	$	5.80	 	 	$	6.75	 	 	$	6.53	 	 	$	8.42	 	 	$	6.34	 	 	$	8.65	 	 	$	9.82	 	 	$	9.98	 
	 Adjusted product contribution per adjusted total gram sold
	 	$	6.05	 	 	$	5.94	 	 	$	5.54	 	 	$	6.51	 	 	$	6.31	 	 	$	8.36	 	 	$	6.18	 	 	$	8.65	 	 	$	9.82	 	 	$	9.98	 

  

	1	 As defined. See “Non-IFRS Measures” section for discussion on
how equivalent grams and kilograms are calculated.     

  
 5 

 BUSINESS HIGHLIGHTS 

CONTINUED SALES GROWTH 

Increased Sales of Cannabis-Based Extract Products 

MedReleaf began sales of its cannabis-based extract products, including both cannabis oil and cannabis oil capsules, in November 2016. Since that time, the
proportion of revenue related to cannabis-based extract products has increased to 18% of total revenues in the year ended March 31, 2018, which represents increased extract revenues of 532%, compared to total revenues in the year ended
March 31, 2017. 
 BRAND EXPANSION 

Preparing for the Launch of the Recreational Market: San Rafael ’71TM 

MedReleaf continues to make investments in preparation for the recreational market, which is expected to be implemented in early fall of 2018. The Company
continues to augment its management team with a number of key marketing and strategy professionals focused on all elements of readying the organization for a recreational market that will be substantial in size, as estimates suggest. In February
2018, the Company introduced its first adult-use recreational brand, San Rafael ’71TM, inspired by and designed to celebrate the spirit of classic
cannabis culture. 
 San Rafael ’71TM has been designed with the classic consumer in mind, one of the largest segments of the Canadian cannabis market.
San Rafael ’71TM is for adults who are discerning and knowledgeable about cannabis products and those who value quality and an authentic experience. 

To mark the launch and to introduce Canada to the brand, the company has partnered with one of Canada’s most well-regarded brewers, Amsterdam Brewing, to
develop and launch the first San Rafael ’71TM product, 4:20 Pale Ale. A full suite of San Rafael ‘71TM products and experiences will be introduced to the marketplace as regulations allow. 

MedReleaf introduces iconic Woodstock brand 
 MedReleaf
entered into an exclusive licencing agreement with Woodstock Cannabis Company for use of the iconic Woodstock brand in the Canadian cannabis market. Under the terms of the agreement, MedReleaf will grow and sell a variety of strains and formats
under the Woodstock banner, expanding the offering of products as regulations allow. 
 PRODUCT EXPANSION 

Launch of Soft Gel Capsules 
 Having officially received
Health Canada approval, MedReleaf launched a softgel capsule in February 2018. The capsules will be the first colour-coded and strain-specific softgels in the market. 

MedReleaf First Licenced Producer to Launch Topical Cream 

On October 4, 2017, MedReleaf successfully launched a topical cream, becoming the first Licenced Producer to do so. The cream is specifically formulated
to provide superior absorption with MedReleaf’s CBD strains and was developed in response to patient feedback for topical applications of CBD. The launch of this cream is expected to further contribute to the continued increase in extract oil
sales experienced by the Company as topicals are seeing strong growth in parallel US markets, with a tripling of sales since 2014 and forecasts indicating a further tripling of sales by 2019, according to the Brightfield Group. The launch of this
cream is further evidence of the Company’s continued leadership in setting the standard for product innovation. 

  
 6 

 Expanding MedReleaf’s Plant Genetic Intellectual Property 

Through our genetic breeding program, MedReleaf has again developed new proprietary cannabis cultivars, with five new cultivars being internally validated and
progressing to commercialization, including new CBD-only genetics. The cultivar development program continues to focus on both the improvement of plant morphology as it pertains to cultivation automation, as
well as the characterization of novel metabolite (cannabinoid and terpene) profiles and their connection to clinical symptom management outcomes. 
 In
January 2018, MedReleaf introduced three proprietary varieties of premium medical cannabis, genetically crafted and rigorously tested to the highest standard of quality and consistency. For the first time, MedReleaf also provided terpene profiles
for patients and health care providers, revealing the unique terpene compositions of each product. The three new products include Equiposa, Orellium and Trutiva. Eqipopsa features an equal balance of CBD to THC and has been bred to maximize the
beneficial effects of both cannabinoids. Orellium has been carefully cultivated to the highest standard of quality, this proprietary 2:1 variety offers the benefits of both CBD and THC, enhanced by its unique terpene profile. Trutiva offers our
highest level of CBD amongst the three new products and optimizes the therapeutic benefits of CBD while minimizing the psychoactive effects of THC. 

LEADERSHIP IN THE INDUSTRY 

Company Receives Good Manufacturing Practices Certification 

On May 30, 2017, the Company received the Good Manufacturing Practices (“GMP”) certification which recognizes the Company’s compliance with
GMP regulations at all stages of the product lifecycle, including third party testing laboratories, as established by International Conference on Harmonization of Technical Requirements for Registration of Pharmaceuticals for Human Use
(“ICH”). The technical requirements of GMP are established to promote practices to ensure that safe, effective and high-quality medicines are developed and registered in the most efficient and cost-effective manner and are the same
standards and procedures that pharmaceutical companies must adhere to in manufacturing their products in North America, and exceed the Good Production Practices required by Health Canada for growing and cultivating medical cannabis. The
Company’s GMP certification signifies that the Company’s quality processes can consistently control and produce cannabinoids and terpenes appropriate to its end use, and that MedReleaf’s production practices meet stringent
pharmaceutical manufacturing requirements that are internationally harmonized in 17 countries including the United States, Canada, Singapore, Japan, Australia and European nations. 

Leading Multi-Certified Quality Assurance Systems 

MedReleaf is the world’s first cannabis company to hold four certifications across various quality systems. They include,
ICH-GMP (Good Manufacturing Practices), ISO 9001 (Quality Management Systems), ISO 14001 (Environmental Management Systems) and, ISO 18001 (Occupational Health and Safety). 

Clinical Research Developments 
 MedReleaf continues to
advance clinical research and data collection, with a focus on patient outcomes and understanding how unique plant varieties can be used as targeted symptom management tools. During the year, the Company launched a new and increasingly comprehensive
version of their patient outcomes survey, focused on better understanding, how different treatment regimens relate to changes in patients’ symptoms, conditions, and quality of life. The survey will help identify what specific cannabis varieties
patients are using, and are reporting to be most efficacious. In addition, the Company launched a genomic study aimed at investigating correlations between human genomics and cannabis efficacy, with results expected in 2019. 

  
 7 

 Other clinical research initiatives include the completion of a phase 1 pharmacokinetic study analyzing the
safety and behaviour of orally administered THC in healthy adult volunteers, where the resulting data will better help patients and physicians understand the safety and optimal administration of THC-containing
oils and capsules; the publication of several peer-reviewed articles spanning multiple disease areas and therapeutic applications related to medical cannabis; and the formal collaboration with EpiLink (Ontario Brain Institute) in obtaining Health
Canada approval for a phase III clinical trial investigating the efficacy of one of MedReleaf’s proprietary CBD oil capsules for reducing seizure frequency in epilepsy treatment-resistant adults. 

CONTINUOUS OPERATIONAL EXPANSION 

Purchase of Exeter Facility 
 On March 1, 2018, the
Company signed a final release and waiver to acquire a 69-acre greenhouse in Exeter, Ontario (“Exeter Facility”) and 95 acres of adjacent land (“Exeter Land”) for a total purchase price of
$26,000 plus applicable taxes and closing costs (the “Exeter Transaction”). On April 11, 2018 the Company closed the Exeter Transaction of $26,000 through cash proceeds of $21,500 and the issuance of 225,083 common shares with a fair
value of $4,500 determined using the five day volume weighted average price as at February 23, 2018 of $19.99 per common share. 
 The Exeter Facility
is equipped with 1 million square feet of existing greenhouse infrastructure, providing estimated production capacity of up to 105,000 kilograms annually. 

Bradford Facility Developments 
 In April 2017, the
Company completed the first phase of its Bradford Facility construction project, which included drying, trimming, packaging, shipping, storage, and grow rooms with an estimated annual production capacity of 2,800 kilograms of cannabis products. The
Company received its Bradford Licence issued under section 35 of the ACMPR for the production of dried cannabis in the completed grow rooms of the Bradford Facility, also in April 2017. 

On October 11, 2017, MedReleaf received its amended licence for its Bradford Facility for the use of its Mother Room and Clone Room which will support
the growing capacity at the Bradford Facility. On October 20, 2017, the Company received an amended licence for the use of two additional cultivation rooms, which effectively doubled annual production capacity to an estimated 5,600 kilograms at
the Bradford Facility. On November 3, 2017, the Company received an additional amended licence which permits the activity of sale to clients from the Bradford Facility. The expiration of the amended licence is April 10, 2020. 

As of February 2018, the Company has completed construction of additional cultivation capacity as part of the second phase in the Bradford Facility
construction project. The use of the additional capacity is currently pending approval for licensing by Health Canada under section 35 of the ACMPR. Upon Health Canada’s approval, the additional cultivation space will increase total annual
production capacity to an estimated 9,500 kilograms. 
 Since receipt of the licence, MedReleaf has successfully harvested multiple cycles with the product
meeting both our rigorous quality assurance process and yield expectations. During the year, the new grow rooms in the Bradford Facility commenced their first grow cycles in the production of cannabis plants. With support of the municipal
government, MedReleaf successfully filled the approximately 50 job vacancies that are required for cultivation, processing and general facility care, with a significant surplus of screened and trained resources available on stand-by in the event of an increase in staffing requirements. 
 Markham Facility Licence Amendment 

On June 29, 2017, MedReleaf received its amended license for its Markham Facility. Health Canada is no longer applying production or sale quantities for
Licensed Producers. Instead Licensed Producers, including MedReleaf, must manage their cannabis inventory according to the security level of the vault, which in the Markham Facility is Level 9, authorizing the storage of 3,125 kilograms, worth
approximately $31,250, of finished goods inventory at any time. In addition, the expiration of the amended license was extended to February 14, 2020. 

  
 8 

 MANAGEMENT TEAM 

Board Renewal 
 At the time of the closing of the
Company’s IPO, MedReleaf replaced its existing board of directors, other than Neil Closner, with four new board members who bring a diverse set of skills and expertise in the following sectors: biotechnology, healthcare, pharmaceuticals, retail
and consumer, along with international business, in regulated industries, financial, executive leadership in private equity, public company and not-for-profit. Neil
Closner, CEO of the Company, remains on the board and Norma Beauchamp, Ronald Funk, Deborah Rosati and Lloyd Segal were appointed to the board on June 7, 2017. 

At the annual meeting of shareholders on September 25, 2017 all five nominees proposed by management were elected with a unanimous vote, and will
continue to assist the Company strategically as they hold office until the close of the next annual meeting of shareholders or until the director’s successor is elected or appointed. 

Augmentation of Senior Management Team 
 MedReleaf has
significantly augmented its senior management team in the areas of operations, strategy, research and development, international expansion, pharmaceutical sales, logistics and supply chain, legal, and human resources in order to maintain its
industry leadership and to position itself for future success. The Company will continue to add to the senior team based on skills and expertise deemed necessary as the industry evolves, both in Canada and internationally. 

FINANCING AND CAPITAL RESOURCES 

Secured New $20 Million Credit Facility 
 On April 17,
2017, the Company entered into a new $20,000 secured credit agreement (the “Credit Agreement”) with one of the five largest chartered Canadian banks. The Credit Agreement provides the Company with a $10,000 term credit facility and a
$10,000 revolving credit facility, subject to covenant requirements and maintenance by the Company of Licences issued by Health Canada. The Company used $7,500 of the Credit Agreement proceeds to repay its former collateralized credit facility (the
“Former Credit Facility”). 
 Initial Public Offering 

On June 7, 2017, the Company completed the IPO, which to the knowledge of the Company was the largest of any cannabis company globally. The IPO consisted
of an initial public offering and secondary offering of an aggregate of 10,600,000 Common Shares at a price of $9.50 per Common Share for aggregate gross proceeds of $100,700, with MedReleaf and certain selling shareholders receiving gross proceeds
of $80,700 and $20,000, respectively. The Common Shares commenced trading on June 7, 2017 on the TSX under the trading symbol “LEAF”. 

December 2017 Offering 
 On December 4, 2017, the
Company announced the closing of the December 2017 Offering, which was a short form prospectus offering on a “bought deal basis”, pursuant to which the Company issued an aggregate of 3,625,470 Common Shares at a price of $16.55 per Common
Share, for aggregate gross proceeds to the Company of approximately $60,002. Issuance costs in relation to the equity offering amounted to $4,063 and are reflected in shareholders’ equity. Proceeds from the offering will be used to finance the
acquisition and/or construction of additional cannabis production and manufacturing facilities in Canada as well as in other jurisdictions with federal legal cannabis markets, where warranted by the opportunities available to the Company, and the
expansion of the Company’s marketing and sales initiatives. 

  
 9 

 January 2018 Offering 

On January 31, 2018, MedReleaf closed a short form prospectus offering on a “bought deal basis”, pursuant to which the Company issued an
aggregate of 5,000,000 units (the “Units”) of the Company at a price of $26.50 per Unit for aggregate gross proceeds of $132,500. 
 Each Unit
consisted of one common share (a “Common Share”) and one-half of one common share purchase warrant (each full common share purchase warrant, a “Warrant”) of the Company. Each Warrant will
be exercisable to acquire one common share of the Company for a period of two years following the closing date of the January 2018 Offering at an exercise price of $34.50 per common share, subject to adjustment in certain events. In the event that
the volume weighted average trading price of the Common Shares for ten (10) consecutive trading days exceeds $51.75, the Company shall have the right to accelerate the expiry date of the Warrants upon not less than fifteen (15) trading
days’ notice. 
 On February 1, 2018, the Company granted the underwriters an over-allotment option which was exercised to purchase an additional
375,000 Additional Warrants at a price of $0.90 per Additional Warrant. 
 CORPORATE INITIATIVES 

High employee engagement and satisfaction 
 MedReleaf
prides itself on its high employee satisfaction and engagement. MedReleaf has focused on various employee initiatives such as building a recruitment team to acquire top class talent, creating onboarding programs to recruit and introduce prospective
candidates to the new field of cannabis cultivation, working with insurance companies to advocate for worker rights to access cannabis through benefit providers, implementing MedReleaf’s internal medical cannabis reimbursement program for
employees, as well as developing “Cannabis 101” training for in-house cannabis education. 
 MedReleaf
Launches Corporate Social Responsibility Initiatives 
 MedReleaf prides itself in undertaking corporate social responsibility initiatives that benefit
various stakeholders and communities across Canada, including i) entering into a partnership with Canada Company, a charitable, non-partisan organization that serves to build the bridge between business and
community leaders and the Canadian Military; ii) obtaining Military Employment Transition (“MET”) Certification and MET Spouse Certification; iii) entering into a partnership in order to provide coaching to internationally-trained
professionals to help them develop strategies for securing meaningful employment in Canada; iv) launching an internal program in which full- and part-time employees receive onsite English as a Second Language training at no cost in order to improve
their professional skill sets and, ultimately, improve their long-term career prospects in Canada; v) providing education, training and advice to dozens of Canadian employers in order to help them improve their capabilities for managing medical
cannabis in the workplace; and iv) participation and support for numerous Canadian charitable organizations, including Cystic Fibrosis Canada, Arthritis Society and Rescue 7. 

MedReleaf has provided complimentary consulting and policy revision services for group benefit plans and workplace drug and alcohol policies to a number of
organizations across the country. This is a critical element of the Company’s corporate social responsibility plan. The company will continue to help prepare Canadian employers manage cannabis in the workplace to ease the transition into
legalization. 
 BUSINESS INITIATIVES 

Signing of First Letter of Intent for Supply of 8 tons of Recreational Cannabis to Québec 

In February 2018, MedReleaf signed a Letter of Intent (“LOI”) with Société des alcools du Québec (“SAQ”) to supply
the Province of Quebec with a guaranteed volume of high quality adult-use cannabis through SAQ’s retail and online stores. Under the terms of the LOI, MedReleaf will supply SAQ with a minimum of 8,000
kilograms of cannabis products per year. 

  
 10 

 SAQ was not only focused on selecting producers that would provide a steady supply of safe, high quality
cannabis, but they also wanted to be able to provide a broad assortment of products to consumers that cover a range of price points and experiences. The Company believes its reputation for premium award-winning cannabis helped in its selection as
one of only 6 LPs to secure an LOI and are pleased to be making these products available to consumers early fall. 
 R&D Collaboration and Investment
in Flora Fotonica Ltd. 
 On September 14, 2017, the Company entered into a binding agreement to invest and collaborate on the research and
development of specialized grow lighting systems for cannabis cultivation with Flora Fotonica Ltd (“Flora Fotonica”). Flora Fotonica will provide the Company with exclusive access to its proprietary LED lighting technology and the Company
will dedicate licenced cultivation space, laboratories, and research personnel. This collaboration will allow the Company to utilize the technology being developed to enable potential increases to crop yields and active cannabinoids, additionally it
will contribute to the ongoing effort of the Company to reduce energy consumption and the production cost throughout the cultivation process. 

MedReleaf Launches Pharmacogenetic-based Cannabis Compatibility Test 

On November 8, 2017, MedReleaf announced the launch of ReleafDxTM, the first pharmacogenetics-based
cannabis compatibility test to be available from a Canadian licensed producer. The patent pending test is administered by a simple cheek swab and analyzes biomarkers within known metabolic pathways to provide physicians with guidance on dose and
product selection for individual patients. 
 MedReleaf Signs Supplier Agreement with Shoppers Drug Mart 

On December 21, 2017, MedReleaf announced an agreement to become a medical cannabis supplier to Shoppers Drug Mart. Subject to Health Canada’s
approval of Shoppers Drug Mart’s application to be a licensed producer, under the terms of the agreement the Company will supply Shoppers Drug Mart with premium cannabis-based pharmaceutical products. It is expected the products will be sold
online, as Canadian regulations currently restrict the sale of medical cannabis in retail pharmacies. 
 INTERNATIONAL
GROWTH 
 Completed First Commercial ICH-GMP Certified Cannabis-Based Pharmaceutical Export

 MedReleaf successfully completed its’ first commercial ICH-GMP certified cannabis-based pharmaceutical
export to a patient in Brazil. Working with the President of the Brazilian NGO, APEPI (translated as “Support for Research and Medical Cannabis Patients”), Margarette Santos De Brito, MedReleaf was able to obtain an import permit from
ANVISA (translated as “National Health Surveillance Agency”), which management believes resulted in the first ever export of medical cannabis oil to Brazil. This export marks the beginning of what is expected to be significant
international activities, representing a new area of growth for the Company. 
 International Cultivation Licence Applications 

MedReleaf will only pursue international medical and/or recreational cannabis opportunities in accordance and compliance with all applicable laws. The timing
of the Company’s activities in such international markets is entirely dependent on the pace of regulatory developments and, as such, it is not feasible for the Company to provide a timeline respecting those activities. While the Company intends
to participate in these processes, there is no guarantee that it will do so or, if it does, that it will ultimately be awarded any licences. 

Australia: On May 11, 2017, MedReleaf’s Australian partners submitted an application for cultivation of cannabis plants and manufacture of
cannabis oils pursuant to medicinal cannabis guidelines by the Australian Office of Drug Control. The application is in active review by the Australian Office of Drug Control, and the Company through its partners have provided detailed responses to
two additional requests for information, most recently on October 16, 2017 and is optimistic about being granted a licence. 

  
 11 

 On November 14, 2017, MedReleaf’s Australian joint venture partner, Indica Industries Pty Ltd.
(t/a “MedReleaf Australia”) received a license from the Australian Government Office of Drug Control for the cultivation and production of medical cannabis. The license to undertake authorized cannabis activities commences on
November 10, 2018 in order to allow time to complete infrastructure development of the facility. 
 MedReleaf, through its wholly-owned subsidiary,
MedReleaf Holdings (Australia) Ltd., has a 10% equity interest in MedReleaf Australia and, subject to the execution of additional documentation, it is contemplated that the Company would become entitled to receive certain royalties on the gross
revenues of MedReleaf Australia, as well as additional equity in the future. 
 Germany: In March 2018, MedReleaf has announced its agreement to
become the largest supplier of medical cannabis products to Cannamedical Pharma GMBH (“Cannamedical”), a leading medical cannabis distributor to pharmacies in Germany. MedReleaf will provide Cannamedical with monthly exports of five of its
premium strain varieties significantly improving the predictability and security of drug delivery to the German market. 
 FINANCIAL PERFORMANCE
HIGHLIGHTS 
  

	 	•	 	 Sales for the year ended March 31, 2018 reached a historic high of $43,646, an increase of $3,307 or 8%,
compared to the prior year same period sales. The increase in sales was primarily due to sales growth for extract based products partially offset by veteran volume capacity and pricing limitations. Extract sales for the year ended March 31,
2018 were $7,980 and represented 18% of total sales, as compared to the year ended March 31, 2017 whereby extract sales were $1,263 and represented 3% of total sales. 

 

	 	•	 	 Sales and gross profit during the year ended March 31, 2018 increased compared to the same period of fiscal
2017. This increase is primarily attributable to fair value adjustments on biological assets, as well as the increased production capacity at the Markham Facility and Bradford Facility (based on square footage) and patient demand.

  

	 	•	 	 In response to pricing changes introduced by the VAC Policy, (as defined and discussed below under “Recent
Developments – Veteran Affairs Canada Reimbursement Policy”) which took effect on November 22, 2016, the Company offered price discounts to qualifying veterans resulting in a reduction in sales and gross profit from the effective date
of such pricing changes through to the year ended March 31, 2018. The Company expects to continue to offer these discounts, effectively lowering the price of some products to qualifying veterans, for the foreseeable future. In addition to the
pricing changes, VAC’s Policy also imposed volume restrictions which came into effect on May 21, 2017. 

  

	 	•	 	 Sales volumes for the year ended March 31, 2018 increased to 5,034 adjusted total kilograms, representing a
36% increase from 3,698 total kilograms of cannabis product sold during the year ended March 31, 2017, driven by extract sales. 

  

	 	•	 	 Working capital as at March 31, 2018 was $255,738 and increased $231,033 compared to March 31, 2017
working capital of $24,705. The increase in working capital was primarily due to proceeds related to the Company’s IPO, December 2017 Offering, and January 2018 Offering. 

 

	 	•	 	 Adjusted Product Contribution Margin for the year ended March 31, 2018 was $30,434 or $6.05 per adjusted
gram sold, representing a decrease of $469 or 2%, compared to $30,903 or $8.36 per adjusted gram for the year ended March 31, 2017, driven by the introduction of the VAC policy. 

  
 12 

	 	•	 	 Cash cost per adjusted gram sold for the year ended March 31, 2018 was $1.51 per gram, a decrease of $0.21
per adjusted gram sold or 12%, when compared to $1.72 per adjusted gram for the year ended March 31, 2017. This was due to increased sales, which allowed for a lower allocation of production costs per adjusted gram. 

 

	 	•	 	 Adjusted EBITDA decreased by $16,145 to a loss of $2,294 for the year ended March 31, 2018 compared to the
prior year same period adjusted EBITDA of $13,851. The adjusted EBITDA decrease was primarily due to our investment in the recreational market and development for our international business initiatives, as well as continuous improvements in the
Company’s research and development activities and increased operating and overhead expenses due to increased advertising and promotional expenses related to the preparation of the Company’s launch of its recreational brand.

 RECENT DEVELOPMENTS (SUBSEQUENT TO MARCH 31, 2018) 

Purchase of Industrial building in Bradford 
 In June 2018,
MedReleaf completed the purchase of a 37,714 square feet industrial building in Bradford, Ontario located adjacent to the Company’s existing Bradford facility. The Company will use this new facility to expand its processing operations at its
Bradford location. 
 MedReleaf launches AltaVie 
 In
April 2018, the company announced the introduction of AltaVie by MedReleaf, the Company’s premium recreational cannabis brand designed for a premium consumer who is curious, discerning about life in general and searching for physical, mental
and emotional enrichment. The AltaVie product line up will contain a robust assortment of premium offerings, putting an emphasis on strains and forms that will be equally popular with the premium consumer, those new to cannabis and those interested
in the wellness category, helping each segment get more out of life. 
 MedReleaf adds PINs to its medical cannabis products 

In April 2018, MedReleaf announced the introduction of Product Identification Numbers (“PINs”) for 57 of its unique medical cannabis products
including dried flower, oils, and capsules. Similar to traditional Drug Identification Numbers, PINs are designed to make it easier for employers and payers to classify and incorporate pharmaceutical and health care products into benefits coverage
plans. With the introduction of PINs, MedReleaf continues to demonstrate leadership among Canadian licensed producers to facilitate the coverage of medical cannabis on employer-sponsored benefits plans. 

MedReleaf partners with Niagara College 
 In April 2018,
MedReleaf announced that it has entered into a memorandum of understanding with Niagara College to foster the development of cannabis production expertise in Canada through its Graduate Certificate program in Commercial Cannabis Production,
Canada’s first postsecondary credential in this emerging field. By partnering with Niagara College, MedReleaf is proud to be offering financial support for students and to be sharing its expertise to help develop the program’s structure
and curriculum in order to advance the development of the Canadian cannabis industry. 
 Canadian and Israeli Tech Companies Join Forces to Compete in
Global Markets 
 The joint R&D project between MedReleaf and Israel’s Flora Fotonica to create new LED lighting systems with a special focus on
cannabis growing facilities, was selected by the Canada-Israel Industrial Research and Development Foundation (“CIIRDF”) as one of the eight new bilateral R&D projects in May 2018. Leveraging more than $4,700 from CIIRDF, these
bilateral R&D teams will combine the strengths and expertise of 20 Canadian and Israeli technology and research companies to develop new technologies with application in the agriculture, energy, aerospace, and information and communications
technologies sectors. 

  
 13 

 Reformulary Group signs MedReleaf as first Licensed Producer 

Reformulary Group, Canada’s leading, independent drug plan management company, announced in May 2018 that it has signed MedReleaf as its first Licensed
Producer of medical cannabis. The agreement will provide subscribers of Reformulary’s Cannabis Standard, the first cannabis formulary in Canada, with preferred pricing options. This partnership is a major step for Canadian employers looking to
navigate the process of covering medical cannabis. 
 Collaboration with CFL Alumni Association 

In May 2018, MedReleaf announced that it will collaborate with the Canadian Football League Alumni Association (“CFLAA”) in conducting an
observational study on the benefits of medical cannabis in treating chronic pain and related ailments in retired professional athletes. The collaboration will bring greater awareness to the potential health benefits of using medical cannabis in the
treatment of ailments that include chronic pain. 
 MedReleaf and BioPharma Services Inc. Announce Strategic Alliance 

In May 2018, MedReleaf and BioPharma Services Inc. (“BioPharma”) announced that they have entered into an exclusive agreement to conduct clinical
research for cannabis and cannabis derived products. BioPharma will provide medical, clinical, pharmacological, and lab expertise to expedite MedReleaf’s product strategy to support in-market products as
well as products under development for registration in Canadian and international markets. 
 Aurora Acquisition 

On May 14, 2018, it was announced that Aurora Cannabis Inc. (“Aurora”) and the Company entered into a definitive arrangement agreement (the
“Arrangement Agreement”) whereby Aurora would acquire all of the issued and outstanding common shares of the Company for approximately $3.2 billion on a fully dilutive basis (the “Aurora Transaction”). The proposed
transaction will bring together two premiere cannabis companies to create the scale the Company believes will be required for growth in Canada and globally. 

Under the terms of the Aurora Transaction, holders of the issued and outstanding common shares of the Company will receive 3.575 common shares of Aurora and
$0.000001 per common share of the Company held at on the date of conversion. The Aurora transaction contains customary provisions that includes for reciprocal termination fees of $80,000 and expense reimbursements fees of $15,000 if the transaction
is terminated in certain specified circumstances. The proposed transaction is subject to approval by the shareholders of MedReleaf. 

  
 14 

 RESULTS OF OPERATIONS FOR THE THREE AND TWELVE MONTHS ENDED MARCH 31, 2018 AND 2017 

SALES 
 The table below summarizes the
Company’s quarterly sales activities for 2018 and 2017: 
  

																																									
	 	 	 	 	 	 	 	 	Three months ended	 	 	 	 	 	 	 	 	 	 	 	Three months ended	 	 	 	 
	 	 	Year ended
Mar. 31 2018	 	 	Mar. 31,
2018	 	 	Dec. 31,
2017	 	 	Sep. 30,
2017	 	 	Jun. 30,
2017	 	 	Year ended
Mar. 31 2017	 	 	Mar. 31,
2017	 	 	Dec. 31,
2016	 	 	Sep. 30,
2016	 	 	Jun. 30,
2016	 
	 Dried cannabis sales
	 	 	34,061	 	 	 	9,222	 	 	 	8,573	 	 	 	7,693	 	 	 	8,573	 	 	 	37,950	 	 	 	9,062	 	 	 	9,831	 	 	 	10,475	 	 	 	8,582	 
	 Dried cannabis grams sold
	 	 	4,150,315	 	 	 	1,136,215	 	 	 	1,064,873	 	 	 	925,197	 	 	 	1,024,030	 	 	 	3,521,553	 	 	 	1,069,233	 	 	 	944,800	 	 	 	852,245	 	 	 	655,275	 
	 Average selling price, dried cannabis
	 	$	8.21	 	 	$	8.12	 	 	$	8.05	 	 	$	8.31	 	 	$	8.37	 	 	$	10.78	 	 	$	8.48	 	 	$	10.41	 	 	$	12.29	 	 	$	13.10	 
	 Extract sales
	 	 	7,980	 	 	 	2,370	 	 	 	2,349	 	 	 	1,760	 	 	 	1,501	 	 	 	1,263	 	 	 	967	 	 	 	296	 	 	 	—  	 	 	 	—  	 
	 Equivalent grams sold
	 	 	745,898	 	 	 	288,428	 	 	 	198,617	 	 	 	125,954	 	 	 	132,899	 	 	 	146,551	 	 	 	98,092	 	 	 	48,459	 	 	 	—  	 	 	 	—  	 
	 Adjusted equivalent grams sold 1 
	 	 	884,091	 	 	 	288,428	 	 	 	258,615	 	 	 	164,003	 	 	 	173,045	 	 	 	176,183	 	 	 	127,724	 	 	 	48,459	 	 	 	—  	 	 	 	—  	 
	 Average selling price, extract cannabis
	 	$	10.70	 	 	$	8.22	 	 	$	11.83	 	 	$	13.97	 	 	$	11.29	 	 	$	8.62	 	 	$	9.86	 	 	$	6.11	 	 	$	0.00	 	 	$	0.00	 
	 Adjusted average selling price, extract cannabis
	 	$	9.03	 	 	$	8.22	 	 	$	9.08	 	 	$	10.73	 	 	$	8.67	 	 	$	7.17	 	 	$	7.57	 	 	$	6.11	 	 	$	0.00	 	 	$	0.00	 
	 Other revenue
	 	 	1,605	 	 	 	422	 	 	 	428	 	 	 	368	 	 	 	387	 	 	 	1,126	 	 	 	331	 	 	 	299	 	 	 	274	 	 	 	222	 
	 Total sales
	 	 	43,646	 	 	 	12,014	 	 	 	11,350	 	 	 	9,821	 	 	 	10,461	 	 	 	40,339	 	 	 	10,360	 	 	 	10,426	 	 	 	10,749	 	 	 	8,804	 
	 Total grams sold
	 	 	4,896,213	 	 	 	1,424,643	 	 	 	1,263,490	 	 	 	1,051,151	 	 	 	1,156,929	 	 	 	3,668,104	 	 	 	1,167,325	 	 	 	993,259	 	 	 	852,245	 	 	 	655,275	 
	 Adjusted total grams sold 1 
	 	 	5,034,406	 	 	 	1,424,643	 	 	 	1,323,488	 	 	 	1,089,200	 	 	 	1,197,075	 	 	 	3,697,736	 	 	 	1,196,957	 	 	 	993,259	 	 	 	852,245	 	 	 	655,275	 
	 Total average selling price
	 	$	8.91	 	 	$	8.43	 	 	$	8.98	 	 	$	9.34	 	 	$	9.04	 	 	$	11.00	 	 	$	8.87	 	 	$	10.50	 	 	$	12.61	 	 	$	13.44	 
	 Adjusted total average selling price 1

	 	$	8.67	 	 	$	8.43	 	 	$	8.58	 	 	$	9.02	 	 	$	8.74	 	 	$	10.91	 	 	$	8.66	 	 	$	10.50	 	 	$	12.61	 	 	$	13.44	 

  

	1 	 As defined. See “Non-IFRS Measures” section for discussion on
how equivalent grams and kilograms are calculated. 

 Sales for the three months ended March 31, 2018 were $12,014 and increased
$1,654 or 16% compared to the three months ended March 31, 2017 of $10,360. Sales for the year ended March 31, 2018 were $43,646 and increased $3,307 or 8% compared to the year ended March 31, 2017 of $40,339. 

Sales growth was primarily the result of increased production capacity, patient demand, yield improvements, and the continued growth of cannabis oil extracts
for sale. Throughout the years ended March 31, 2018 and 2017, the Company’s Markham Facility was operating at full capacity (based on square footage). In November 2016, Health Canada approved the Company to produce and sell cannabis oil
extracts. 
 During the three months ended March 31, 2018, 1,425 adjusted kilograms of cannabis products were sold at an adjusted average selling price
of $8.43. This represents an increase in volume of 228 kilograms sold compared to an adjusted 1,197 kilograms sold during the three months ended March 31, 2017, at an adjusted total average selling price of $8.66. 

During the year ended March 31, 2018, an adjusted 5,034 kilograms of cannabis products were sold at an adjusted average selling price of $8.67 per gram.
This represents an increase of 1,337 kilograms or 36% compared to the adjusted 3,698 kilograms sold during the year ended March 31, 2017, at an adjusted average selling price of $10.91 per gram 

The average selling price was calculated by taking net sales divided by number of adjusted grams sold during the period. Increased sales volumes during the
three and twelve months ended March 31, 2018 were the result of increased production capacity, increased patient demand, yield improvements and the introduction of cannabis oil extracts for sale. As a result of the VAC Policy, the Company also
began to offer discounts to qualifying Veterans to assist with the non-reimbursable portion of their medication. The price restrictions came into effect in November 2016 and resulted in a reduction in average
selling price. Despite the discounts offered as part of the VAC policy, during the year ended March 31, 2018, the Company has continued to trend positively with modest gains due in part to successful product launches and increased demand for
premium products. 

  
 15 

 COST OF SALES 

Production costs consist of labour, materials, consumables, supplies, overhead, amortization on production equipment, shipping, packaging and other expenses
required to produce cannabis products sold during the period. Production costs related to the transformation of biological assets to the point of harvest are capitalized and included in the fair value measurement of biological assets. Once goods are
sold, the associated capitalized costs are recognized as production costs in the statement of operations in the related reporting period. 
 Biological
assets consist of cannabis plants measured at fair value less cost to sell up to the point of harvest and is inclusive of capitalized production costs. Changes in fair value less cost to sell of the biological assets during the reporting period
before harvest are recognized in the results of operations in the related reporting period. 
 Harvested cannabis is transferred from biological assets at
their fair value less cost to sell at harvest, which becomes the deemed cost for inventory which, upon sale, the fair value cost adjustment portion is expensed to finished harvest inventory sold and the capitalized cost portion is expensed to
production costs. Gross profit before gain on biological assets represents profit earned before the net impact of fair value gains and finished harvest inventory sold cost of sales that result from the transformation of biological assets. 

The fair value changes of the biological assets, inventory expensed, fair value recovery and impairments, and production costs that make up the total cost of
sales, for the three and twelve months ended March 31, 2018 and 2017, is presented in the table below: 
  

																																									
	 	  	 	 	 	 	 	 	Three months ended	 	 	 	 	 	 	 	 	 	 	 	Three months ended	 	 	 	 
	 	  	Year ended
Mar. 31
2018	 	 	Mar. 31,
2018	 	 	Dec. 31,
2017	 	 	Sep. 30,
2017	 	 	Jun. 30,
2017	 	 	Year ended
Mar. 31
2017	 	 	Mar. 31,
2017	 	 	Dec. 31,
2016	 	 	Sep. 30,
2016	 	 	Jun. 30,
2016	 
	 Production costs
	  	 	13,212	 	 	 	3,550	 	 	 	4,020	 	 	 	2,730	 	 	 	2,912	 	 	 	9,436	 	 	 	2,962	 	 	 	1,832	 	 	 	2,376	 	 	 	2,266	 
	 Fair value adjustment on inventory sold
	  	 	26,553	 	 	 	6,107	 	 	 	8,232	 	 	 	5,621	 	 	 	6,593	 	 	 	24,216	 	 	 	7,652	 	 	 	5,110	 	 	 	6,644	 	 	 	4,810	 
	 Fair value adjustment on biological assets
	  	 	(44,098	) 	 	 	(12,261	) 	 	 	(10,887	) 	 	 	(10,277	) 	 	 	(10,673	) 	 	 	(31,252	) 	 	 	(10,570	) 	 	 	(6,230	) 	 	 	(7,905	) 	 	 	(6,547	) 
	 Fair value adjustment on carrying inventory
	  	 	1,309	 	 	 	1,309	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 
		  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Cost of sales
	  	 	(3,024	) 	 	 	(1,295	) 	 	 	1,365	 	 	 	(1,926	) 	 	 	(1,168	) 	 	 	2,400	 	 	 	44	 	 	 	712	 	 	 	1,115	 	 	 	529	 

 Cost of sales for the three months ended March 31, 2018 were ($1,295), representing a decrease of $1,339 compared to the
prior year same period cost of sales of $44. This decrease in cost of sales is due primarily to an increase in fair value gains on changes in biological assets that resulted from increased production, yield improvements, and the valuation of
extracts. 
 Production costs during the three months ended March 31, 2018 were $3,550, an increase of $588 or 20%, compared to the year ended
March 31, 2017. Production costs increased due to an increase in production capacity in Bradford that resulted in higher yields and increased sales. 

Cost of sales for the year ended March 31, 2018 were ($3,024), representing a decrease of $5,424, compared to the prior year same period cost of sales of
$2,400. This decrease in cost of sales is due primarily to an increase in fair value gains on changes in biological assets that resulted from increased production, yield improvements and the valuation of extracts. 

Production costs during the year ended March 31, 2018 were $13,212, representing an increase of $3,776 or 40%, compared to the year ended March 31,
2017. Production costs increased due to an increase in production capacity that resulted in higher yields and increased sales. 
 Fair value adjustment
relating to inventory sold, which represents the fair value cost adjustment portion of cost of goods sold that arise from biological asset transformation and harvest, were $26,553 for the year ended March 31, 2018, representing an increase of
$2,337 or 10%, compared to the same period of the prior year due primarily to sales growth which resulted in increased production. 
 Production costs and
cost of finished inventory harvest sold were partially offset by fair value adjustment on biological assets. Fair value adjustments are sensitive to changes in the Company’s average selling price and other changes in the Company’s
valuation estimates which include, but are not limited to, average selling prices, remaining costs to complete, the allocation rate and method of production costs, the stage of plant growth and cycles and expected yields. Any changes in underlying
estimates and assumptions used to determine fair value gains on the transformation of biological assets could have a negative impact on expected gains. 

  
 16 

 GROSS PROFIT 

Gross profit, including gain on fair value changes of biological assets for the three months ended March 31, 2018 and 2017 was $13,309 and $10,316 or 111%
and 100% of sales, respectively. Gross profit, including gain on fair value changes of biological assets for the years ended March 31, 2018 and 2017 was $46,670 and $37,939, or 107% and 94% of sales, respectively. Gross profit increased during
the three and twelve months ended March 31, 2018 compared to the same periods of fiscal 2017, primarily due to an increase in sales and an increase in fair value gains driven by increased production capacity, yield improvements, and the sale of
extracts commencing in November 2016. Gross profit adjusted for the fair value incremental impact of biological assets is presented below, see “Adjusted Product Contribution Margin (Non-IFRS
Measure)”. 
 EXPENSES 
  

																																									
	 	  	 Year ended
	 	 	 	 	 	Three months ended	 	 	 	 	 	Year ended	 	 	 	 	 	Three months ended	 	 	 	 
	 	  	Mar. 31
2018	 	 	Mar. 31,
2018	 	 	Dec. 31,
2017	 	 	Sep. 30,
2017	 	 	Jun. 30,
2017	 	 	Mar. 31
2017	 	 	Mar. 31,
2017	 	 	Dec. 31,
2016	 	 	Sep. 30,
2016	 	 	Jun. 30,
2016	 
	 Selling and marketing
	  	 	11,438	 	 	 	4,488	 	 	 	2,610	 	 	 	2,331	 	 	 	2,009	 	 	 	7,181	 	 	 	2,061	 	 	 	1,742	 	 	 	1,815	 	 	 	1,563	 
	 General and administrative
	  	 	34,482	 	 	 	11,032	 	 	 	9,665	 	 	 	8,600	 	 	 	5,185	 	 	 	13,700	 	 	 	4,877	 	 	 	5,162	 	 	 	2,066	 	 	 	1,595	 
	 Research and development
	  	 	1,128	 	 	 	242	 	 	 	187	 	 	 	317	 	 	 	382	 	 	 	875	 	 	 	322	 	 	 	150	 	 	 	186	 	 	 	217	 
	 Amortization of property, plant and equipment
	  	 	1,983	 	 	 	549	 	 	 	678	 	 	 	359	 	 	 	397	 	 	 	495	 	 	 	162	 	 	 	130	 	 	 	109	 	 	 	94	 
	 Amortization of intangible assets
	  	 	632	 	 	 	475	 	 	 	157	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 
	 Initial public offering related costs
	  	 	2,611	 	 	 	—  	 	 	 	—  	 	 	 	102	 	 	 	2,509	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 
	 Fair value loss on shareholder loans
	  	 	192	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	192	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 
	 Fair value loss on deferred share units
	  	 	428	 	 	 	16	 	 	 	412	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 
	 Interest income
	  	 	(1,271	) 	 	 	(909	) 	 	 	(223	) 	 	 	(124	) 	 	 	(15	) 	 	 	(75	) 	 	 	(56	) 	 	 	(13	) 	 	 	(2	) 	 	 	(4	) 
	 Finance costs
	  	 	694	 	 	 	176	 	 	 	169	 	 	 	109	 	 	 	240	 	 	 	121	 	 	 	59	 	 	 	16	 	 	 	23	 	 	 	23	 
		  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Total expenses
	  	 	52,317	 	 	 	16,069	 	 	 	13,655	 	 	 	11,694	 	 	 	10,899	 	 	 	22,297	 	 	 	7,425	 	 	 	7,187	 	 	 	4,197	 	 	 	3,488	 
		  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Current income taxes
	  	 	(1,246	) 	 	 	(2,776	) 	 	 	(277	) 	 	 	1,479	 	 	 	328	 	 	 	1,798	 	 	 	1,798	 	 	 	—  	 	 	 	—  	 	 	 	—  	 
	 Deferred income taxes
	  	 	3,130	 	 	 	416	 	 	 	2,020	 	 	 	700	 	 	 	(6	) 	 	 	2,886	 	 	 	(1,094	) 	 	 	789	 	 	 	1,697	 	 	 	1,494	 

 Total expenses for the three and twelve months ended March 31, 2018 were $16,069 and $52,317, respectively, an increase
of $8,644 and $30,020, compared to the three and twelve months ended March 31, 2017 when total expenses were $7,425 and $22,297, respectively. The increase in total expenditures was mainly due to our investment in the recreational market and
development for international business initiatives, as well as continuous improvements in the Company’s research and development activities and increased operating and overhead expenses due to increased advertising and promotional expenses
related to the preparation of the Company’s launch of its recreational brand. 
 Selling and marketing expenses for the three and twelve months ended
March 31, 2018 were $4,488 and $11,438, an increase of $2,427 and $4,257, respectively compared to the three and twelve months ended March 31, 2017 selling and marketing expenses of $2,061 and $7,181, respectively. These expenses include
costs for patient education programs, marketing, promotions, sponsorship, and royalty fees. These increased expenditures in selling and marketing expenses were driven primarily by an increase in advertising and marketing and patient education
program fees to support ongoing strategy development and initiatives. This was offset by a royalty fee rebate applied during the year ended March 31, 2018 that reduced fees for the previous two quarters to nil. During the three and twelve
months ended March 31, 2018, the Company continued to expand its selling and marketing programs through participation in industry events, greater focus on brand and marketing strategies, and the attainment of new human resource talent to
support these initiatives. 
 The Company intends to continue to invest in selling and marketing initiatives throughout the next year to promote the
Company’s existing products and to prepare for the anticipated launch of the recreational market. 
 General and administrative (“G&A”)
expenses for the three and twelve months ended March 31, 2018 were $11,032 and $34,482 (92% and 79% of sales) increasing $6,155 and $20,782, respectively, compared to the three and twelve months ended March 31, 2017 expenses of $4,877 and
$13,700 (47% and 34% of sales). Increased G&A expenditures during the three and twelve months ended March 31, 2018 can be specifically attributed to stock based compensation expenses, fair value increase on the DSU plan, increase in payroll
costs due to increased human resource talent, new market research initiatives, overhead expenses related to the Bradford Facility, professional fees to support ongoing strategy development and general corporate matters, and costs required to report
as a publicly listed entity. 

  
 17 

 Research and development (“R&D”) costs for the three and twelve months ended March 31,
2018 were $242 and $1,128, representing a decrease of $80 and an increase of $253, from $322 and $875 for the three and twelve months ended March 31, 2017, respectively. This increase in R&D expenditures for the year ended March 31,
2018 was due primarily to new and ongoing initiatives, clinical trials and human resource additions to support product growth and development. 
 During the
three and twelve months ended March 31, 2018, the Company incurred nil and $2,611 in initial public company related costs. These costs include various professional services, legal, consulting, and program development fees incurred to support
the Company’s IPO. 
 Income taxes for the three and twelve months ended March 31, 2018 were ($2,360) and $1,884 (2017 – $704 and $4,684),
respectively. The Company is subject to current income taxes at a statutory rate of 25.0% however the effective tax rate for the three and twelve months ended March 31, 2018 differs from the statutory rate due to
non-deductible stock based compensation expense resulting in higher taxable income. All non-capital loss carry forwards were used during the year ended March 31,
2017. 
 Net loss for the three and twelve months ended March 31, 2018 was $812 and $7,531 (2017 – net income of $2,187 and $10,958),
respectively. Decrease in net income was primarily due to increased overhead expenses partially offset by increased sales and gross profit as the Company expanded production capacity, specifically driven by fair value gains experienced at Bradford
Facility. The main drivers of increased overhead expense for the three and twelve months ended March 31, 2018 were stock option expenses, IPO related costs, business development costs, investments in sales, marketing and brand development, and
other G&A expenses incurred to support the current and future growth of the Company. 
 ADJUSTED EBITDA (NON-IFRS MEASURE) 
  

																																									
	 	  	Year ended	 	 	 	 	 	Three months ended	 	 	 	 	 	Year ended	 	 	 	 	 	Three months ended	 	 	 	 
	 	  	Mar. 31
2018	 	 	Mar. 31,
2018	 	 	Dec. 31,
2017	 	 	Sep. 30,
2017	 	 	Jun. 30,
2017	 	 	Mar. 31
2017	 	 	Mar. 31,
2017	 	 	Dec. 31,
2016	 	 	Sep. 30,
2016	 	 	Jun. 30,
2016	 
	 Income (loss) before income taxes
	  	 	(5,647	) 	 	 	(3,172	) 	 	 	(3,258	) 	 	 	53	 	 	 	730	 	 	 	15,642	 	 	 	2,891	 	 	 	2,527	 	 	 	5,437	 	 	 	4,787	 
	 Adjustments:
	  				 				 				 				 				 				 				 				 				 			
	 Depreciation and amoritzation
	  	 	5,517	 	 	 	1,872	 	 	 	1,776	 	 	 	926	 	 	 	943	 	 	 	1,692	 	 	 	588	 	 	 	432	 	 	 	354	 	 	 	318	 
	 Fair value change in DSU
	  	 	428	 	 	 	16	 	 	 	412	 	 	 	—  	 	 	 	—  	 	 				 				 				 				 			
	 Stock-based compensation
	  	 	11,418	 	 	 	2,177	 	 	 	3,546	 	 	 	4,275	 	 	 	1,420	 	 	 	3,053	 	 	 	604	 	 	 	2,251	 	 	 	99	 	 	 	99	 
	 Interest income
	  	 	(1,271	) 	 	 	(909	) 	 	 	(223	) 	 	 	(124	) 	 	 	(15	) 	 	 	(75	) 	 	 	(56	) 	 	 	(13	) 	 	 	(2	) 	 	 	(4	) 
	 Finance costs
	  	 	694	 	 	 	176	 	 	 	169	 	 	 	109	 	 	 	240	 	 	 	121	 	 	 	59	 	 	 	16	 	 	 	23	 	 	 	23	 
	 Initial public offering related fees
	  	 	2,611	 	 	 	—  	 	 	 	—  	 	 	 	102	 	 	 	2,509	 	 	 	454	 	 	 	454	 	 	 	—  	 	 	 	—  	 	 	 	—  	 
	 Fair value loss on shareholder loans
	  	 	192	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	192	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 
	 Net impact, fair value of biological assets
	  	 	(16,236	) 	 	 	(4,845	) 	 	 	(2,655	) 	 	 	(4,656	) 	 	 	(4,080	) 	 	 	(7,036	) 	 	 	(2,918	) 	 	 	(1,120	) 	 	 	(1,261	) 	 	 	(1,737	) 
		  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Adjusted EBITDA
	  	 	(2,294	) 	 	 	(4,685	) 	 	 	(233	) 	 	 	685	 	 	 	1,939	 	 	 	13,851	 	 	 	1,622	 	 	 	4,093	 	 	 	4,650	 	 	 	3,486	 

 Adjusted EBITDA for the three and twelve months ended March 31, 2018 was ($4,685) and ($2,294), representing a decrease
of $6,307 and $16,145, compared to the three and twelve months ended March 31, 2017, respectively. The decrease in EBITDA was primarily due to the Company’s investment in the recreational market and its international business initiatives,
as well as continuous improvements in R&D activities. As a result, increased operating and overhead expenses, such as advertising and promotion, were incurred for the preparation of the Company’s launch of its recreational brand and other
initiatives. Additionally, the introduction of the VAC Policy whereby the Company began to offer discounts to qualifying Veterans to assist with the non-reimbursable portion of their medication, contributed to
a reduction in gross profit and EBITDA. 
 CASH COST PER GRAM SOLD
(NON-IFRS MEASURE) 
 The following are the Company’s cash production costs,
on a total and per gram and equivalent gram sold basis, for the years ended March 31, 2018 and 2017 as compared to reported production costs (excluding costs resulting from the fair value of biological assets), which represents cost of sales,
in accordance with IFRS: 

  
 18 

																																									
	 	 	Year ended	 	 	 	 	 	Three months ended	 	 	 	 	 	Year ended	 	 	 	 	 	Three months ended	 	 	 	 
	 	 	Mar. 31
2018	 	 	Mar. 31,
2018	 	 	Dec. 31,
2017	 	 	Sep. 30,
2017	 	 	Jun. 30,
2017	 	 	Mar. 31
2017	 	 	Mar. 31,
2017	 	 	Dec. 31,
2016	 	 	Sep. 30,
2016	 	 	Jun. 30,
2016	 
	 Production costs
	 	 	13,212	 	 	 	3,550	 	 	 	4,020	 	 	 	2,731	 	 	 	2,912	 	 	 	9,436	 	 	 	2,962	 	 	 	1,832	 	 	 	2,376	 	 	 	2,266	 
	 Amortization included in production costs
	 	 	(2,924	) 	 	 	(870	) 	 	 	(941	) 	 	 	(567	) 	 	 	(546	) 	 	 	(1,197	) 	 	 	(426	) 	 	 	(302	) 	 	 	(245	) 	 	 	(224	) 
	 Recovery of production costs
	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	405	 	 	 	(405	) 	 	 	—  	 
	 Post production costs
	 	 	(2,699	) 	 	 	(681	) 	 	 	(762	) 	 	 	(617	) 	 	 	(639	) 	 	 	(1,896	) 	 	 	(751	) 	 	 	(396	) 	 	 	(459	) 	 	 	(290	) 
		 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Cash production costs
	 	 	7,589	 	 	 	1,998	 	 	 	2,317	 	 	 	1,547	 	 	 	1,727	 	 	 	6,343	 	 	 	1,785	 	 	 	1,539	 	 	 	1,267	 	 	 	1,752	 
		 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Total grams sold
	 	 	4,896,213	 	 	 	1,424,643	 	 	 	1,263,490	 	 	 	1,051,151	 	 	 	1,156,929	 	 	 	3,668,104	 	 	 	1,167,325	 	 	 	993,259	 	 	 	852,245	 	 	 	655,275	 
	 Cash cost per total gram sold
	 	$	1.55	 	 	$	1.40	 	 	$	1.83	 	 	$	1.46	 	 	$	1.49	 	 	$	1.73	 	 	$	1.53	 	 	$	1.55	 	 	$	1.49	 	 	$	2.67	 
	 Change in conversion of equivalent grams
	 	 	138,193	 	 	 	—  	 	 	 	59,998	 	 	 	38,049	 	 	 	40,146	 	 	 	29,632	 	 	 	29,632	 	 	 	—  	 	 	 	—  	 	 	 	—  	 
	 Adjusted total grams sold 1 
	 	 	5,034,406	 	 	 	1,424,643	 	 	 	1,323,488	 	 	 	1,089,200	 	 	 	1,197,075	 	 	 	3,697,736	 	 	 	1,196,957	 	 	 	993,259	 	 	 	852,245	 	 	 	655,275	 
	 Adjusted cash cost per total gram sold
	 	$	1.51	 	 	$	1.40	 	 	$	1.75	 	 	$	1.42	 	 	$	1.44	 	 	$	1.72	 	 	$	1.49	 	 	$	1.55	 	 	$	1.49	 	 	$	2.67	 

  

	1 	 As defined. See “Non-IFRS Measures” section for discussion on
how equivalent grams and kilograms are calculated. 

 The cash cost per adjusted total gram sold for the three months ended March 31,
2018 and 2017, was $1.40 and $1.49, respectively, a decrease of $0.09 or 6% compared to the three months ended March 31, 2017. The adjusted cash cost per gram sold for the years ended March 31, 2018 and 2017, were $1.51 and $1.72,
respectively, a decrease of $0.21 or 12% compared to the year ended March 31, 2017. The cost improvements per gram were due to increased production and yield improvements that resulted in improved efficiencies in labour utilization and
allocation of fixed costs. 
 No recovery was recognized during the year ended March 31, 2018. During the year ended March 31, 2017, the Company
recognized a recovery of inventory that resulted in a net decrease in production costs of $405. This recovery was primarily the result of dried cannabis held for extraction that was produced during the nine months ended December 31, 2016 but
was not valued until the Markham Commercial Licence was amended to allow the Company to produce cannabis oil. While the adjustment does not affect the annual results, it does impact production costs for the three months ended December 31, 2016
and September 30, 2016, and therefore, has been excluded and then added back in estimating cash production costs for those quarters. 

ADJUSTED PRODUCT CONTRIBUTION MARGIN
(NON-IFRS MEASURE) 
 The following is the Company’s Adjusted Product
Contribution Margin compared to reported gross profit, which includes the gain on changes in fair value of biological assets, in accordance with IFRS for the years ended March 31, 2018 and 2017: 

 

																																									
	 	 	Year ended	 	 	 	 	 	Three months ended	 	 	 	 	 	Year ended	 	 	 	 	 	Three months ended	 	 	 	 
	 	 	Mar. 31 2018	 	 	Mar. 31,
2018	 	 	Dec. 31,
2017	 	 	Sep. 30,
2017	 	 	Jun. 30,
2017	 	 	Mar. 31 2017	 	 	Mar. 31,
2017	 	 	Dec. 31,
2016	 	 	Sep. 30,
2016	 	 	Jun. 30,
2016	 
	 Gross profit
	 	 	46,670	 	 	 	13,309	 	 	 	9,985	 	 	 	11,747	 	 	 	11,629	 	 	 	37,939	 	 	 	10,316	 	 	 	9,714	 	 	 	9,634	 	 	 	8,275	 
	 Adjustments:
	 				 				 				 				 				 				 				 				 				 			
	 Fair value adjustment on inventory sold
	 	 	26,553	 	 	 	6,107	 	 	 	8,232	 	 	 	5,621	 	 	 	6,593	 	 	 	24,216	 	 	 	7,652	 	 	 	5,110	 	 	 	6,644	 	 	 	4,810	 
	 Fair value adjustment on biological assets
	 	 	(44,098	) 	 	 	(12,261	) 	 	 	(10,887	) 	 	 	(10,277	) 	 	 	(10,673	) 	 	 	(31,252	) 	 	 	(10,570	) 	 	 	(6,230	) 	 	 	(7,905	) 	 	 	(6,547	) 
	 Fair value adjustment on carrying inventory
	 	 	1,309	 	 	 	1,309	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 
		 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Net gain on fair value measurement of biological assets
	 	 	(16,236	) 	 	 	(4,845	) 	 	 	(2,655	) 	 	 	(4,656	) 	 	 	(4,080	) 	 	 	(7,036	) 	 	 	(2,918	) 	 	 	(1,120	) 	 	 	(1,261	) 	 	 	(1,737	) 
		 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Adjusted product contribution margin
	 	 	30,434	 	 	 	8,464	 	 	 	7,330	 	 	 	7,091	 	 	 	7,549	 	 	 	30,903	 	 	 	7,398	 	 	 	8,594	 	 	 	8,373	 	 	 	6,538	 
		 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Total grams sold
	 	 	4,896,213	 	 	 	1,424,643	 	 	 	1,263,490	 	 	 	1,051,151	 	 	 	1,156,929	 	 	 	3,668,104	 	 	 	1,167,325	 	 	 	993,259	 	 	 	852,245	 	 	 	655,275	 
	 Adjusted product contribution per total gram sold
	 	$	6.22	 	 	$	5.94	 	 	$	5.80	 	 	$	6.75	 	 	$	6.53	 	 	$	8.42	 	 	$	6.34	 	 	$	8.65	 	 	$	9.82	 	 	$	9.98	 
	 Adjusted total grams sold 1 
	 	 	5,034,406	 	 	 	1,424,643	 	 	 	1,323,488	 	 	 	1,089,200	 	 	 	1,197,075	 	 	 	3,697,736	 	 	 	1,196,957	 	 	 	993,259	 	 	 	852,245	 	 	 	655,275	 
	 Adjusted product contribution per adjusted total gram sold
	 	$	6.05	 	 	$	5.94	 	 	$	5.54	 	 	$	6.51	 	 	$	6.31	 	 	$	8.36	 	 	$	6.18	 	 	$	8.65	 	 	$	9.82	 	 	$	9.98	 

  

	1 	 As defined. See “Non-IFRS Measures” section for discussion on
how equivalent grams and kilograms are calculated. 

 Adjusted product contribution margin for the three months ended March 31, 2018
was $8,464 or $5.94 per adjusted gram sold, an increase of $1,066, compared to $7,398 or $6.18 per adjusted gram sold, for the three months ended March 31, 2017. This increase was due to sales growth which was primarily the result of increased
patient demand, yield improvements, and the continued growth of cannabis oil extracts for sale. 
 Adjusted product contribution margin for the year ended
March 31, 2018 was $30,434 or $6.05 per adjusted gram sold, a decrease of $469, compared to $30,903 or $8.36 per adjusted gram for the year ended March 31, 2017. This marginal decrease in Adjusted Product Contribution Margin was the result
of increased labour costs and depreciation attributable to the Bradford Facility expansion, in addition to both price and volume limits imposed by the VAC Policy whereby the Company began to offer discounts to qualifying Veterans to assist with the non-reimbursable portion of their medication. 

  
 19 

 LIQUIDITY, CAPITAL RESOURCES AND FINANCING 

The Company believes it has sufficient liquidity to support continued operations and to meet its short-term liabilities and commitments as they become due. The
Company manages its liquidity risk by monitoring its operating requirements. The Company prepares budgets and cash forecasts to ensure it has sufficient funds to fulfill obligations. In managing working capital, the Company may, where necessary,
limit or control the amount of working capital used for operations or other initiatives, pursue additional financing, manage the timing of its expenditures, or sell assets. 

The table below summarizes total capitalization as at March 31, 2018 and 2017: 
  

									
	 As at March 31,
	  	2018	 	  	2017	 
	 Term credit facility
	  	 	9,750	 	  	 	—  	 
	 Revolving credit facility
	  	 	845	 	  	 	—  	 
	 Collateralized credit facility
	  	 	—  	 	  	 	7,500	 
	 Shareholder loans
	  	 	—  	 	  	 	2,189	 
		  	  
	  
	 	  	  
	  
	 
	 Total debt
	  	 	10,595	 	  	 	9,689	 
		  	  
	  
	 	  	  
	  
	 
	 Total equity
	  	 	328,044	 	  	 	52,320	 
		  	  
	  
	 	  	  
	  
	 
	 Total capitalization
	  	 	338,639	 	  	 	62,009	 
		  	  
	  
	 	  	  
	  
	 

 On April 17, 2017, the Company entered into a new $20,000 Credit Agreement with a major Canadian bank. The Credit
Agreement provides the Company with a $10,000 term credit facility and a $10,000 revolving credit facility (together the “New Credit Facility”), subject to covenant requirements. The Former Credit Facility lender continues to indirectly
hold 50% of the Company’s outstanding debt under the New Credit Facility, which is administered by and payable to the New Credit Facility lender. The Company utilized the proceeds of the term facility to repay all principal and interest
outstanding of $7,500 on the Former Credit Facility, the balance was used to fund the build-out of the Bradford Facility. As of the date of this MD&A, the Company advanced $845 from the revolving credit
facility. 
 On November 10, 2017, the Company amended the Credit Agreement to remove certain financial covenants (the “November 2017 Amended
Credit Agreement”). The November 2017 Amended Credit Agreement also removed the election to defer principal payments, and as such, quarterly principal repayments of $250 are required each three month period ended December 31,
March 31, June 30, and December 31. The first payment was made on January 2, 2018. 
 On March 29, 2018, the Company further amended the
Credit Agreement (the “March 2018 Amended Credit Agreement”). Under the March 2018 Amended Credit Agreement, the interest coverage ratio, the total leverage ratio and the capitalization ratio under the Credit Agreement were removed and
replaced with the following financial covenants for periods July 1, 2019 and onwards: (i) maintaining a total leverage ratio of not more than 3.00 to 1.00; (ii) maintaining shareholders equity of not less than a shareholders’ equity
floor as defined in the March 2018 Amended Credit Agreement; and (iii) maintaining a fixed charge coverage ratio of not less than 1.25 to 1.00. For periods prior to July 1, 2019, the Company must maintain a cash and cash equivalent balance
of at least 150% of the aggregate outstanding principle balance of all amounts borrowed under the Credit Agreement. 
 As at March 31, 2018, the
Company was in compliance with all covenants contained in the March 2018 Amended Credit Agreement. 
 On June 7, 2017, the Company completed its IPO
and secondary offering (together, the “Offering”) of an aggregate of 10,600,000 common shares (the “Offered Shares”) of the Company at a price of $9.50 per Offered Share (the “Offering Price”) for aggregate gross
proceeds of $100,700, with certain selling shareholders receiving $20,000 of the gross proceeds as part of a secondary offering. 

  
 20 

 On December 4, 2017, the Company closed its December 2017 Offering, which was a short form prospectus
offering on a “bought deal basis”, pursuant to which the Company issued an aggregate of 3,625,470 Common Shares at a price of $16.55 per Common Share, for aggregate gross proceeds to the Company of $60,002. 

On January 31, 2018, MedReleaf closed a short form prospectus offering on a “bought deal basis”, pursuant to which the Company issued an
aggregate of 5,000,000 units (the “Units”) of the Company at a price of $26.50 per Unit for aggregate gross process of $132,500. 
 While the
Company believes that it has the ability to generate sufficient amounts of cash and cash equivalents, in the short-term and long term, to maintain current operational capacity, additional sources of capital and/or financing will be required to meet
planned growth. Liquidity will fluctuate based on demand for working capital resources required for these initiatives. 
 The Company is subject to risks
and uncertainties that could significantly impair its ability to raise funds through debt or equity or to generate profits sufficient to meet future obligations, operational, or development needs. See “Risks” for information on the risks
and uncertainties that could have a negative effect on the Company’s liquidity. 
 The table below sets out the cash and working capital (including
cash and cash equivalents) as at March 31, 2018 and 2017: 
  

									
	 As at March 31,
	  	2018	 	  	2017	 
	 Cash and cash equivalents
	  	 	215,868	 	  	 	12,899	 
	 Working capital (including cash and cash equivalents)
	  	 	255,738	 	  	 	24,705	 
		  	  
	  
	 	  	  
	  
	 

 The Company’s working capital as at March 31, 2018, was $255,738 and has increased $231,033 compared to
March 31, 2017 ($24,705). This increase in working capital was due primarily to the net proceeds of $256,005 raised from the issuance of share capital and warrants. Cash and cash equivalents is inclusive of $5,000 invested in short-term,
cashable Guaranteed Investment Certificates (“GICs”). 
 Accounts receivable as at March 31, 2018 was $10,750, an increase of $797 from
March 31, 2017 of $9,953. This increase was primarily driven by the sales tax refunds receivable, partially offset by a decrease in trade accounts receivable due to increased efforts in collection. Subsequent to March 31, 2018, the Company
received an HST refund of $2,820 in settlement of sales tax refunds receivable included in accounts receivable as at March 31, 2018. 
 Inventories as
at March 31, 2018 were $32,856, an increase of $23,345, compared to March 31, 2017 of $9,511. The increase in inventories was due to increased production, deemed costs arising from fair value gains on biological assets, and the addition of
cannabis oil inventory that were previously not valued, partially offset by the fair value adjustment of the carrying value of inventory. 
 Biological
assets as at March 31, 2018 were $3,202, an increase of $393 compared to March 31, 2017 of $2,809. This increase was due to increased fair value gains on biological assets resulting from increased production and the addition of cannabis
oil extracts that increased the expected yield and fair value of biological assets. 
 Accounts payable and accrued liabilities as at March 31, 2018
were $16,989, an increase of $9,754 from March 31, 2017 of $7,235. The increase is primarily due to progress billings associated with the second phase of the Bradford Facility construction project. 

  
 21 

 The tables below summarize the Company’s cash flows for years ended March 31, 2018 and 2017: 

 

									
	 Years ended March 31,
	  	2018	 	  	2017	 
	 Operating activities
	  	 	(13,156	) 	  	 	12,188	 
	 Financing activities
	  	 	259,647	 	  	 	31,714	 
	 Investing activities
	  	 	(43,522	) 	  	 	(31,920	) 
		  	  
	  
	 	  	  
	  
	 
	 Cash and cash equivalents, beginning of period
	  	 	12,899	 	  	 	917	 
	 Cash and cash equivalents, end of period
	  	 	215,868	 	  	 	12,899	 
		  	  
	  
	 	  	  
	  
	 

 Cash and cash equivalents as at March 31, 2018 were $215,868, which was $202,969 higher than the balance of $12,899 as at
March 31, 2017. Increase in cash and cash equivalents was primarily due to the net proceeds from the IPO of Common Shares of the Company, as well as the December 2017 and January 2018 Offerings, offset by additions to property, plant and
equipment relating to construction at the Bradford Facility. 
 CASH FLOW USED IN
OPERATING ACTIVITIES 
 Cash flow used in operating activities for the year ended March 31, 2018 was $13,156,
representing a decrease of $25,344 over the cash flow provided by operating activities of $12,188 for the year ended March 31, 2017. Increased operating and overhead expenses due to advertising and promotional efforts related to the preparation
of the Company’s launch of its recreational brand, as well as increased professional fees to support ongoing strategy development and general corporate matters, payroll costs due to increased human resource talent, and costs required to report
as a publicly listed entity, resulted in the additional use of cash flow during the year ended March 31, 2018, compared to the year ended March 31, 2017. See “Expenses” under “Results of Operations for years ended
March 31, 2018 and 2017” above. 
 CASH FLOW PROVIDED BY FINANCING
ACTIVITIES 
 Cash flow provided by financing activities for the year ended March 31, 2018 was $259,647, an increase of $227,933
compared to cash flow provided by financing activities for the year ended March 31, 2017 of $31,714. The increase in cash flows provided by financing activities was primarily due to net proceeds from the issuance of share capital and warrants
of $256,005 (2017—$24,694). 
 CASH FLOW USED IN INVESTING
ACTIVITIES 
 Cash flow used in investing activities totaled $43,522 for the year ended March 31, 2018. This is an increase of
$11,602 compared to the year ended March 31, 2017 of $31,920. This increase in cash flows used in investing activities was primarily due to an increase in additions to property, plant and equipment during the year, which included additional
spending on production rooms, leasehold improvements, furniture and other equipment related to the construction and development of the Bradford facility, as well as additions to intangible assets. 

  
 22 

 COMMITMENTS 

The Company has debt, operating lease contractual obligations, and construction related contractual obligations that it has committed to and which are
presented in the table below: 
  

																					
	 	  	Less than 1 year	 	  	1-3 years	 	  	4-5 years	 	  	After 5 years	 	  	Total	 
	 Operating lease1 
	  	 	289	 	  	 	620	 	  	 	675	 	  	 	358	 	  	 	1,942	 
	 Term credit facility
	  	 	1,000	 	  	 	2,000	 	  	 	2,000	 	  	 	4,750	 	  	 	9,750	 
	 Revolving credit facility
	  	 	845	 	  	 	—  	 	  	 	—  	 	  	 	—  	 	  	 	845	 
	 Capital projects2 
	  	 	8,325	 	  	 	—  	 	  	 	—  	 	  	 	—  	 	  	 	8,325	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 

  

	1 	 Operating lease is exclusive of common area costs. 

	2 	 Relates to capital commitments that the Company has made to specific vendors for capital projects pertaining to
on-going construction projects. 

 As at March 31, 2018, the first phase of the Bradford
Facility construction project has been completed and the Company planted its first cannabis plants at the facility. Approximately $8,325 of future payments have been committed in relation to the continuous capital development of the Bradford
Facility. Furthermore, the Company is currently committed to making payments under an operating lease for its Markham Facilities as well as payments with regards to its debt obligations. 

On March 1, 2018, the Company signed a waiver committing the Company to purchase a green house and land in Exeter, Ontario for the purchase price of
$26,000 plus applicable taxes and closing costs. The Company subsequently closed the transaction on April 11, 2018. 
 The Company has an obligation to
purchase additional intangible assets on each of December 8, 2018, 2019, and 2020 by way of issuance of Common Shares, contingent on the seller meeting specified targets. Should the seller satisfy the specified targets on the dates listed
above, the purchase price of each intangible asset will be $3,750, $3,250, and $3,000, respectively, as previously agreed upon. As at March 31, 2018, this obligation has not been reflected in the consolidated financial statements. 

OFF-BALANCE SHEET ARRANGEMENTS 

The Company has the following off-balance sheet arrangements in addition to those as described below under
“Transactions with Related Parties”. 
 On April 19, 2015, as part of an amendment to the Licence Agreement with Tikun Olam (both as defined
below under “Transactions with Related Parties”), Tikun Olam agreed to reduce future royalties owed by MedReleaf under the terms of the original licence agreement by an amount equal to $250 which is to be offset against future royalties
owed by MedReleaf at the earliest possible time provided that this does not occur prior to July 17, 2017. As at March 31, 2018, $250 of royalty fees were applied against the $250 Royalty Rebate, reducing the Royalty Rebate to nil. 

LEGAL PROCEEDINGS 
 The
Company currently, and from time to time, is involved in legal proceedings, as well as demands, claims and threatened litigation, that arise in the normal course of the Company’s business. The Company is currently engaged in a dispute before
the Agriculture Food and Rural Affairs Appeals (“AFRAA”) Tribunal in connection with an unsuccessful unionization effort by United Food and Commercial Workers Union (“UFCW Canada”) at the Markham Facility. In 2015, UFCW Canada
filed applications for union certification before the Ontario Labour Relations Board (the “OLRB”) and the Canada Industrial Relations Board (the “CIRB”). The OLRB ordered that a vote of employees be held, which received a
majority of votes against unionization. The OLRB also found that it lacked jurisdiction to consider the UFCW Canada’s application for certification because the Company is not governed by the Labour Relations Act (Ontario) and is instead
governed by the Agricultural Employees Protection Act (“AEPA”). UFCW Canada’s application for certification to the CIRB was similarly dismissed on the basis that the CIRB lacked jurisdiction. UFCW Canada subsequently initiated the
current complaint before the AFRAA Tribunal, which includes a challenge of the constitutionality of the AEPA. 

  
 23 

 MedReleaf believes that the ultimate amount of liability, if any, for any pending claims of any type (either
alone or combined, and including the application before the AFRAA Tribunal) will not materially affect its financial position or results of operations. However, the ultimate outcome of any litigation is uncertain and, regardless of outcome,
litigation can have an adverse impact on the Company’s business because of defence costs, negative publicity, diversion of management resources and other factors. See “Risks and Uncertainties”. 

TRANSACTIONS WITH RELATED PARTIES 
 The Company has
engaged in transactions and has outstanding balances with related parties of the Company. 
 Included in G&A expenses for the year ended March 31,
2018 was nil (2017—$122) in consulting fees paid to Two Plus Management Corp. a consulting company whose principal is Neil Closner, an executive officer and shareholder of the Company. 

Included in G&A expenses for the year ended March 31, 2018 was $15 (2017—$57) in consulting fees paid to Vive Technologies Inc., whose principal
is Jeremy Friedberg, a consultant and shareholder of the Company. 
 On July 17, 2013, the Company entered into a licence and distribution agreement
(“Licence Agreement”) for a term of 12 years (renewable for a further five-year period) with Tikun Olam Ltd., a corporation incorporated under the laws of Israel and a shareholder of the Company. The Licence Agreement grants the Company
exclusive licence to use Tikun Olam Ltd.‘s intellectual property, as defined in the Licence Agreement, for the cultivation, processing, marketing, sale and other commercialization of medical cannabis in Canada and New York State. 

Under the Licence Agreement, the Company is subject to royalties on certain net revenue in connection with Tikun Olam Ltd.‘s intellectual property
commencing in the third year of the term of the Licence Agreement (July 18, 2015). Total royalties included in selling and marketing expenses for the year ended March 31, 2018 was $272 (2017—$535). In accordance with the share purchase
promissory note, these royalties, less applicable withholding taxes, have been offset against the share purchase loan outstanding. In consideration for certain licensing concessions, Tikun Olam Ltd. agreed to reduce future royalties owed by the
Company under the terms of the original licence agreement by an amount equal to $250 (the “Royalty Rebate”), which is to be offset against future royalties owed by the Company commencing July 17, 2017. During the year ended
March 31, 2018, $250 of royalty fees were applied against the $250 Royalty Rebate, reducing the Royalty Rebate to nil. As at March 31, 2018, the Company included in accrued liabilities $151 (2017—$103) of withholding taxes payable on
behalf of Tikun Olam Ltd. and $522 (2017—$146) of royalty fees payable. 
 These transactions are in the normal course of business and are measured at
their exchange amounts, as mutually agreed to by the related parties and the Company. 
 CRITICAL ACCOUNTING ESTIMATES 

The preparation of the Financial Statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, sales
and expenses, and the related disclosure of contingent liabilities. The Company bases its judgments on historical experience and on various other assumptions that it believes are reasonable under the circumstances, the results of which form the
basis for making estimates about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. 

  
 24 

 The following discusses the most significant accounting judgments and estimates that the Company has made in
the preparation of the Financial Statements. 
 INVENTORY 

Inventory, consisting of harvested goods, cannabis oil extracts and accessories is measured at the lower of cost and net realizable value. 

Cost includes production costs directly attributable to the production or purchase of inventory items as well as deemed costs attributable to fair value gains
on the transformation of biological assets. These deemed costs are estimated using assumptions that include, but are not limited to, average selling prices, remaining costs to complete, the allocation rate and method of production costs, the stage
of plant growth and cycles, and expected yields. Any change in these assumptions could negatively impact operational results, the actual realizable value of inventory and future expected gains. 

Cannabis is measured and weighed at various stages throughout its life and production cycle. Due to its biological nature, cannabis loses moisture, and
therefore weight over time. The Company, in measuring inventory, must make assumptions as to the amount of loss attributable to moisture loss or evaporation, which may result in an actual finished product weight less than was estimated. 

Extracts are a by-product that are derived from dried cannabis. Extracts are added to oils and sold as cannabis oil in
vials or capsules and are priced based on the total combined amount of THC and CBD content. The Company estimates the amount of THC and CBD expected to be derived from each gram of dried cannabis. 

BIOLOGICAL ASSETS 
 The
Company measures biological assets consisting of cannabis plants at fair value less costs to sell up to the point of harvest. Production costs related to the transformation of biological assets to the point of harvest are capitalized and included in
the fair value measurement of biological assets. Agricultural produce consisting of cannabis is measured at fair value less costs to sell at the point of harvest, which becomes the basis for the cost of harvested goods inventories after harvest.

 Gains or losses arising from changes in fair value less costs to sell during the years, exclusive of capitalized production costs, are included in the
results of operations of the related year. Upon harvest, capitalized production costs are transferred to finished harvest and included in the results of operations during the year in which the harvested cannabis is sold and revenue recognized. 

The Company determines the fair value of biological assets using a model-based approach that incorporates interdependent estimates and assumptions including
the most recent three-month average selling price, expected yields, the stage of growth, the average cultivation time to the point of harvest, the rate of consumption, the expected remaining costs to sell, and is then risk adjusted at each stage of
growth to determine the weighted average fair value “deemed cost” per gram. 
 ESTIMATED USEFUL
LIVES AND DEPRECIATION OF PROPERTY AND EQUIPMENT 

The depreciation of property and equipment is dependent on estimates of the useful lives, which are determined through the exercise of judgement. Actual useful
lives may differ from those estimates and may require future write-down or impairment. The assessment of any impairments of these assets takes in to account such factors as economic and market conditions and the useful lives of these assets. 

  
 25 

 INTANGIBLE ASSETS 

Intangible assets are comprised of trademarks, patents, and other intangible assets and are considered to have an indefinite useful life. No amortization is
recognized for indefinite useful life intangible assets. 
 Intangible assets with an indefinite useful life are tested for impairment annually or when
events or changes in circumstances indicate that they might be impaired. An intangible asset is impaired if the recoverable amount is less than its carrying amount. The recoverable amount is the higher of the asset’s fair value less cost to
sell and the value in use. If the recoverable amount of the individual asset cannot be estimated because it does not generate independent economic inflows, the entire cash generating unit (“CGU”) is tested for impairment. A CGU is the
smallest group of assets that can generate cash inflows independent of other assets. 
 SHARE-BASED
COMPENSATION 
 In determining the amount and timing of expenditures related to share-based compensation, the Company uses judgement to
determine key estimates such as the value of shares, the rate of forfeiture of options granted, the expected life of the option, the volatility of the value of the shares and the risk-free interest rate used. 

ASSET RETIREMENT OBLIGATIONS 

Asset retirement obligations estimate the future fair value cost required to remediate the Company’s leased facility in Markham. The estimated valuation
is based on management’s best judgement and third-party estimates where available and requires the Company to make assumptions including discount rate, the existence of any future obligations, the likelihood that any obligations will be
incurred and their amounts and timing. 
 SHARE ISSUANCE AND SHARE LISTING
COSTS 
 In connection with the Company’s Offering and listing of the Company’s existing shares on the TSX (the
“Listing”), the Company incurred underwriters’ fees, legal costs, consulting fees, initial listing fees, travel and other professional fees. All costs that were incremental and directly attributable to the issuance of new common
shares were recorded as a reduction to share capital. All other costs incurred in relation to the Company’s listing of existing shares and preparing the Company to operate and report as a publicly listed Company were expensed to Initial public
offering costs. The Company’s management applied judgement in determining which costs to attribute to the Offering and which to attribute to the Listing, where costs were incurred jointly, the Company allocated the costs based on the percentage
(9%) of common shares applicable to the Offering (8,494,742 common shares) and the percentage (91%) applicable to the Listing (81,880,206 common shares). 

DEFERRED SHARE UNITS 

Certain Non-Employee Directors (“NED”) can elect to receive up to 100% of their annual compensation in
Deferred Share Units (“DSU”). Each DSU grant price is determined using the Company’s five day volume weighted average trading price (“VWAP”). NEDs can elect to receive settlement of their DSUs by way of a lump sum cash
payment on any date the NED ceases to be a director of the Company or any of its subsidiaries (the “Settlement Date”). The settlement amount is equal to the market value on the Settlement Date of one share for each DSU credited to the
director’s account on the Settlement Date. 
 Upon initial recognition on the date of grant, the Company records a DSU liability for DSUs that have
vested, in Accounts payable and accrued liabilities. The DSU liability is remeasured at its fair value at the end of each fiscal reporting period and on the settlement date, with changes in fair value recognized through net (loss) income. 

  
 26 

 INVESTMENT TAX CREDITS 

The Company claims investment tax credits for expenditures incurred as a result of scientific research and development initiatives. Management makes a number
of estimates and assumptions in determining the amount of investment tax credits eligible to be claimed. 
 INCOME TAXES

 In calculating the amount of current and deferred income tax expenses, liabilities and assets, management must use judgement in making estimates and
assumptions including but not limited to, the timing of when future liabilities or benefits will be realized, the tax rates expected to be in effect and applicable to temporary differences when they reverse, taxable income, and the utilization of
tax loss carry forwards and credits available, if any. 
 NEW STANDARDS AND INTERPRETATIONS NOT YET ADOPTED 

IFRS 9 – FINANCIAL INSTRUMENTS 

In July 2014, the IASB issued the final publication of the IFRS 9 Financial Instruments (“IFRS 9”) standard. The new standard is effective for annual
periods beginning on or after January 1, 2018. IFRS 9 includes revised guidance on the classification and measurement of financial instruments, new guidance for measuring impairment on financial assets, and new hedge accounting guidance. 

While there is no material impact on the classification and measurement of the Company’s financial assets and financial liabilities under IFRS 9, the
introduction of the “expected credit loss” model for impairment will impact the Company’s impairment of accounts receivable. Under IFRS 9, the model will be based on the Company’s grouping of the allowance, determined by the
nature of the receivable. The new model incorporates current and forecasted factors that are specific to the borrowers and general economic conditions at the reporting date. A provision matrix, based on the Company’s historical observed default
rates over the expected life of the accounts receivable, will also be applied. Bad debt allowance will be calculated by multiplying the provision rates against the aged accounts receivable for each grouping. 

The Company assessed the impact of adopting IFRS 9 retrospectively and determined that the impact was not material. Commencing April 1, 2018, the Company
will adopt IFRS 9 on a cumulative effective basis, with no restatement of the comparative period. 
 IFRS 15 – REVENUE
FROM CONTRACTS WITH CUSTOMERS 
 In May 2014, the IASB issued IFRS 15 Revenue from Contracts
with Customers (“IFRS 15”). The new standard is effective for annual periods beginning on or after January 1, 2018. IFRS 15 introduces a single model for recognizing revenue from contracts with customers. The standard requires revenue
to be recognized in a manner that depicts the transfer of promised goods or services to a customer and at an amount that reflects the consideration expected to be received in exchange for transferring those goods or services. 

The Company assessed the impact of adopting IFRS 15 retrospectively and determined that the impact was not material. Commencing April 1, 2018, the
Company will adopt IFRS 15 on a cumulative effective basis, with no restatement of the comparative period. 
 IFRS 16 – LEASES

 In 2016, the IASB issued IFRS 16, Leases (“IFRS 16”), replacing IAS 7, Leases, and related interpretations. The standard introduces a single
on-balance sheet recognition and measurement model for lessees, eliminating the distinction between operating and finance leases. Lessors continue to classify leases as finance and operating leases. IFRS 16
becomes effective for annual periods beginning on or after January 1, 2019, and is to be applied retrospectively. Early adoption is permitted if IFRS 15 has been adopted. The Company is currently assessing the impact of the new standard on its
consolidated financial statements. 

  
 27 

 FINANCIAL INSTRUMENTS 

The Company’s financial instruments as at March 31, 2018, consisted of cash and cash equivalents, accounts receivable, convertible note receivable,
accounts payable and accrued liabilities, and term and revolving credit facilities. 
 CASH AND CASH
EQUIVALENTS 
 Included in cash and cash equivalents are short-term investments in short-term Guaranteed Investment Certificates which
involves exposure to credit and interest rate risk. Credit risk is managed by selecting high quality issuers and low risk investments which minimizes the potential of default by the issuer of the certificates. Interest rate risk is mitigated by the
short-term, cashable nature of the securities. 
 ACCOUNTS RECEIVABLE 

Accounts receivable is comprised of amounts due from patients, insurance providers, third party e-commerce payment
processing facilitators, and input tax credit refunds. Accounts receivable are subject to credit risk and liquidity risk that could result in an inability to collect amounts due. Credit risk is mitigated by regular monitoring of aged receivables and
managing the underlying business relationships with insurance providers. Liquidity risk is mitigated by requiring advance payment for most non-insurance or high-risk transactions. 

CONVERTIBLE LOAN RECEIVABLE 

The convertible loan receivable consists of a promissory note issued by Ehave in favour of the Company, to develop software and a branded application for the
Company. The note is convertible into equity securities of Ehave at the option of the Company and is subject to risk which is mitigated by managing the underlying business relationship. 

ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 

Accounts payable and accrued liabilities is comprised of trade and non-trade payables, employee related costs and
compensation accrued, sales tax and other government remittances payable, and other Company obligations expected to be settled within one year. These obligations are subject to liquidity risk, in that the Company may not be able to settle its
obligations as they become due. See “Liquidity, Capital Resources and Financing”, above, for discussion on how the Company manages liquidity risk. 

TERM CREDIT FACILITY 

The Term Credit Facility is a variable rate, 10-year secured loan and is subject to interest and liquidity risk. The
Company regularly monitors economic and market conditions to assess the likelihood and impact of changes in variable interest rates. See “Liquidity, Capital Resources and Financing”, above, for discussion on how the Company manages
liquidity risk. 
 DISCLOSURE CONTROLS AND INTERNAL CONTROLS OVER FINANCIAL REPORTING 

INTERNAL CONTROLS OVER FINANCIAL REPORTING 

In accordance with National Instrument 52-109 – Certification of Disclosure in Issuers’ Annual and Interim
Filings, management is responsible for establishing and maintaining adequate Disclosure Controls and Procedures (“DCP”) and Internal Control Over Financial Reporting (“ICFR”). Management has designed DCP and ICFR based on the
2013 Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), with the objective of providing reasonable assurance that the Company’s financial reports and
information, including the Company’s Condensed Interim Consolidated Financial Statements and MD&A were prepared in accordance with IFRS. There have been no changes to the design of internal controls over financial report that occurred
during the year ended March 31, 2018 that have materially affected or are reasonably likely to materially affect the internal controls over financial reporting. The CEO and CFO have concluded that the design of DCP and ICFR were adequate and to
provide such assurance as at March 31, 2018. 

  
 28 

 LIMITATIONS OF CONTROLS AND
PROCEDURES 
 The Company’s management, including the CEO and CFO, believes that any DCP or ICFR, no matter how well conceived and
operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be
considered relative to their costs. Because of the inherent limitations in all control systems, they cannot provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been prevented or detected. These
inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by
collusion of two or more people, or by unauthorized override of the control. The design of any control system also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future conditions. Accordingly, because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. 

OUTSTANDING SHARE DATA 
 As at the date of this MD&A
and March 31, 2018, the following Common Shares and securities convertible into Common Shares of the Company were issued and outstanding: 
  

									
	 	  	June 18, 2018	 	  	March 31, 2018	 
	 Common shares outstanding
	  	 	101,329,195	 	  	 	100,779,791	 
	 Convertible warrants
	  	 	2,875,000	 	  	 	2,875,000	 
	 Common stock options
	  	 	5,918,871	 	  	 	6,645,835	 
		  	  
	  
	 	  	  
	  
	 
	 Shares outstanding and issuable upon conversion of convertible warrants and exercise of common
stock options
	  	 	110,123,066	 	  	 	110,300,626	 
		  	  
	  
	 	  	  
	  
	 

 RISKS AND UNCERTAINTIES 

MedReleaf is subject to various risks that could have a material and negative effect on the Company, it’s financial performance, condition and outlook.
These risks could cause actual results to differ materially from those expressed or implied in forward-looking statements included in this MD&A, the Company’s financial statements and other Company reports and documents. These risks include
but are not limited to, the following risk factors. 
 REGULATORY RISKS 

 

	 	•	 	 The Company may not always be able to successfully comply with the regulatory requirements for Licensed Producers
as set out by the ACMPR and Health Canada; 

  

	 	•	 	 The laws, regulations and guidelines generally applicable to the medical cannabis industry may change in ways
unforeseen by the Company, changes with respect to the reimbursement program established for Veterans or the cancellation thereof and the potential implementation of a legal framework regulating the recreational market for cannabis;

  

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

  
 29 

	 	•	 	 The Company (and all other Licensed Producers) are constrained by law in their ability to market their products.

 LEGAL RISKS 
  

	 	•	 	 The Company may be subject to product liability claims; 

 

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

  

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

 

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

FINANCIAL RISKS 
  

	 	•	 	 The Markham and Bradford Facilities are integral to the Company’s business, financial condition, and results
of operations; 

  

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

 

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

  

	 	•	 	 The Company’s credit facilities may impose limitations on the types of transactions or financial
arrangements required to adequately manage the Company’s business; and 

  

	 	•	 	 Management may not be able to successfully implement adequate internal controls over financial reporting.

 BUSINESS RISKS 
  

	 	•	 	 The Company is dependent upon its Licences for the ability to grow, store and sell medical cannabis and other
products derived therefrom; 

  

	 	•	 	 The medical cannabis industry and market is relatively new in Canada, and the Company may ultimately be unable to
succeed in this new industry and market; 

  

	 	•	 	 The Company may compete for market share with other companies, including licensed producers, which may have
longer operating histories and more manufacturing and marketing experience than the Company; 

  

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

  

	 	•	 	 MedReleaf may seek to expand its business and operations into jurisdictions outside of Canada, and there are
risks associated with doing so; 

  

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

 

	 	•	 	 The Company may not be able to transport its medical cannabis products to patients in a safe and efficient
manner; 

  

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

  

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

  

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

  

	 	•	 	 The proposed Arrangement Agreement between MedReleaf and Aurora may impose certain risks on the Company’s
current operations; 

  
 30 

	 	•	 	 If the proposed Arrangement Agreement is not completed, the market price of the Common Shares may decline and the
Company’s business may suffer;.and 

  

	 	•	 	 The Company may not be able to meet the increased demand associated with the legalization of the recreational
market; conversely, the legalization of the recreational market may result in an over-supply in the cannabis industry that could impact the Company’s operations. 

RISKS INHERENT IN AN AGRICULTURAL BUSINESS 

 

	 	•	 	 Access to certain key inputs such as raw materials, electricity, water and other utilities, and certain providers
thereof, may be required to maintain a successful cannabis growing operation; and 

  

	 	•	 	 The Company is subject to risks inherent in an agricultural business. 

PERCEPTION RISKS 
  

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

  

	 	•	 	 The Company’s cannabis-based pharmaceutical products may be the subject to recalls for a variety of reasons;

  

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

  

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

  

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

 GENERAL RISKS 

 

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

  

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

  

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

  

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

  

	 	•	 	 The Company may be subject to risks related to its information technology systems, including cyber-attacks; and

  

	 	•	 	 The Company may face disruption in connection with labour organization efforts. 

For a more detailed description of the various risks associated with the Company, refer to the AIF under the heading “Risk Factors”, which is
available under the Company’s SEDAR profile at www.sedar.com. 

  
 31Exhibit 10.1

 

TITAN PHARMACEUTICALS, INC.

EMPLOYMENT AGREEMENT

 

This Employment
Agreement (this “Agreement”) is made and entered into as of April 1, 2019 (the “Effective
Date”) by and between Titan Pharmaceuticals, Inc. (the “Company”) and Sunil Bhonsle (“Executive”).
The Company and Executive are hereinafter collectively referred to as the “Parties”, and individually
referred to as a “Party”.

 

Recitals

 

A.           The
Company desires assurance of the association and services of Executive in order to retain Executive’s experience, skills,
abilities, background and knowledge, and is willing to engage Executive’s services on the terms and conditions set forth
in this Agreement.

 

B.           Executive
desires to be in the employ of the Company, and is willing to accept such employment on the terms and conditions set forth in this
Agreement.

 

Agreement

 

In consideration of the
foregoing Recitals and the mutual promises and covenants herein contained, and for other good and valuable consideration, the Parties,
intending to be legally bound, agree as follows:

 

		1.	Employment.

 

1.1         Title.
Executive’s position shall be Chief Executive Officer and President, subject to the terms and conditions set forth in this
Agreement.

 

1.2         Term.
The term of this Agreement shall begin on the Effective Date and shall continue for a period of two (2) years or until it is terminated
pursuant to Section 4 herein (the “Term”).

 

1.3         Duties.
Executive shall have the customary powers, responsibilities and authorities of Executive Chairman of corporations of the size,
type and nature of the Company, as it exists from time to time. Executive shall report to the Company’s board of directors
(the “Board”).

 

		2.	Noncompetition;
                                         Nonsolicitation.

 

2.1         Covenant
not to Compete. During the Term and for a period of twelve (12) months thereafter (the “Restricted Period”),
Executive shall not engage in competition with the Company, either directly or indirectly, in any manner or capacity, as adviser,
principal, agent, affiliate, promoter, partner, officer, director, employee, stockholder, owner, co-owner, consultant, or member
of any association or otherwise, in any phase of the business of developing, manufacturing and marketing of products for the treatment
of opioid addiction or implantable long-term, continuous drug delivery (a “Competitive Entity”), except
with the prior written consent of the Board. Ownership by Executive, in professionally managed funds over which the Executive does
not have control or discretion in investment decisions, or as a passive investment, of less than five percent (5%) of the outstanding
shares of capital stock of any corporation with one or more classes of its capital stock listed on a national securities exchange
or publicly traded on a national securities exchange or in the over-the-counter market shall not constitute a breach of this Section.

 

    	 

     

    

 

2.2         Nonsolicitation.
During the Restricted Period, Executive shall not: (i) solicit or induce, or attempt to solicit or induce, any employee
of the Company to leave the employ of the Company; or (ii) solicit or attempt to solicit the business of any client or customer
of the Company with respect to products, services, or investments similar to those provided or supplied by the Company.

 

2.3         Acknowledgements.
Executive acknowledges and agrees that his services to the Company pursuant to this Agreement are unique and extraordinary
and that in the course of performing such services Executive shall have access to and knowledge of significant confidential, proprietary,
and trade secret information belonging to the Company. Executive agrees that the covenant not to compete and the nonsolicitation
obligations imposed by this Section 2 are reasonable in duration, geographic area, and scope and are necessary to protect the Company’s
legitimate business interests in its goodwill, its confidential, proprietary, and trade secret information, and its investment
in the unique and extraordinary services to be provided by Executive pursuant to this Agreement. If, at the time of enforcement
of this Section 2, a court holds that the covenant not to compete and/or the nonsolicitation obligations described herein are unreasonable
or unenforceable under the circumstances then existing, then the Parties agree that the maximum duration, scope, and/or geographic
area legally permissible under such circumstances will be substituted for the duration, scope and/or area stated herein.

 

		3.	Compensation
                                         of the Executive.

 

3.1         Base
Salary. The Company shall pay Executive a base salary (the “Base Salary”) at the annualized rate
of Four Hundred Twenty-Five Thousand Dollars ($425,000), less payroll deductions and all required withholdings, payable in regular
periodic payments in accordance with the Company’s normal payroll practices. The Base Salary shall be prorated for any partial
year of employment on the basis of a 365-day fiscal year. Executive’s compensation will be reviewed at least on an annual
basis and the Company may increase, but not decrease (except in connection with a Company-wide decrease in executive compensation),
Executive’s Base Salary from time to time, and if so increased, “Base Salary” shall include such increases for
purposes of this Agreement.

 

3.2         Bonuses.
Executive may, at the sole discretion of the Board or the compensation committee of the Board (the “Committee”) be
considered for an annual bonus of up to an aggregate of fifty (50%) percent of the Executive’s then Base Salary, payable
in (i) cash and/or (ii) awards under the Company’s equity incentive plans (“Annual Bonus”). Both
the amount and make-up of any Annual Bonus shall be at the sole discretion of the Board or the Committee.

 

    	2

     

    

 

3.3         Stock
Options. On April 2, 2019 (the “Grant Date”), the Company will grant Executive 10-year options to
purchase an aggregate of 200,000 shares of common stock under the Titan Pharmaceuticals Third Amended and Restated 2015 Omnibus
Equity Incentive Plan (the “Plan”) at an exercise price equal to Fair Market Value (as defined in the Plan), such options
to vest as to 83,334 shares on the Grant Date with the balance to vest at such time, if ever, as the Company receives shareholder
approval of the Board’s amendment to Section 5.1 of the Plan to increase the limitation on the number of awards granted to
a single individual in any calendar year to 250,000. In the event Executive’s employment is terminated under the provisions
of Sections 4.5.3 or 4.5.4 hereof, all vested stock options the held by Executive, including those issued on the Grant Date, will
remain exercisable for a period of twelve (12) months following termination.

 

3.4         Expense
Reimbursements. The Company will reimburse Executive for all reasonable business expenses Executive incurs in conducting his
duties hereunder, pursuant to the Company’s usual expense reimbursement policies

 

3.5         Benefits.
The Executive shall, in accordance with Company policy and the applicable plan documents, be eligible to participate in benefits
under any benefit plan or arrangement, including medical, dental, vision, disability and life insurance programs, that may be in
effect from time to time and made available to the Company’s senior management employees, subject to the terms and conditions
of those benefit plans.

 

		4.	Termination.

 

4.1         Termination
by the Company. Executive’s employment with the Company is at will and may be terminated by the Company at any time and
for any reason, or for no reason, including, but not limited to, under the following conditions:

 

4.1.1           Termination
by the Company for Cause. The Company may terminate Executive’s employment under this Agreement for “Cause”
by delivery of written notice to Executive. Any notice of termination given pursuant to this Section 4.1.1 shall effect termination
as of the date of the notice, or as of such other date as specified in the notice.

 

4.1.2           Termination
by the Company without Cause. The Company may terminate Executive’s employment under this Agreement without Cause at
any time and for any reason, or for no reason. Such termination shall be effective on the date Executive is so informed, or as
otherwise specified by the Company.

 

4.2         Termination
by Resignation of Executive. Executive’s employment with the Company is at will and may be terminated by Executive at
any time and for any reason, or for no reason, including via a resignation for Good Reason in accordance with the procedures set
forth in Section 4.6.3 below.

 

4.3         Termination
for Death or Complete Disability. Executive’s employment with the Company shall automatically terminate effective upon
the date of Executive’s death or Complete Disability (as defined below).

 

4.4         Termination
by Mutual Agreement of the Parties. Executive’s employment with the Company may be terminated at any time upon a mutual
agreement in writing of the Parties. Any such termination of employment shall have the consequences specified in such agreement.

 

    	3

     

    

 

		4.5	Compensation Upon Termination.

 

4.5.1           Death
or Complete Disability. If, during the Term of this Agreement, Executive’s employment shall be terminated by death or
Complete Disability, the Company shall pay to Executive, his estate, or his heirs, as applicable, (i) any Base Salary owed to Executive
through the date of termination; (ii) expenses reimbursement amounts owed to Executive; (iii) all unpaid amounts of any Annual
Bonus(es) Executive earned prior to the termination date; (iv) any payments and benefits to which Executive (or his estate) is
entitled pursuant to the terms of any employee benefit or compensation plan or program in which he participates (or participated);
and (v) any amount to which Executive is entitled pursuant to any other written agreements between the Company or any of its affiliates
and Executive (the amounts in (i) through (v) above being the “Termination Amounts”). The Company shall
pay Executive: (A) the amounts contained in items (i) through (iii) within ten (10) days following such termination; (B) any payments
associated with (iv) in accordance to the terms of such plans or programs; and (C) any such amounts in (v) in accordance with the
terms of such agreements, with the Termination Amounts being subject to the standard deductions and withholdings (as applicable).
In addition, subject to Executive (or his estate or heirs, as applicable) furnishing to the Company an executed waiver and release
of claims in the form attached hereto as Exhibit A (the “Release”) within the time period specified
therein, and allowing the Release to become effective in accordance with its terms, then Executive, his estate, or his heirs, as
applicable, shall also be entitled to: (1) continuation of Executive’s salary (at the Base Salary rate in effect at the time
of termination) for a period of ninety (90) days following the termination date; and (2) a prorated annual bonus equal to the Annual
Bonus, if any, for the year of termination multiplied by a fraction, the numerator of which shall be the number of full and partial
months Executive worked for the Company and the denominator of which shall be 12. The Base Salary payments will be subject to standard
payroll deductions and withholdings and will be made on the Company’s regular payroll cycle, provided, however, that any
payments otherwise scheduled to be made prior to the effective date of the Release shall accrue and be paid in the first payroll
period that follows such effective date. The prorated annual bonus payment will be subject to standard payroll deductions and withholdings
and will paid at the same time as the Annual Bonus, if any, would have been paid to Executive under Section 3.2 above, had Executive
remained employed with the Company.

 

4.5.2           Termination
For Cause or Resignation without Good Reason. If, during the Term of this Agreement, Executive’s employment is terminated
by the Company for Cause, or Executive resigns his employment hereunder without Good Reason, the Company shall pay Executive the
Termination Amounts, less standard deductions and withholdings. The Company shall thereafter have no further obligations to Executive
under this Agreement, except as otherwise provided by law.

 

    	4

     

    

 

4.5.3           Termination
Without Cause or Resignation For Good Reason Not In Connection with a Change of Control. If the Company terminates Executive’s
employment without Cause, or if Executive resigns for Good Reason, at any time other than upon the occurrence of, or within thirty
(30) days prior to, or six (6) months following, the effective date of a Change of Control (as defined below), the Company shall
pay Executive the Termination Amounts, less standard deductions and withholdings. In addition, subject to Executive furnishing
to the Company an executed Release within the time period specified therein, and allowing the Release to become effective in accordance
with its terms, Executive shall be entitled to: (1) severance in the form of continuation of his salary (at the Base Salary rate
in effect at the time of termination, but prior to any reduction triggering Good Reason) for the greater of a period of twelve
(12) months following the termination date or the remaining term; (2) payment of Executive’s premiums to cover COBRA for
a period of twelve (12) months following the termination date; and (3) a prorated annual bonus equal to the target Annual Bonus,
if any, for the year of termination multiplied by a fraction, the numerator of which shall be the number of full and partial months
Executive worked for the Company and the denominator of which shall be 12, (4) immediate accelerated vesting of any unvested Restricted
Shares and unvested outstanding stock option(s). These payments under (1), (2), (3) and (4) above will be subject to standard payroll
deductions and withholdings and will be made on the Company’s regular payroll cycle, provided, however, that any payments
otherwise scheduled to be made prior to the effective date of the Release shall accrue and be paid in the first payroll period
that follows such effective date.

 

4.5.4           Termination
Without Cause or Resignation For Good Reason In Connection with a Change of Control. If the Company terminates Executive’s
employment without Cause, or if Executive resigns for Good Reason, upon the occurrence of, or within thirty (30) days prior to,
or within six (6) months following, the effective date of a Change of Control, the Company shall pay Executive the Termination
Amounts, less standard deductions and withholdings. In addition, subject to Executive furnishing to the Company an executed Release
within the time period specified therein, and allowing the Release to become effective in accordance with its terms, then Executive
shall be entitled to: (1) severance in the form of a lump sum payment equivalent to the greater of twelve (12) months of his Base
Salary (at the Base Salary rate in effect at the time of termination, but prior to any reduction triggering Good Reason) or the
remaining Term; (2) payment of Executive’s premiums to cover COBRA for a period of eighteen (18) months following the termination
date; (3) a prorated annual bonus equal to the target Annual Bonus, if any, for the year of termination multiplied by a fraction,
the numerator of which shall be the number of full and partial months Executive worked for the Company and the denominator of which
shall be 12, and (4) immediate accelerated vesting of any unvested Restricted Shares and unvested outstanding stock option(s).
These payments under (1), (2), and (3) above, will be subject to standard payroll deductions and withholdings and will be made
on the Company’s regular payroll cycle, provided, however, that any payments otherwise scheduled to be made prior to the
effective date of the Release shall accrue and be paid in the first payroll period that follows such effective date.

 

4.6         Definitions.
For purposes of this Agreement, the following terms shall have the following meanings:

 

4.6.1           Complete
Disability. “Complete Disability” means that Executive is determined to be permanently disabled pursuant
to the Company’s long term disability plan and is receiving disability benefits under such plan.

 

    	5

     

    

 

4.6.2           Cause.
“Cause” for the Company to terminate Executive’s employment hereunder shall mean the occurrence
of any of the following events, as determined by the Company and/or the Board in its and/or their sole and absolute discretion:

 

(i)               The
willful failure, disregard or refusal by Executive to perform his material duties or obligations under this Agreement or to follow
lawful directions received by Executive from the Board;

 

(ii)              Any
grossly negligent act by Executive having the effect of materially injuring (whether financially or otherwise) the business or
reputation of the Company or any willful act by Executive intended to cause such material injury, except any acts (A) made by Executive
in connection with the enforcement of his rights, whether under this Agreement, any other agreement between the Company or any
affiliate and Executive, or pursuant to applicable law (e.g. disparagement, etc.) or (B) which are required by law or pursuant
to a subpoena or demand by a governmental or regulatory body;

 

(iii)             Executive’s
indictment of any felony involving moral turpitude (including entry of a nolo contendere plea);

 

(iv)             The
determination, after a reasonable and good-faith investigation by the Company, that the Executive engaged in discrimination prohibited
by law (including, without limitation, age, sex or race discrimination);

 

(v)              Executive’s
material misappropriation or embezzlement of the property of the Company or its Affiliates (whether or not a misdemeanor or felony);
or

 

(vi)             Material
breach by Executive of this Agreement and/or of the Company’s Proprietary Information and Inventions Agreement or other non-disclosure
agreement to which Executive is a party (collectively, the “PIIA”); provided, however, that, any
such termination of Executive shall only be deemed for Cause pursuant to this definition if: (1) the Company gives the Executive
written notice of the condition(s) alleged to constitute Cause, which notice shall describe such condition(s); and (2) the Executive
fails to remedy such condition(s) (if curable) within thirty (30) days following receipt of the written notice.

 

For purposes of this definition, the Parties
agree that (1) a change in Executive’s role and/or title to no less than President shall not constitute Cause under this
Agreement; and (2) any breach of Sections 2 or 5 of this Agreement shall be deemed a material breach that is not capable of cure
by Executive.

 

4.6.3           Good
Reason. For purposes of this Agreement, and subject to the caveat at the end of this Section, “Good Reason” for
Executive to terminate his employment hereunder shall mean the occurrence of any of the following events without Executive’s
prior written consent:

 

(i)               any
reduction by the Company of Executive’s Base Salary as initially set forth herein or as the same may be increased from time
to time, provided, however, that if such reduction occurs in connection with a Company-wide decrease in executive compensation,
such reduction shall not constitute Good Reason for Executive to terminate his employment;

 

    	6

     

    

 

(ii)              a
material breach by the Company (or any of its affiliates) of this Agreement or any other written agreement between the Company
or any of its affiliates and Executive; or

 

(iii)             a
material adverse change in Executive’s duties, titles, authority, responsibilities or reporting relationships, with such
determination being made with reference to the greatest extent of your duties, titles, authority, responsibilities or reporting
relationships, etc. as increased (but not decreased) from time to time; provided, however, a change in Executive’s role and/or
title to no less than President shall not constitute Good Reason under this Agreement;

 

(iv)             any
failure of the Company or any affiliate to pay Executive any amount owed to Executive under this Agreement or any other written
agreement plan or program between the Company, any affiliates and Executive;

 

(v)              any
reduction in Executive’s bonus eligibility; or

 

(vi)             the
assignment to Executive of duties materially inconsistent with his position with the Company.

 

Provided, however, that,
any such termination by the Executive shall only be deemed for Good Reason pursuant to this definition if: (1) the Executive
gives the Company written notice of his intent to terminate for Good Reason; which notice shall describe such condition(s); (2)
the Company fails to remedy such condition(s) within thirty (30) days following receipt of the written notice the “Cure
Period”); and (3) Executive voluntarily terminates his employment within thirty (30) days following the end of the
Cure Period.

 

4.6.4           Change
of Control. For purposes of this Agreement, “Change of Control” shall mean the occurrence, in a single transaction
or in a series of related transactions, of any one or more of the following events (excluding in any case transactions in which
the Company or its successors issues securities to investors primarily for capital raising purposes):

 

(i)               the
acquisition by a third party (or more than one party acting as a group) of securities of the Company representing more than fifty
percent (50%) of the combined voting power of the Company’s then outstanding securities other than by virtue of a merger,
consolidation or similar transaction;

 

(ii)              a
merger, consolidation or similar transaction following which the stockholders of the Company immediately prior thereto do not own
at least fifty percent (50%) of the combined outstanding voting power of the surviving entity (or that entity’s parent) in
such merger, consolidation or similar transaction;

 

(iii)             the
dissolution or liquidation of the Company; or

 

(iv)             the
sale, lease, exclusive license or other disposition of all or substantially all of the assets of the Company.

 

    	7

     

    

 

4.7         Survival
of Certain Sections. Sections 3, 4, 5, 6, 7, 8, 9, 12, 13, 16, 17, 19 and 21 of this Agreement will survive the termination
of this Agreement.

 

4.8         Parachute
Payment. Payments made by the Company to Executive shall be subject to withholding for applicable federal, state or local income
tax withholding requirements and Social Security or other employee tax requirements applicable to the payment of compensation and
benefits hereunder. If it shall be determined that any payment or distribution by the Company to or for the benefit of Executive
under this Agreement or any other plans or arrangements between the parties would be subject to the deduction limitations and excise
tax imposed by Sections 280G and 4999 of the Internal Revenue Code, (including any applicable interest and penalties, collectively
referred to herein as “Excise Taxes”), then the parties agree to take such action as may be necessary
to place Executive in the best after-tax position taking into account all income, employment and Excise Taxes, without regard to
the deductibility of any payments by the Company. Thus, for example, any amount deemed to constitute a “parachute payment”
under Section 280G, shall be reduced to the extent necessary to avoid Excise Taxes that would otherwise be imposed if, and only
if, such reduction would result in Executive retaining a larger total after-tax amount of compensation, taking into account all
employee compensation, benefits, income, employment and excise taxes. For avoidance of doubt, Executive shall be fully responsible
for and the Company shall have no liability to Executive for the payment of any Excise Taxes.

 

4.9         Application
of Internal Revenue Code Section 409A. The parties intend that any compensation, benefits and other amounts payable or provided
to Executive under this Agreement be paid or provided in a manner that is either exempt from, or in compliance with, Section 409A
of the United States Internal Revenue Code of 1986, as amended from time to time and related rules, regulations and Treasury pronouncements
(together, “Section 409A”) such that there will be no adverse tax consequences, interest, or penalties
for Executive under Section 409A as a result of the payments and benefits so paid or provided to him. The parties agree to modify
this Agreement, or the timing (but not the amount) of the payment hereunder of severance or other compensation, or both, to the
extent necessary to comply with and to the extent permissible under Section 409A. In addition, notwithstanding anything to the
contrary contained in any other provision of this Agreement, the payments and benefits to be provided Executive under this Agreement
shall be subject to the provisions set forth below.

 

(i)               The
date of Executive’s “separation from service,” as defined in the regulations issued under Section 409A, shall
be treated as Executive’s date of termination of employment for purpose of determining the time of payment of any severance
that becomes payable to Executive pursuant to Section 6 upon the termination of Executive’s employment and that is deemed
to be nonqualified deferred compensation for purposes of Section 409A. To the extent that any severance payable to Executive pursuant
to Section 6 constitutes nonqualified deferred compensation within the meaning of Section 409A, such amounts shall not commence
on the Payment Date, and instead, the first installment shall not be paid until the sixtieth (60th) day following Executive’s
separation from service to the extent necessary to avoid adverse tax consequences under Section 409A; provided, that such first
installment shall be in an amount equal to the amount of the installments to which Executive would have been paid on the Company’s
regular paydays prior to the sixtieth (60th) day following Executive’s separation from service had such installments not
been delayed pursuant to this Section 20(b). Any remaining payments due under this Agreement that are not required to be delayed
pursuant to the preceding sentence will be paid as scheduled as otherwise provided in the Agreement.

 

    	8

     

    

 

(ii)              Notwithstanding
any provision in this Agreement to the contrary, if Executive is a “specified employee” within the meaning of Section
409A at the time of his “separation from service” within the meaning of Section 409A, then any payment otherwise required
to be made to him under this Agreement on account of his separation from service, to the extent such payment (after taking in to
account all exclusions applicable to such payment under Section 409A) is properly treated as nonqualified deferred compensation
subject to Section 409A, shall not be made until the first (1st) business day after: (i) the expiration of six (6) months from
the date of Executive’s separation from service, or (ii) if earlier, the date of Executive’s death. Any remaining payments
due under this Agreement that are not required to be delayed pursuant to the preceding sentence will be paid as scheduled as otherwise
provided in the Agreement.

 

(iii)             In
the case of any amounts that are payable to Executive under this Agreement, Executive’s right to receive such payments shall
be treated as a right to receive a series of separate payments under Section 409A.

 

(iv)             To
the extent that the reimbursement of any expenses or the provision of any in-kind benefits pursuant to this Agreement is subject
to Section 409A: (i) the amount of such expenses eligible for reimbursement, or in-kind benefits to be provided hereunder during
any one calendar year shall not affect the amount of such expenses eligible for reimbursement or in-kind benefits to be provided
hereunder in any other calendar year; provided, however, that the foregoing shall not apply to any limit on the amount of any expenses
incurred by Executive that may be reimbursed or paid under the terms of the Company’s medical plan, if such limit is imposed
on all similarly situated participants in such plan; (ii) all such expenses eligible for reimbursement hereunder shall be paid
to Executive as soon as administratively practicable after any documentation required for reimbursement for such expenses has been
submitted, but in any event by no later than December 31 of the calendar year following the calendar year in which such expenses
were incurred; and (iii) Executive’s right to receive any such reimbursements or in-kind benefits shall not be subject to
liquidation or exchange for any other benefit.

 

4.10       Clawback.
The Annual Bonus, and any and all stock based compensation (such as options and equity awards)(collectively, the “Clawback
Benefits”) shall be subject to “Company Clawback Rights” as follows: During the period that the Executive
is employed by the Company and upon the termination of the Executive’s employment and for a period of two (2) years thereafter,
if there is an announcement of the restatement of any previously announced financial results from which any Annual Bonus, option,
equity or vesting condition to Executive shall have been determined, Executive agrees to repay any excess portion of the Annual
Bonus amounts which were determined by reference to any Company financial results which were later restated (as defined below),
to the extent the Clawback Benefits amounts paid exceed the Clawback Benefits amounts that would have been paid based on the restatement
of the Company’s financial information. All Clawback Benefits amounts resulting from such restated financial results shall
be retroactively adjusted by the Board to take into account the restated results, and any excess portion of the Clawback Benefits
resulting from such restated results shall be immediately surrendered to the Company and if not so surrendered within ninety (90)
days of the revised calculation being provided to the Executive by the Board following a publicly announced restatement, the Company
shall have the right to take any and all action to effectuate such adjustment. The calculation of the Revised Clawback Benefits
amount shall be determined by the Board and shall be final and binding on the Company and Executive. The Clawback Rights shall
terminate following a Change of Control.

 

    	9

     

    

 

		5.	Confidential
                                         And Proprietary Information.

 

As a condition of employment
Executive agrees to execute and abide by the PIIA.

 

		6.	Assignment
                                         and Binding Effect.

 

This Agreement shall
be binding upon and inure to the benefit of Executive and Executive’s heirs, executors, personal representatives, assigns,
administrators and legal representatives. Because of the unique and personal nature of Executive’s duties under this Agreement,
neither this Agreement nor any rights or obligations under this Agreement shall be assignable by Executive. This Agreement shall
be binding upon and inure to the benefit of the Company and its successors, assigns and legal representatives. Any such successor
of the Company will be deemed substituted for the Company under the terms of this Agreement for all purposes. For this purpose,
“successor” means any person, firm, corporation or other business entity which at any time, whether by purchase, merger
or otherwise, directly or indirectly acquires all or substantially all of the assets or business of the Company.

 

		7.	Notices.

 

All notices or demands
of any kind required or permitted to be given by the Company or Executive under this Agreement shall be given in writing and shall
be personally delivered (and receipted for) or faxed during normal business hours or mailed by certified mail, return receipt requested,
postage prepaid, addressed as follows:

 

If to the Company:

Titan Pharmaceuticals, Inc.

400 Oyster Point Blvd., Suite 505

South San Francisco, CA

(650) 989-2660

Attn: Chairman

 

If to Executive:

 

[_________________]

 

Any such written notice shall be deemed
given on the earlier of the date on which such notice is personally delivered or three (3) days after its deposit in the United
States mail as specified above. Either Party may change its address for notices by giving notice to the other Party in the manner
specified in this Section.

 

    	10

     

    

 

		8.	Choice
                                         of Law.

 

This Agreement shall
be construed and interpreted in accordance with the internal laws of the State of California without regard to its conflict of
laws principles.

 

		9.	Integration.

 

This Agreement, including
Exhibit A and the PIIA, contains the complete, final and exclusive agreement of the Parties relating to the terms and conditions
of Executive’s employment and the termination of Executive’s employment, and supersedes all prior and contemporaneous
oral and written employment agreements or arrangements between the Parties.

 

		10.	Amendment.

 

This Agreement cannot
be amended or modified except by a written agreement signed by Executive and the Company.

 

		11.	Waiver.

 

No term, covenant or
condition of this Agreement or any breach thereof shall be deemed waived, except with the written consent of the Party against
whom the wavier is claimed, and any waiver or any such term, covenant, condition or breach shall not be deemed to be a waiver of
any preceding or succeeding breach of the same or any other term, covenant, condition or breach.

 

		12.	Severability.

 

The finding by a court
of competent jurisdiction of the unenforceability, invalidity or illegality of any provision of this Agreement shall not render
any other provision of this Agreement unenforceable, invalid or illegal. Such court shall have the authority to modify or replace
the invalid or unenforceable term or provision with a valid and enforceable term or provision, which most accurately represents
the Parties’ intention with respect to the invalid or unenforceable term, or provision.

 

		13.	Interpretation;
                                         Construction.

 

The headings set forth
in this Agreement are for convenience of reference only and shall not be used in interpreting this Agreement. This Agreement has
been drafted by legal counsel representing the Company, but the Executive has been encouraged to consult with, and has consulted
with, Executive’s own independent counsel and tax advisors with respect to the terms of this Agreement. The Parties acknowledge
that each Party and its counsel has reviewed and revised, or had an opportunity to review and revise, this Agreement, and any rule
of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation
of this Agreement.

 

    	11

     

    

 

		14.	Representations
                                         and Warranties.

 

Executive represents
and warrants that Executive is not restricted or prohibited, contractually or otherwise, from entering into and performing each
of the terms and covenants contained in this Agreement, and that Executive’s execution and performance of this Agreement
will not violate or breach any other agreements between the Executive and any other person or entity.

 

		15.	Counterparts.

 

This Agreement may be
executed in two counterparts, each of which shall be deemed an original, all of which together shall contribute one and the same
instrument. Signatures to this Agreement transmitted by fax, by email in “portable document format” (“.pdf”)
or by any other electronic means intended to preserve the original graphic and pictorial appearance of this Agreement shall have
the same effect as physical delivery of the paper document bearing original signature.

 

		16.	Arbitration.

 

To ensure the rapid and
economical resolution of disputes that may arise in connection with the Executive’s employment with the Company, Executive
and the Company agree that any and all disputes, claims, or causes of action, in law or equity, arising from or relating to Executive’s
employment, or the termination of that employment, will be resolved, to the fullest extent permitted by law, by final, binding
and confidential arbitration pursuant to the Federal Arbitration Act in San Francisco, California conducted by the Judicial Arbitration
and Mediation Services/Endispute, Inc. (“JAMS”), or its successors, under the then current rules of JAMS
for employment disputes; provided that the arbitrator shall: (a) have the authority to compel adequate discovery for the resolution
of the dispute and to award such relief as would otherwise be permitted by law; and (b) issue a written arbitration decision including
the arbitrator’s essential findings and conclusions and a statement of the award. Accordingly, Executive and the Company
hereby waive any right to a jury trial. Both Executive and the Company shall be entitled to all rights and remedies that either
Executive or the Company would be entitled to pursue in a court of law. The Company shall pay any JAMS filing fee and shall pay
the arbitrator’s fee. The arbitrator shall have the discretion to award attorneys fees to the party the arbitrator determines
is the prevailing party in the arbitration. Nothing in this Agreement is intended to prevent either Executive or the Company from
obtaining injunctive relief in court to prevent irreparable harm pending the conclusion of any such arbitration. Notwithstanding
the foregoing, Executive and the Company each have the right to resolve any issue or dispute involving confidential, proprietary
or trade secret information, or intellectual property rights, by Court action instead of arbitration.

 

    	12

     

    

 

		17.	Indemnification.

 

The Company shall defend
and indemnify Executive in his capacity as President and Chief Executive Officer of the Company to the fullest extent permitted
under the Delaware General Corporation Law (“DGCL”). The Company shall also maintain a policy for indemnifying
its officers and directors, including but not limited to the Executive, for all actions permitted under the DGCL taken in good
faith pursuit of their duties for the Company, including but not limited to maintaining an appropriate level of Directors and Officers
Liability coverage and maintaining the inclusion of such provisions in the Company’s by-laws or articles of incorporation,
as applicable and customary. The rights to indemnification shall survive any termination of this Agreement.

 

		18.	Trade
                                         Secrets Of Others.

 

It is the understanding
of both the Company and Executive that Executive shall not divulge to the Company and/or its subsidiaries any confidential information
or trade secrets belonging to others, including Executive’s former employers, nor shall the Company seek to elicit from Executive
any such information. Consistent with the foregoing, Executive shall not provide to the Company, and the Company shall not request,
any documents or copies of documents containing such information.

 

		19.	Advertising
                                         Waiver.

 

Executive agrees to permit
the Company, and persons or other organizations authorized by the Company, to use, publish and distribute advertising or sales
promotional literature concerning the products and/or services of the Company, or the machinery and equipment used in the provision
thereof, in which Executive’s name and/or pictures of Executive taken in the course of Executive’s provision of services
to the Company appear. Executive hereby waives and releases any claim or right Executive may otherwise have arising out of such
use, publication or distribution.

 

		20.	NO
                                         MITIGATION.

 

Executive shall not
be required to mitigate damages or the amount of any payment provided for under this Agreement by seeking other employment or otherwise
after the termination of his employment hereunder, and any amounts earned by Executive, whether from self-employment, as a common-law
employee or otherwise, shall not reduce the amount of any payment otherwise payable to him.

 

In
Witness Whereof, the Parties have executed this Agreement as of the date first above written.

 

	TITAN PHARMACEUTICALS, INC.	 
	 	 	 
	By:	/s/ Marc Rubin	 
	 	Name: Marc Rubin	 
	 	Title: Executive Chairman	 

 

	Executive:	 
	 	 
	/s/ Sunil Bhonsle	 
	SUNIL BHONSLE 	 

 

    	13

     

    

 

EXHIBIT A

 

RELEASE AND WAIVER OF CLAIMS

 

TO BE SIGNED ON OR FOLLOWING THE SEPARATION
DATE ONLY

 

In consideration of
the payments and other benefits set forth in the Employment Agreement effective as of ________________, to which this form is attached,
I, ___________, hereby furnish ________________ (the “Company”),
with the following release and waiver (“Release and Waiver”).

 

In exchange for the
consideration provided to me by the Employment Agreement that I am not otherwise entitled to receive, I hereby generally and completely
release the Company and its current and former directors, officers, employees, stockholders, partners, agents, attorneys, predecessors,
successors, parent and subsidiary entities, insurers, affiliates, and assigns (collectively, the “Released Parties”)
from any and all claims, liabilities and obligations, both known and unknown, that arise out of or are in any way related to events,
acts, conduct, or omissions occurring prior to or on the date that I sign this Agreement (collectively, the “Released
Claims”). Except as provided below, the Released Claims include, but are not limited to: (a) all claims arising
out of or in any way related to my employment with the Company, or the termination of that employment; (b) all claims related
to my compensation or benefits from the Company including salary, bonuses, commissions, vacation pay, expense reimbursements, severance
pay, fringe benefits, stock, stock options, or any other ownership interests in the Company; (c) all claims for breach of
contract, wrongful termination, and breach of the implied covenant of good faith and fair dealing; (d) all tort claims, including
claims for fraud, defamation, emotional distress, and discharge in violation of public policy; and (e) all federal, state, and
local statutory claims, including claims for discrimination, harassment, retaliation, misclassification, attorneys’ fees,
or other claims arising under the federal Civil Rights Act of 1964 (as amended), the federal Americans with Disabilities Act of
1990, the federal Age Discrimination in Employment Act of 1967 (as amended) (the “ADEA”), the fair employment
practices statutes of the state or states in which I have provided services to the Company and/or any other federal, state or local
law, regulation or other requirement. Notwithstanding the foregoing, the following are not included in the Released Claims (the
“Excluded Claims”): (a) any rights or claims under the Agreement or any other written agreement
between the Company and me, including any stock option award agreement or plan, (b) any rights or claims that may arise as a result
of events occurring after the date this Release and Waiver is executed or which otherwise cannot lawfully be waived, (c) any indemnification
rights I may have as a former officer or director of the Company or its subsidiaries or affiliated companies, including any rights
or claims for indemnification I may have pursuant to any written indemnification agreement with the Company to which I am a party,
the charter, bylaws, or operating agreements of the Company, or under applicable law; (d) any claims for benefits under any directors’
and officers’ liability policy maintained by the Company or its subsidiaries or affiliated companies in accordance with the
terms of such policy, (e) any rights or claims under any employee benefit or compensation plan or program in which I participate
or participated (or was eligible to participate), (f) any rights or claims to unemployment compensation, and (g) reimbursement
for business expenses which are consistent with the Company’s reimbursement policy. I hereby represent and warrant that,
other than the Excluded Claims, I am not aware of any claims I have or might have against any of the Released Parties that are
not included in the Released Claims.

 

    	14

     

    

 

I expressly waive and
relinquish any and all rights and benefits under any applicable law or statute providing, in substance, that a general release
does not extend to claims which a party does not know or suspect to exist in his or his favor at the time of executing the release,
which if known by him or his would have materially affected the terms of such release.

 

I acknowledge that,
among other rights, I am waiving and releasing any rights I may have under ADEA, that this Release and Waiver is knowing and voluntary,
and that the consideration given for this Release and Waiver is in addition to anything of value to which I was already entitled
as an executive of the Company. If I am 40 years of age or older upon execution of this Release and Waiver, I further acknowledge
that I have been advised, as required by the Older Workers Benefit Protection Act, that: (a) the release and waiver granted herein
does not relate to claims under the ADEA which may arise after this Release and Waiver is executed; (b) I should consult with an
attorney prior to executing this Release and Waiver; and (c) I have twenty-one (21) days from the date of termination of my employment
with the Company in which to consider this Release and Waiver (although I may choose voluntarily to execute this Release and Waiver
earlier); (d) I have seven (7) days following the execution of this Release and Waiver to revoke my consent to this Release and
Waiver; and (e) this Release and Waiver shall not be effective until the seven (7) day revocation period has expired without my
having previously revoked this Release and Waiver.

 

I acknowledge my continuing
obligations under my Proprietary Information and Inventions Agreement. Pursuant to the Proprietary Information and Inventions Agreement
I understand that among other things, I must not use or disclose any confidential or proprietary information of the Company and
I must immediately return all Company property and documents (including all embodiments of proprietary information) and all copies
thereof in my possession or control. I understand and agree that my right to the severance pay I am receiving in exchange for my
agreement to the terms of this Release and Waiver is contingent upon my continued compliance with my Proprietary Information and
Inventions Agreement.

 

This Release and Waiver
constitutes the complete, final and exclusive embodiment of the entire agreement between the Company and me with regard to the
subject matter hereof. I am not relying on any promise or representation by the Company that is not expressly stated herein. This
Release and Waiver may only be modified by a writing signed by both me and a duly authorized officer of the Company.

 

	Date:	 	 	By:	 

 

    	15

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