Document:

EX-4.18

 Exhibit 4.18 
  

 
 MEDRELEAF CORP. 

ANNUAL INFORMATION FORM 

For the fiscal year ended March 31, 2018 

Dated: June 18, 2018 

 TABLE OF CONTENTS 

 

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

 ANNUAL INFORMATION FORM 

In this annual information form (“Annual Information Form”), unless otherwise noted or the context indicates otherwise, the
“Company”, “MedReleaf”, “we”, “us” and “our” refer to MedReleaf Corp. All financial information in this Annual Information Form is reported in Canadian dollars.
Certain defined terms used herein have the meanings given to them under “Glossary”. 
 The information contained herein is dated as of
March 31, 2018 unless otherwise stated. 
 FORWARD-LOOKING INFORMATION 

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

	 	•	 	 the intended use of proceeds from equity financings; 

 

	 	•	 	 the performance of the Company’s business and operations; 

 

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

 

	 	•	 	 the intention to grow MedReleaf’s business and operations; 

 

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

  

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

 

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

  

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

  

	 	•	 	 the renewal of the MedReleaf Licences; 

 

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

 

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

  

	 	•	 	 laws and any amendments thereto applicable to the Company; 

 

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

  

	 	•	 	 the Company’s future product offerings; 

 

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

  

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

 

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

  

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

  

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

  
 1 

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

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

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

The Company was incorporated on February 28, 2013 under the Business Corporations Act (Ontario) (the “OBCA”) with the name
“MedReleaf Corp.”. The Company’s articles were amended on December 16, 2013 in order to create the former class B shares (which were subsequently amended and then deleted from the Company’s authorized capital pursuant to the
Capital Reorganization), and the Company’s articles were amended again on May 27, 2015 in order to create the former class C shares (which were subsequently re-designated as class B shares pursuant
to the Capital Reorganization (the “Class B Shares”)). 
 In connection with the completion of its initial public
offering and a secondary offering (the “IPO”), on June 6, 2017 the Company completed a capital reorganization (the “Capital Reorganization”) to simplify the Company’s capital structure. The related
amendments to the Company’s articles: (i) replaced the conversion provisions of the former class B shares to permit the implementation of the Capital Reorganization in connection with the IPO; (ii) eliminated the former class B shares
from the authorized capital of the Company; (iii) re-designated the class A common shares as common shares with rights, privileges, restrictions and conditions described under “Capital
Structure” (the “Common Shares”); (iv) re-designated the former class C shares as Class B Shares; (v) subdivided the Common Shares at a ratio of 116.0909 to one; and
(vi) deleted private company transfer restrictions contained in the Company’s articles. 

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

GENERAL DEVELOPMENT OF THE BUSINESS 

Early Developments 
 In February 2013, MedReleaf
was incorporated under the OBCA for the purpose of becoming a Licensed Producer under the Marihuana for Medical Purposes Regulations (Canada) (the “MMPR”) (which has since been repealed and replaced with the current ACMPR)
and participating in the Canadian medical cannabis market. In July 2013, the Company entered into a strategic alliance with Tikun Olam Ltd. (“Tikun Olam”) whereby the Company obtained an exclusive licence to exploit exclusive
varieties of cannabis and access to extensive data that Tikun Olam had gathered from thousands of its patients for over a decade. In consideration for this licence, the Company granted Tikun Olam a royalty of 2.5% of the net revenue earned from the
exploitation of Tikun Olam’s varieties of cannabis, and a royalty of 0.5% of the net revenue earned from any other variety of cannabis, subject to adjustment in certain cases. In September 2013, the Company entered into a lease in respect of
its 55,000 square foot facility in Markham, Ontario (the “Markham Facility”). 
 In February 2014, the Company completed the first
phase of the build-out of the Markham Facility, including its first cultivation room, and received its first licence under the MMPR in respect of such facility (such licence, as amended and renewed from time
to time by Health Canada, the “MMPR Licence”), which initially authorized the Company to produce, sell, possess, ship, transport and deliver dried cannabis. 

In March 2014, the Company opened its patient registration platform and began cultivating cannabis at the Markham Facility. In August 2014, the Company
shipped its first order of medical cannabis product under the MMPR. 
 In June 2014, the Company completed the second phase of the build-out of the Markham Facility, adding three cultivation rooms, and was granted an amendment to its MMPR Licence to cover these rooms, bringing the total number of cultivation rooms to four. 

Developments during the Financial Year ended March 31, 2016 

In August 2015, MedReleaf received an amendment to the MMPR Licence to cover its research and development and plant breeding areas at the Markham Facility. In
November 2015, Health Canada issued a licence to the Company pursuant to an exemption from certain sections of the Controlled Drugs and Substances Act (Canada) (the “CDSA”), the Narcotic Control Regulations (Canada)
issued pursuant to the CDSA, and relevant provisions of the MMPR authorized by Health Canada that allowed Licensed Producers to conduct activities with cannabis and cannabis oil. This exemption authorized the Company to produce, possess, transport,
deliver and destroy cannabis oil, at its Markham Facility (such licence, as amended and renewed by Health Canada from time to time, the “Supplemental Licence”). In December 2015, the Company completed the third phase of the build-out of its Markham Facility and was granted an amendment to the MMPR Licence to cover three additional cultivation rooms at the Markham Facility, bringing the total number of cultivation rooms to seven, and
which also increased the Company’s production and sales capacity to 3,000 kilograms during the term of the licence. 
 In February 2016, the MMPR
Licence was renewed effective February 15, 2016 for a one year term, which included a renewal to the Supplemental Licence. In connection with this renewal, MedReleaf completed the final phase of the
build-out of its Markham Facility and was granted an amendment to the MMPR Licence to cover three additional cultivation rooms at such facility, bringing the total number of cultivation rooms to 10. 

  
 3 

 Developments during the Financial Year ended March 31, 2017 

In July 2016, the Company completed the purchase of its 210,596 square foot facility in Bradford, Ontario (the “Bradford Facility”) for
approximately $8.75 million, which was financed primarily from the proceeds of a $7.5 million credit facility provided by a Canadian financial institution, which was subsequently repaid using loan proceeds advanced under the Credit
Facilities. 
 In August 2016, the ACMPR was introduced to replace the MMPR and the Company’s MMPR Licence and Supplemental Licence were continued
under the ACMPR and are referred to as the “Markham Licence”. 
 In November 2016, the Markham Licence was amended to authorize the Company
to sell cannabis oil and cannabis oil capsules. 
 In February 2017, the Company licensed certain of its intellectual property to Indica Industries Pty Ltd.
(“Indica”), an Australian corporation, in order to support an application for Australian cannabis cultivation and manufacturing licences by such corporation. Under the terms of the agreements, MedReleaf, through its wholly-owned
subsidiary, MedReleaf Holdings (Australia) Ltd., acquired a 10% equity interest in Indica. As well, subject to the execution of additional documentation, it is contemplated that the Company would become entitled to receive certain royalties on the
gross revenues of Indica, as well as MedReleaf Holdings (Australia) Ltd. receiving potential additional equity in Indica. 
 Developments during the
Financial Year ended March 31, 2018 
 On April 12, 2017, the Company was issued a “second site” cultivation licence from Health
Canada pursuant to the ACMPR in respect of its Bradford Facility, permitting the cultivation of up to 100 kilograms of dried cannabis, of which it may sell or provide up to three kilograms, solely for the purpose of analytical testing (as amended
and renewed from time to time, the “Bradford Licence” and together with the Markham Licence, the “MedReleaf Licences”). 

On April 17, 2017, the Company entered into a credit agreement with a Canadian chartered bank and another Canadian financial institution (as amended, the
“Credit Agreement”), providing for revolving loans to a maximum credit limit of $10 million and non-revolving term loans to a maximum aggregate amount of $10 million
(collectively, the “Credit Facilities”). 
 On May 26, 2017, Health Canada announced it was enabling Licensed Producers to
increase production of cannabis by permitting Licensed Producers to, among other things, increase cannabis production within existing facilities to the maximum amount authorized for storage, based on the capacity and security level of their vault(s)
or safe(s), in order to better manage production and meet demand. As a result, the Company was authorized to produce greater amounts of medical cannabis products under the Licences than were previously authorized when the MedReleaf Licences were
initially granted. 
 On May 30, 2017 the Company received certification that its production processes met the requirements set by the International
Conference on Harmonization of Technical Requirements for Registration of Pharmaceuticals for Human Use (ICG Q7): Good Manufacturing Practices Guide for Active Pharmaceutical Ingredients (ICH Good Manufacturing Practices). 

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

  
 4 

 On October 11, 2017, the Company received an amended Bradford Licence for the use of its mother room
and clone room to support the growing capacity at the Bradford Facility and, on October 20, 2017, the Bradford Licence was amended again to include the use of two additional cultivation rooms. On November 3, 2017, the Bradford Licence was
amended to authorize the commercial sale of medical cannabis products from the Bradford Facility. 
 On November 14, 2017, the Company announced that
Indica had been granted a licence from the Australian Government Office of Drug Control for the cultivation and production of medical cannabis. The licence to undertake authorized cannabis activities commences on November 10, 2018 in order to
allow time to complete infrastructure development of a production facility. 
 On December 4, 2017, the Company completed an offering on a “bought
deal” basis by way of short-form prospectus, which also included a secondary offering, pursuant to which the Company issued 3,625,470 Common Shares at a price of $16.55 per Common Share, for gross proceeds to the Company of approximately
$60 million (the “December 2017 Offering”). Certain selling shareholders of the Company sold an aggregate of 2,447,130 Common Shares for aggregate gross proceeds to the selling shareholders of approximately
$40 million. The Company intends to use the net proceeds from the December 2017 Offering to finance the acquisition and/or construction of additional cannabis production and manufacturing facilities in Canada as well in other jurisdictions with
federal legal cannabis markets, where warranted by the opportunities available to the Company, and the expansion of the Company’s marketing and sales initiatives. 

On December 21, 2017, the Company announced that it had entered into an agreement to become a supplier to Shoppers Drug Mart of MedReleaf-branded medical
cannabis products, with such agreement being contingent on Shoppers Drug Mart receiving a distribution licence from Health Canada. 
 On January 31,
2018 the Company completed an offering on a “bought deal” basis by way of short-form prospectus (the “January 2018 Offering”) pursuant to which the Company issued 5,000,000 units of the Company at a price of $26.50
per unit, for gross proceeds of $132.5 million. Each unit consisted of one Common Share and one-half of one common share purchase warrant (each full Common Share purchase warrant, a
“Warrant”). The Warrants were issued pursuant to a common share warrant indenture dated January 31, 2018 between the Company and TSX Trust Company, as warrant agent (the “Warrant Indenture”). Each
Warrant entitles the holder to purchase one Common Share at an exercise price of $34.50 (subject to adjustment in certain circumstances) until January 31, 2020 (subject to accelerated expiry at the Company’s option if the volume-weighted
average trading price of the Common Shares for 10 consecutive trading days exceeds $51.75). The underwriters of the January 2018 Offering exercised the over-allotment option for the purchase of 375,000 Warrants, which closed on February 1,
2018. The Company intends to use the net proceeds from the January 2018 Offering for the same purposes as the net proceeds received in connection with the December 2017 Offering. 

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

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

On March 19, 2018, the Company announced that it had entered into an agreement to become the largest supplier of medical cannabis products to
Cannamedical Pharma GMBH, a leading medical cannabis distributor to pharmacies in Germany. 
 Developments Subsequent to the Financial Year ended
March 31, 2018 
 On April 11, 2018, the Company announced that it had completed a supply agreement with Société des alcools
du Québec (“SAQ”) to supply the Province of Québec with a guaranteed minimum 8,000 kilograms per year of high-quality adult recreational-use cannabis. 

  
 5 

 On April 12, 2018, the Company announced that it had purchased one million square feet of existing
greenhouse infrastructure on a 69 acre property located in Exeter, Ontario, together with 95 acres of adjacent land (collectively, the “Exeter Property”) for a total purchase price of approximately $26 million,
consisting of cash and Common Shares. 
 On May 14, 2018, the Company and Aurora Cannabis Inc. (“Aurora”) entered into a definitive
arrangement agreement (as amended, the “Arrangement Agreement”) pursuant to which Aurora will acquire all of the issued and outstanding Common Shares by way of a court-approved plan of arrangement under the OBCA (the
“Arrangement”). Under the terms of the transaction, holders of Common Shares will receive 3.575 common shares of Aurora and $0.000001 in cash for each Common Share held (subject to the making of joint tax elections). Upon completion
of the Arrangement, existing Aurora and MedReleaf shareholders would own approximately 61% and 39% of the pro forma company, respectively, on a fully-diluted basis. The Arrangement has been unanimously approved by the board of directors of
each of MedReleaf and Aurora and each board has recommended that their respective shareholders vote in favour of the Arrangement. 
 Pursuant to the
Arrangement, among other steps and procedures, the following transactions will occur: 
  

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

  

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

  

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

  

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

  

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

  
 6 

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

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

Overview 
 MedReleaf is a Licensed Producer of
medical cannabis products based in Markham, Ontario. The Company produces and sells its medical cannabis products to patients across Canada. MedReleaf is a research and development-driven company dedicated to patient care, scientific innovation,
research and advancing the understanding of the therapeutic benefits of cannabis. 
 Currently, the Company primarily derives its revenues from the sale to
its patients of dried cannabis, cannabis oils, cannabis oil capsules and, recently, a topical cream (designed to work with the Company’s cannabis oils). MedReleaf’s sales are supported by a variety of initiatives, including health
conference sponsorships, as well as through its cannabis education and outreach team of employees. The Company expects both its portfolio of products and the jurisdictions in which it operates to expand as applicable federal laws allow, resources
permit, and where market research indicates opportunity. See “Description of the Business – International Opportunities”. 

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

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

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

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

  
 7 

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

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

As it has done successfully in the past, the Company expects to apply for amendments to the MedReleaf Licences and seek additional licences where required, in
order to meet the Company’s expanding operational and production capabilities. The time it takes Health Canada to process any such amendment application or application for a new licence varies depending on the complexity of the application and
other factors outside the control of the Company. Accordingly, no assurance can be given that any amendment(s) sought in respect of the MedReleaf Licences, or any new licences sought by the Company, will be obtained on terms desired, or at all. See
“Risk Factors”. 
 In addition, unless renewed, the MedReleaf Licences will expire at the end of their respective terms, with the
Markham Licence expiring on February 14, 2020 and the Bradford Licence expiring on April 10, 2020. However, as the Company has successfully done in the past, the Company intends to seek the renewal of its licences prior to the expiration
of their respective terms. Despite the Company’s previous successes in obtaining renewals of its licences, there can be no assurance that the Company will be able to renew the MedReleaf Licences on the same terms, or at all. See
“Risk Factors”. 
 MedReleaf’s Facilities 

Markham Facility 
 The Company currently operates the
55,000 square foot Markham Facility, which is covered by the Markham Licence. The Markham Facility is occupied pursuant to a lease agreement dated September 3, 2013 (the “Markham Lease”). The initial term of the Markham
Lease expires on March 31, 2024, however the Company has the right (provided it is not then in default of the Markham Lease) to extend the Markham Lease for two further terms of five years. The Markham Lease permits the Company to use the lands
and building comprising the Markham Facility for the production of medical cannabis, to the extent permitted by all laws and in keeping with the standards of a first-class industrial building. As of the date of this Annual Information Form, the
Markham Lease is in good standing. 
 The Markham Facility is a modern, fully operational facility that was built out in three phases, with each phase
capitalizing on the insights and knowledge gained from MedReleaf’s operations over time. The Markham Facility has approximately 23,500 square feet of dedicated cultivation space organized into 10 cultivation rooms, and approximately 31,500
square feet of support and auxiliary services space, including areas for propagation, trimming, drying, oil extraction, shipping, storage, water treatment, laboratories, quality assurance and quality control facilities, maintenance areas, shipping
and distribution areas, management offices, and a patient care centre. 
 The Company believes that its indoor cultivation techniques, using proprietary know-how developed at the Markham Facility, have enabled it to produce premium, indoor-grown medical cannabis products at costs comparable with greenhouse operators. 

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

  
 8 

 Upon full build-out completion, the Bradford Facility will have
approximately 86,000 square feet of dedicated cultivation space organized into 19 cultivation rooms and approximately 124,000 square feet of support and auxiliary services space which will include areas for propagation, trimming, drying,
commercial-scale oil extraction, pharmaceutical-grade manufacturing, an industrial kitchen, shipping, storage, water treatment, laboratories, plant-based and analytical research and development facilities, quality assurance and quality control
facilities, maintenance areas, shipping and distribution areas, and administrative offices. 
 No assurance can be provided that the Company will be able to
obtain any required amendments to the Bradford Licence or that the completion of the remaining phases of the build-out of the Bradford Facility will be completed on time or on budget, or at all. See
“Risk Factors”. 
 Exeter Property 

The Company also recently acquired the Exeter Property, consisting of one million square feet of existing greenhouse infrastructure on a 69 acre property in
Exeter, Ontario, along with 95 acres of adjacent land. The Company is continuing to consider the manner and scope of retrofitting the Exeter Property. 
 It
is expected that, after retrofitting, the Exeter Property will have production capacity of up to 105,000 kilograms of cannabis product annually with a first harvest anticipated by the end of calendar 2018, subject to receipt of a licence from Health
Canada. 
 The retrofitted Exeter Property is expected to add large scale, low-cost greenhouse production alongside
the Markham Facility and Bradford Facility and, when fully operational, is expected to increase the Company’s fully funded capacity to approximately 140,000 kilograms of cannabis product per year. The adjacent lands on the Exeter Property could
also accommodate a greenhouse approximately 1.5 times larger than the existing greenhouse infrastructure on the Exeter Property, providing for future expansion of cultivation capacity. 

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

Storage and Security 
 The ACMPR prescribes physical
security requirements that are necessary to secure sites where Licensed Producers conduct activities with cannabis for medical purposes. 
 As required by
the ACMPR, the Markham Facility contains a storage vault that is deemed to be “security level nine”, as defined by the Health Canada Directive on Physical Security Requirements for Controlled Substances (the “Security
Directive”), and as determined by the construction of the vault and MedReleaf’s proximity to a major city (Toronto). The vault can only be accessed by a “Responsible Person in Charge” (as defined under the ACMPR) and at least
one Responsible Person in Charge must be present in the vault at all times if the doors are open. The Bradford Facility contains a vault deemed to be “security level ten”, as defined by the Security Directive. 

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

  
 9 

 On January 25, 2018, Health Canada announced changes to the physical security requirements under the
ACMPR, providing that Licensed Producers were no longer required to meet the vault and storage measures outlined in the Security Directive, but rather Licensed Producers may store cannabis within a secure area of their facility. In addition,
Licensed Producers are no longer required to maintain constant video surveillance inside the rooms where cannabis is being cultivated, propagated or harvested. All access points to cultivation, propagation and harvesting rooms continue to be subject
to constant surveillance requirements to record all entries and exits. 
 It is possible that Health Canada may make further changes to the physical storage
and security requirements, including changes that are more or less onerous to those presently required. Any such changes to existing regulations and regulatory requirements may affect the Company’s business and operations, potentially
adversely. See “Risk Factors”. 
 Principal Products 

Medical Cannabis Products 
 Under the ACMPR and the
MedReleaf Licences, the Company is authorized to cultivate and sell cannabis products for medical purposes in both dried and oil form, to residents of Canada who comply with the requirements of the ACMPR. The Company’s medical cannabis products
can be ingested in a variety of ways, including smoking, vaporizing, and consumption in the form of oil or edibles. 
 MedReleaf strongly believes that
maintaining both the cannabinoids and terpenes in their original relative ratios is important in order to maximize the medicinal properties of medical cannabis products and therefore it endeavours to do so with its products. 

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

MedReleaf currently sells numerous strain varieties of cannabis in three main product lines: dried cannabis, cannabis oils, and cannabis oil capsules. The
Company intends to introduce new formats for its medical cannabis products if and when authorized by Health Canada. 
 Additionally, MedReleaf also seeks to
maintain a minimum level of inventory to ensure that it can continue to provide its patients with quality cannabis products on a consistent basis, without supply interruption, while also acquiring new patients. 

New Products and Accessories 
 MedReleaf has a variety of
new medical cannabis products at various stages of development, including oral products, topical products, edible products and inhalable products. These products will need to be approved by Health Canada before they can be offered. No assurance can
be given that the Company will succeed in bringing any of these products to market. See “Risk Factors”. 
 In addition to its
medical cannabis products, the Company also sells a variety of accessories including grinders, vaporizers and its exclusive lockable containers, and continues to explore expanding these offerings for its patients. 

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

  
 10 

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

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

 The Company’s patients order medical cannabis products through the Company’s online store or by phone. Medical cannabis is and will continue
to be delivered by secured courier or other methods permitted by the ACMPR or future regulation. 
 The Company will distribute recreational cannabis
products in accordance with the finalized regulatory framework in relation to cannabis for recreational purposes in Canada. For example, the Company has entered into an agreement to become a supplier to Shoppers Drug Mart of MedReleaf-branded
medical cannabis products, with such agreement being contingent on Shoppers Drug Mart receiving a distribution licence from Health Canada. In addition, the Company entered into a supply agreement with SAQ to supply the Province of Québec with
a guaranteed minimum 8,000 kilograms per year of high-quality adult recreational-use cannabis, pending the legalization of cannabis for recreational purposes. 

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

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

Knowledge with respect to cultivating and growing cannabis is important in the cannabis industry. The nature of growing cannabis is not substantially different
from the nature of growing other agricultural products. Variables such as temperature, humidity, lighting, air flow, watering and feeding cycles are meticulously defined and controlled to produce consistent product and to avoid contamination. The
product is cut, sorted and dried under defined conditions that are established to protect the activity and purity of the product. Once processing is complete, each and every processing batch is subject to full testing against stringent quality
specifications. 
 The Company grows the primary component of its finished products, namely, cannabis. The Company’s cultivation operations are
dependent on a number of key inputs and their related costs including raw materials and supplies related to the Company’s growing operations, as well as electricity, water and other utilities. See “Risk Factors”. 

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

  
 11 

 Protection of Intangible Assets 

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

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

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

  

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

  

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

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

 

	 	•	 	 licensing and overseeing the commercial industry; and 

 

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

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

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

  

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

  

	 	•	 	 security measures relating to facilities and personnel; 

 

	 	•	 	 good production practices; 

 

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

 

	 	•	 	 patient registration and ordering requirements. 

  
 12 

 Health Canada requires rigorous testing of cannabis products and derivatives provided by Licensed Producers.
A Licensed Producer is subject to a wide variety of compliance and enforcement activities conducted by Health Canada after it has received its licence. For instance, Health Canada will typically perform unannounced inspections on a Licensed
Producer’s facility to ensure adequate security measures and production practices are in place. 
 Expected Legalization of Recreational Cannabis
in Canada 
 In connection with the current Government of Canada’s platform advocating for the legalization and regulation of recreational
cannabis in order to dismantle the illegal market and restrict access by under-age individuals, on April 13, 2017, the Government of Canada released Bill C-45
which, if implemented, would enact the Cannabis Act. The Cannabis Act would provide a licensing and permitting scheme for the production, testing, packaging, labeling, sending, delivery, transportation, sale, possession, and disposal of cannabis for
non-medical (i.e., recreational) use, to be implemented by regulations made under the Cannabis Act. The Government of Canada advised that it intends to bring the Cannabis Act into force no later than July 2018
(or such other date that may be determined by the Government of Canada). The Cannabis Act proposes to maintain separate access to cannabis for medical or scientific purposes, however the transitional provisions of the Cannabis Act provide that every
license issued under Section 35 of the ACMPR that is in force immediately before the day on which the Cannabis Act comes into force is deemed to be a licence issued under the Cannabis Act, and that such licence will continue in force until it
is revoked or expires. 
 On October 3, 2017, the Parliamentary Standing Committee on Health proposed amendments to the Cannabis Act including, among
other things, an amendment that would permit cannabis edibles and concentrates to be sold, to come into force no later than 12 months after the Cannabis Act comes into force. 

On November 10, 2017, the Government of Canada proposed that federal tax on cannabis for recreational purposes should not exceed $1 per gram or 10% of
the producer’s price, whichever is higher, with retail sales taxes levied on top of that amount. 
 While the Cannabis Act provides for the regulation
of the commercial production of cannabis for recreational purposes and related matters by the federal government, the Cannabis Act proposes that the provinces and territories of Canada will have authority to regulate other aspects of recreational
cannabis (similar to what is currently the case for liquor and tobacco products), such as sale and distribution, minimum age requirements, places where cannabis can be consumed, and a range of other matters. 

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

There is no guarantee that the provincial and territorial frameworks supporting the legalization of cannabis for recreational use in Canada will be
implemented on the terms anticipated, or at all. See “Risk Factors”. 
 On November 21, 2017, Health Canada released for public
consultation its proposed approach to the regulation of cannabis. The purpose of the consultation paper was to solicit public feedback on an initial set of regulatory proposals that Health Canada is considering, focused on the regulations that would
facilitate the coming into force of the proposed Cannabis Act. On March 19, 2018, Health Canada published a summary of the comments received on the proposed regulations as well as some proposed additions to the regulatory proposal which cover
seven broad categories, namely: (1) licences, permits and authorizations; (2) security clearances; (3) cannabis tracking system; (4) cannabis products; (5) packaging and labelling; (6) cannabis for medical purposes; and
(7) health products and cosmetics containing cannabis. The details of the proposed regulations are subject to change until final regulations are published. 

  
 13 

 The Senate of Canada adopted Bill C-45 on June 7, 2018 with
amendments that will now be considered by the House of Commons. 
 MedReleaf intends to participate in the Canadian recreational market, if and when the
recreational use of cannabis is legalized in Canada, and only in compliance with all applicable federal and provincial laws and regulations concerning the Canadian recreational cannabis market. As it has done in the Canadian medical cannabis market,
the Company’s customer acquisition strategy for the Canadian recreational cannabis market will be to focus on leveraging its analytical and consumer insight capabilities in order to identify profitable market segments, understand the unique
needs of each segment, design brands and products to address market demand, and collect and analyze customer and sales data to improve the customer experience. 

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

In addition to its Canadian domestic operations, the Company is also exploring international opportunities, including (subject to applicable laws and
regulations): (a) opportunities to export its medical cannabis products to other countries; and (b) opportunities to create international alliances with local partners to apply for cultivation licences in other countries. MedReleaf is currently
pursuing these opportunities in several countries. 
 The Company does not have, and does not intend to engage in, any direct, indirect or ancillary
involvement in the U.S. cannabis industry (as described in CSA Staff Notice 51-352 – Issuers with U.S. Marijuana-Related Activities (Revised)) until it is federally legal to do so. 

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

Competitive Conditions 
 The principal competitive
factors on which MedReleaf competes with other Licensed Producers are the price and quality of its medical cannabis products (and associated goodwill and brand recognition), physician familiarity and willingness to prescribe the Company’s
medical cannabis products, and the Company’s patient services. While MedReleaf prices its cannabis products according to the Company’s perception of market demand, given its relatively low cost of production (based on management’s
assessment of the Company’s own financial information against that of all publicly-traded Licensed Producers), it is expected that the Company will be able to enjoy pricing flexibility while maintaining its margins. See “Risk
Factors”. 
 In addition, if the Cannabis Act and provincial and territorial recreational regulatory frameworks are implemented, the size of the
medical cannabis market may be reduced and new business challenges may arise for companies participating in the medical cannabis market and/or intending to participate in the recreational cannabis market. It is expected that the recreational
cannabis market will be highly competitive. 

  
 14 

 RISK FACTORS 

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

Risks Related to the Business and the Industry 

The Company is dependent upon the MedReleaf Licences for its ability to grow, store and sell medical cannabis and other products derived therefrom and
the MedReleaf Licences are subject to ongoing compliance, reporting requirements and renewal 
 The Company’s ability to grow, store and sell
cannabis for medical purposes in Canada is dependent on the MedReleaf Licences. The MedReleaf Licences are subject to ongoing compliance, reporting requirements and renewal. Although MedReleaf believes it will meet the requirements of the ACMPR for
future renewals of the MedReleaf Licences, there can be no guarantee that Health Canada will renew the MedReleaf Licences or, if renewed, that they will be renewed on the same or similar terms or that Health Canada will not revoke the MedReleaf
Licences. Should the Company fail to comply with the requirements of the MedReleaf Licences or should Health Canada not renew the MedReleaf Licences when required, or renew the MedReleaf Licences on different terms or revoke the MedReleaf Licences,
there would be a material adverse effect on the Company’s business, financial condition and results of operations. 
 Other governmental licences are
currently, and in the future may be, required in connection with MedReleaf’s operations, in addition to other unknown permits and approvals which may be required. To the extent such permits and approvals are required and not obtained, the
Company may be prevented from operating and/or expanding its business, which could have a material adverse effect on the Company’s business, financial condition and results of operations. 

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

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

  
 15 

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

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

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

Furthermore, the legislative framework pertaining to the Canadian recreational cannabis market will be subject to significant provincial and territorial
regulation, which will vary across provinces and territories and result in an asymmetric regulatory and market environment, different competitive pressures and significant additional compliance and other costs and/or limitations on the
Company’s ability to participate in such market. 
 Future clinical research studies on the effects of medical cannabis may lead to conclusions
that dispute or conflict with the Company’s understanding and belief regarding the medical benefits, viability, safety, efficacy, dosing and social acceptance of cannabis 

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

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

  
 16 

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

The MedReleaf Facilities are integral to the Company’s business and adverse changes or developments affecting either of the Markham Facility or the
Bradford Facility may impact the Company’s business, financial condition and results of operations 
 Adverse changes or developments affecting
the MedReleaf Facilities, including but not limited to a force majeure event or a breach of security, could have a material adverse effect on the Company’s business, financial condition and prospects. Any breach of the security measures
and other facility requirements, including any failure to comply with recommendations or requirements arising from inspections by Health Canada, could also have an impact on MedReleaf’s ability to continue operating under the MedReleaf Licences
or the prospect of renewing the MedReleaf Licences or could result in a revocation of the MedReleaf Licences. 
 The Company is also in the process of
completing the build-out of its Bradford Facility. Management of the Company expects that the Bradford Facility, upon full build-out completion, will significantly
increase the Company’s cultivation and growing capacity. However, no assurance can be given that Health Canada will approve necessary amendments to the Bradford Licence to take full advantage of the Bradford Facility once fully built. If the
Company is unable to secure any necessary amendments to the Bradford Licence, the expectations of management with respect to the increased future cultivation and growing capacity may not be borne out, which could have a material adverse effect on
the Company’s business, financial condition and results of operations. Further, construction delays or cost over-runs in respect of the build-out of the Bradford Facility, howsoever caused, could have a
material adverse effect on the Company’s business, financial condition and results of operations. 
 The medical cannabis industry and market are
relatively new in Canada, and this industry and market may not continue to exist or grow as anticipated or the Company may ultimately be unable to succeed in this new industry and market 

As a Licensed Producer, MedReleaf is operating its business in a relatively new medical cannabis industry and market. In addition to being subject to general
business risks, a business involving an agricultural product and a regulated consumer product, the Company needs to continue to build brand awareness in this industry and market through significant investments in its strategy, its production
capacity, quality assurance, and compliance with regulations. These activities may not promote the Company’s brand and products as effectively as intended, or at all. Competitive conditions, consumer tastes, patient requirements and spending
patterns in this new industry and market are relatively unknown and may have unique circumstances that differ from existing industries and markets. 
 In
addition, the ACMPR also permits patients to produce a limited amount of cannabis for their own medical purposes or to designate a person to produce a limited amount of cannabis on their behalf and the proposed Cannabis Act provides for individuals
to produce limited amounts of cannabis for their own recreational use. This could potentially significantly reduce the market for the Company’s products, which could have a material adverse effect on the Company’s business, financial
condition and results of operations. 
 Accordingly, there are no assurances that this industry and market will continue to exist or grow as currently
estimated or anticipated, or function and evolve in a manner consistent with management’s expectations and assumptions. Any event or circumstance that affects the medical cannabis industry and market could have a material adverse effect on the
Company’s business, financial condition and results of operations. 

  
 17 

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

In addition, there has been and will likely continue to be industry consolidation, resulting in the creation of larger companies with financial resources,
manufacturing and marketing capabilities, who may have or develop product offerings that are greater than those of the Company. As a result of this competition, the Company may be unable to maintain its operations or develop them as currently
proposed on terms it considers acceptable or at all. Increased competition by larger, better-financed competitors with geographic advantages could materially and adversely affect the Company’s business, financial condition and results of
operations. 
 The number of licences granted and the number of Licensed Producers ultimately authorized by Health Canada could also have an impact on the
operations of the Company. The Company expects to face additional competition from new market entrants that are granted licences under the ACMPR or existing licence holders which are not yet active in the industry. If a significant number of new
licences are granted by Health Canada in the near term, the Company may experience increased competition for market share and may experience downward price pressure on its products as new entrants increase production. 

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

If the number of users of cannabis for medical purposes in Canada increases, or if the legalization of cannabis for recreational purposes is implemented, the
demand for cannabis products generally will likely increase and the Company expects that competition will become more intense, as current and future competitors begin to offer an increasing number of diversified products. To remain competitive, the
Company will require a continued high level of investment in research and development, sales and patient support. The Company may not have sufficient resources to maintain research and development, sales and patient support efforts on a competitive
basis which could have a material adverse effect on the Company’s business, financial condition and results of operations. 
 As well, the legal
landscape for medical and recreational cannabis is changing internationally. More countries have passed laws that allow for the production and distribution of cannabis for medical purposes in some form or another. The Company has some international
strategic alliances in place, which may be affected if more countries legalize medical cannabis. Increased international competition and limitations placed on the Company by Canadian regulations might lower the demand for the Company’s products
on a global scale. 

  
 18 

 The Company’s expansion efforts may not be successful 

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

The legalization of cannabis for recreational purposes may not be implemented as anticipated or at all and, if implemented, differing approaches to the
distribution and sales by the provinces and territories of Canada may impose barriers to participation by the Company in any recreational cannabis market, and may also result in changes to the current regulatory regime providing access to cannabis
for medical purposes 
 The Government of Canada has provided guidance that, subject to Parliamentary approval and Royal Assent, it intends to
provide regulated and restricted access to cannabis pursuant to the Cannabis Act by no later than July 2018, however there remains no assurance that the legalization of cannabis by the Government of Canada will occur as anticipated or at all. In
particular, on December 20, 2017 the Prime Minister of Canada communicated that the Government of Canada intends to legalize cannabis for recreational purposes in the summer of 2018, despite previous reports of a July 1, 2018 deadline.

 Health Canada’s proposed approach to the regulation of cannabis (described under “Description of the Business—Expected
Legalization of Recreational Cannabis in Canada”) includes proposals relating to cannabis for medical purposes and health products containing cannabis. Such proposals, if implemented, could result in changes to the current regulatory regime
under the ACMPR, which may impact the operations of Licensed Producers or affect the Canadian medical cannabis industry generally. Any such regulatory changes could adversely affect the Company’s business, financial condition and results of
operations. 
 In addition, if the Cannabis Act comes into effect, there is no guarantee that provincial legislation regulating the distribution and sale of
cannabis for recreational purposes will be enacted according to the terms announced by such provinces, or at all, or that any such legislation, if enacted, will create the opportunities for growth anticipated by the Company. For example, the
Provinces of Ontario (Canada’s most populous province), Québec and New Brunswick have announced sales and distribution models that would create government-controlled monopolies over the legal retail and distribution of cannabis for
recreational purposes in such provinces, which could limit the Company’s opportunities in those provinces. 
 The Company may be unable to
attract or retain key personnel with sufficient experience in the medical cannabis industry, and may prove unable to attract, develop, and retain additional employees required for the Company’s development and future success 

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

  
 19 

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

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

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

MedReleaf has expanded and intends to further expand its business and operations into jurisdictions outside of Canada, and there are risks associated
with doing so 
 The Company has expanded and may in the future further expand its operations and business into jurisdictions outside of Canada.
There can be no assurance that any market for the Company’s products will develop in any such foreign jurisdiction. The Company may face new or unexpected risks or significantly increase its exposure to one or more existing risk factors,
including economic instability, changes in laws and regulations and the effects of competition. These factors may limit the Company’s capability to successfully expand its operations and may have a material adverse effect on the Company’s
business, financial condition and results of operations. 
 The Company may enter into strategic alliances, or expand the scope of currently existing
relationships with third parties with whom it believes will have a beneficial impact on its business, financial condition and results of operation and there are risks associated with such activities 

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

  
 20 

 The Company is subject to risks inherent in an agricultural business 

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

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

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

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

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

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

  
 21 

 If MedReleaf is not able to comply with all safety, health and environmental regulations applicable to
its operations and industry, it may be held liable for any breaches thereof 
 Safety, health and environmental legislation affects nearly all
aspects of the Company’s operations, including product development, working conditions, waste disposal, emission controls and the maintenance of air and water quality standards and land reclamation and, with respect to environmental regulation,
imposes limitations on the generation, transportation, storage and disposal of solid and hazardous waste. Compliance with safety, health and environmental legislation can require significant expenditures, and failure to comply with such safety,
health and environmental legislation may result in the imposition of fines and penalties, the temporary or permanent suspension of operations, clean-up costs resulting from contaminated properties, damages and
the loss of important permits. Exposure to these liabilities arises not only from the Company’s existing operations, but from operations that may in the future be closed or sold to third parties. The Company could also be held liable for worker
exposure to hazardous substances and for accidents causing injury or death. There can be no assurances that the Company will at all times be in compliance with all safety, health and environmental regulations or that steps to achieve compliance
would not materially adversely affect the Company’s business. 
 Safety, health and environmental legislation is evolving in a manner which will
require stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects and a heightened degree of responsibility for
companies and their officers, directors and employees. The Company is not able to determine the specific impact that future changes in safety, health and environmental laws and regulations may have on its operations and activities, and its resulting
financial position; however, the Company anticipates that capital expenditures and operating expenses may increase in the future as a result of the implementation of new and increasingly stringent safety, health and environmental regulation. Further
changes in safety, health and environmental laws, new information on existing safety, health and environmental conditions or other events, including legal proceedings based upon such conditions or an inability to obtain necessary permits, may
require increased financial reserves, compliance expenditures or otherwise have a material adverse effect on the Company’s business, financial condition and results of operations. 

The Company may be subject to product liability claims 

As a manufacturer and distributor of products designed to be ingested by humans, MedReleaf faces an inherent risk of exposure to product liability claims,
regulatory action and litigation if its products are alleged to have caused significant loss or injury. In addition, the manufacture and sale of cannabis products for medical purposes involves the risk of injury to consumers due to tampering by
unauthorized third parties or product contamination. Previously unknown adverse reactions resulting from human consumption of cannabis products alone or in combination with other medications or substances could occur. The Company may be subject to
various product liability claims, including, among others, that the products produced by the Company caused or contributed to injury or illness, include inadequate instructions for use or include inadequate warnings concerning possible side effects
or interactions with other substances. A product liability claim or regulatory action against the Company could result in increased costs, could adversely affect the Company’s reputation and goodwill with its patients and consumers generally,
and could have a material adverse effect on the Company’s business, financial condition and results of operations. There can be no assurances that MedReleaf will be able to obtain or maintain product liability insurance on acceptable terms or
with adequate coverage against potential liabilities. Such insurance is expensive and may not be available in the future on acceptable terms, or at all. The inability to obtain sufficient insurance coverage on reasonable terms or to otherwise
protect against potential product liability claims could prevent or inhibit the commercialization of products. 
 The Company’s medical cannabis
products may be subject to recalls for a variety of reasons 
 Manufacturers and distributors of products are sometimes subject to the recall or
return of their products for a variety of reasons, including product defects, such as contamination, unintended harmful side effects or interactions with other substances, packaging safety and inadequate or inaccurate labeling disclosure. If any of
the products produced by the Company are recalled due to an alleged product defect or for any other reason, the Company could be required to incur the unexpected expense of the recall and any legal proceedings that might arise in connection with the
recall. The Company may lose a significant amount of sales and may not be able to replace those sales at an acceptable margin or at all. In addition, a product recall may require significant management attention. Although MedReleaf has detailed
procedures in place for testing finished products, there can be no assurance that any quality, potency or contamination problems will be detected in time to avoid unforeseen product recalls, regulatory action or lawsuits, whether frivolous or
otherwise. Additionally, if any of the products produced by MedReleaf were subject to recall, the reputation and goodwill of that product and/or the Company could be harmed. A recall for any of the foregoing reasons could lead to decreased demand
for products produced by MedReleaf and could have a material adverse effect on the Company’s business, financial condition and results of operations. Additionally, product recalls may lead to increased scrutiny of the operations of MedReleaf by
Health Canada or other regulatory agencies, requiring further management attention, increased compliance costs and potential legal fees, fines, penalties and other expenses. Furthermore, any product recall affecting the medical cannabis industry
more broadly could lead consumers to lose confidence in the safety and security of the products sold by Licensed Producers generally, which could have a material adverse effect on the Company’s business, financial condition and results of
operations. 

  
 22 

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

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

The Company may experience breaches of security at its facilities or in respect of electronic documents and data storage and may face risks related to
breaches of applicable privacy laws 
 Given the nature of the Company’s product and its lack of legal availability outside of channels approved
by the Government of Canada, as well as the concentration of inventory in its facilities, despite meeting or exceeding Health Canada’s security requirements, there remains a risk of shrinkage as well as theft. A security breach at one of the
Company’s facilities could expose the Company to additional liability and to potentially costly litigation, increase expenses relating to the resolution and future prevention of these breaches and may deter potential patients from choosing the
Company’s products. 
 In addition, MedReleaf collects and stores personal information about its patients and is responsible for protecting that
information from privacy breaches. A privacy breach may occur through procedural or process failure, information technology malfunction, or deliberate unauthorized intrusions. Theft of data for competitive purposes, particularly patient lists and
preferences, is an ongoing risk whether perpetrated via employee collusion or negligence or through deliberate cyber-attack. Any such theft or privacy breach would have a material adverse effect on the Company’s business, financial condition
and results of operations. 
 Furthermore, there are a number of federal and provincial laws protecting the confidentiality of certain patient health
information, including patient records, and restricting the use and disclosure of that protected information. In particular, the privacy rules under the Personal Information Protection and Electronics Documents Act (Canada)
(“PIPEDA”), protect medical records and other personal health information by limiting their use and disclosure of health information to the minimum level reasonably necessary to accomplish the intended purpose. If the Company was
found to be in violation of the privacy or security rules under PIPEDA or other laws protecting the confidentiality of patient health information, it could be subject to sanctions and civil or criminal penalties, which could increase its
liabilities, harm its reputation and have a material adverse effect on the business, results of operations and financial condition of the Company. 

  
 23 

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

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

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

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

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

  
 24 

 MedReleaf may be unable to expand its operations in accordance with patient demand or to manage its
operations beyond their current scale 
 The Company’s revenue has grown in recent years. The Company’s ability to sustain its growth will
depend on a number of factors, many of which are beyond the Company’s control, including, but not limited to, the availability of sufficient capital on suitable terms, changes in laws and regulations respecting the production of cannabis
products and competition from other Licensed Producers and the black market, and the ability or authorization to produce sufficient volumes of the Company’s medical cannabis products to match patient demand. In addition, the Company is subject
to a variety of business risks generally associated with growing companies. Future growth and expansion could place significant strain on the Company’s management personnel and likely will require the Company to recruit additional management
personnel. 
 There can be no assurance that MedReleaf will be able to manage its expanding operations (including any acquisitions) effectively, that it
will be able to sustain or accelerate its growth or that such growth, if achieved, will result in profitable operations, that it will be able to attract and retain sufficient management personnel necessary for continued growth, or that it will be
able to successfully make strategic investments or acquisitions. The failure to accomplish any of the foregoing could have a material adverse effect on the Company’s business, financial condition and results of operations. 

Demand for medical cannabis products is dependent on a number of social, political and economic factors that are beyond the Company’s control. While the
Company believes that demand for such products will continue to grow, there is no assurance that such increase in demand will occur, that the Company will benefit from any demand increase, or that its business will be profitable. If the Company is
unable to demonstrate sustained profitability, the value of the Common Shares may significantly decrease. 
 MedReleaf may not be able to secure
adequate or reliable sources of funding required to operate its business and meet consumer demand for its products 
 There is no guarantee that the
Company will be able to achieve its business objectives. The continued development of the Company may require additional financing. The failure to raise such capital could result in the delay or indefinite postponement of current business objectives
or the Company ceasing to carry on business. There can be no assurance that additional capital or other types of financing will be available if needed or that, if available, the terms of such financing will be favourable to the Company. In addition,
from time to time, the Company may enter into transactions to acquire assets or the shares of other corporations. These transactions may be financed wholly or partially with debt, which may increase the Company’s debt levels above industry
standards. Any debt financing secured in the future could involve restrictive covenants relating to capital raising activities and other financial and operational matters, which may make it more difficult for the Company to obtain additional capital
and to pursue business opportunities, including potential acquisitions. Debt financings may also contain provisions which, if breached, may entitle lenders or their agents to accelerate repayment of loans and/or realize upon security over the assets
of the Company, and there is no assurance that the Company would be able to repay such loans in such an event or prevent the enforcement of security granted pursuant to such debt financing. 

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

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

  
 25 

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

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

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

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

  
 26 

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

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

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

 The Company may be subject to various potential conflicts of interest because of the fact that some of its directors and executive officers may be
engaged in a range of business activities. In addition, the Company’s directors and executive officers may devote time to their outside business interests, so long as such activities do not materially or adversely interfere with their duties to
the Company and subject to any contractual restrictions restricting such activities. In some cases, the Company’s executive officers and directors may have fiduciary obligations associated with business interests that interfere with their
ability to devote time to the Company’s business and affairs, which could adversely affect the Company’s operations. These business interests could require significant time and attention of the Company’s executive officers and
directors. 
 Conflicts of interest, if any, will be subject to the procedures and remedies provided under applicable laws and policies of the Company. For
example, a director who has a material interest in a matter before the Board or any committee on which he or she serves is required to disclose such interest as soon as the director becomes aware of it and absent himself or herself from the meeting
while discussions and voting with respect to the matter are taking place. In accordance with applicable laws, the directors of the Company are required to act honestly and in good faith with a view to the best interests of the Company. 

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

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

  
 27 

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

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

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

Third parties with whom the Company does business may perceive themselves as being exposed to reputational risk as a result of their relationship with
the Company 
 The parties with which the Company does business may perceive that they are exposed to reputational risk as a result of the
Company’s medical cannabis business activities. Failure to establish or maintain business relationships due to reputational risk arising in connection with the nature of the Company’s business could have a material adverse effect on the
Company’s business, financial condition and results of operations. 
 The Company may be subject to risks related to the protection and
enforcement of its intellectual property rights, and may become subject to allegations that the Company is in violation of intellectual property rights of third parties 

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

  
 28 

 Unauthorized parties may attempt to replicate or otherwise obtain and use the Company’s products, trade
secrets, technical know-how and proprietary information that are not protected by patents. Policing the unauthorized use of the Company’s current or future intellectual property rights could be difficult,
expensive, time-consuming and unpredictable, as may be enforcing these rights against unauthorized use by others. Identifying unauthorized use of intellectual property rights is difficult as the Company may be unable to effectively monitor and
evaluate the products being distributed by its competitors, including parties such as unlicensed dispensaries, and the processes used to produce such products. In addition, in any infringement proceeding, some or all of the Company’s current or
future trademarks, patents or other intellectual property rights or other proprietary know-how, or arrangements or agreements seeking to protect the same for the benefit of the Company, may be found invalid,
unenforceable, anti-competitive or not infringed. An adverse result in any litigation or defense proceedings could put one or more of the Company’s current or future trademarks, patents or other intellectual property rights at risk of being
invalidated or interpreted narrowly and could put existing intellectual property applications at risk of not being issued. Any or all of these events could materially and adversely affect the business, financial condition and results of operations
of the Company. 
 In addition, other parties may claim that the Company’s products infringe on their proprietary and perhaps patent protected rights.
Such claims, whether or not meritorious, may result in the expenditure of significant financial and managerial resources, legal fees, result in injunctions, temporary restraining orders and/or require the payment of damages. As well, the Company may
need to obtain licenses from third parties who allege that the Company has infringed on their lawful rights. However, such licenses may not be available on terms acceptable to the Company or at all. In addition, the Company may not be able to obtain
or utilize on terms that are favorable to it, or at all, licenses or other rights with respect to intellectual property that it does not own. 

MedReleaf may be subject to risks related to its information technology systems, including cyber-attacks 

The Company has entered into agreements with third parties for hardware, software, telecommunications and other information technology (“IT”)
services in connection with its operations. The Company’s operations depend, in part, on how well it and its suppliers protect networks, equipment, IT systems and software against damage from a number of threats, including, but not limited to,
cable cuts, damage to physical plants, natural disasters, intentional damage and destruction, fire, power loss, hacking, computer viruses, vandalism and theft. The Company’s operations also depend on the timely maintenance, upgrade and
replacement of networks, equipment, IT systems and software, as well as pre-emptive expenses to mitigate the risks of failures. Any of these and other events could result in information system failures, delays
and/or increase in capital expenses. The failure of information systems or a component of information systems could, depending on the nature of any such failure, adversely impact the Company’s reputation and results of operations. 

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

The Company may face disruption in connection with labour organization efforts 

None of the Company’s employees are currently subject to a collective bargaining agreement. The Company is currently engaged in a dispute before the AFRAA
Tribunal in connection with an unsuccessful unionization effort by UFCW Canada at the Company’s Markham Facility. See “Legal Proceedings”. 

  
 29 

 Should the Company be unsuccessful before the AFRAA Tribunal, the AFRAA Tribunal may award remedies to UFCW
Canada and/or the employees named in the application, including a declaration that the Company violated its employees’ rights under the AEPA, reinstatement of terminated employees, damages suffered by terminated employees (including for loss of
earnings and/or benefits) and an order that MedReleaf provide UFCW Canada a reasonable opportunity to make representations respecting the terms and conditions of employment of its members. The UFCW Canada has also challenged the constitutionality of
the AEPA arguing that, among other things, it fails to provide a meaningful right for employees subject to the AEPA to bargain collectively. 
 No assurance
can be given that the decision by the AFRAA Tribunal will be favourable to the Company or that the outcome of the application will not adversely impact the Company’s reputation and results of operations. 

If the AFRAA Tribunal decides in favour of the Company, no assurance can be given that there will not occur any further attempts to organize all or part of
the Company’s employees. Although the AEPA does not require an employer to enter into a collective agreement with any employees’ association, employers are required to give an employees’ association (which may be represented by a
union) a reasonable opportunity to make representations respecting the terms and conditions of employment of one or more of its members. 
 Licensed
Producers, including MedReleaf, are constrained by law in their ability to market their products 
 The development of the Company’s business
and operating results may be hindered by applicable restrictions on sales and marketing activities imposed by Health Canada. The regulatory environment in Canada limits the Company’s ability to compete for market share in a manner similar to
other industries. If the Company is unable to effectively market its products and compete for market share, or if the costs of compliance with government legislation and regulation cannot be absorbed through increased selling prices for its
products, the Company’s sales and operating results could be adversely affected. 
 Tax and accounting requirements may change in ways that are
unforeseen to the Company and the Company may face difficulty or be unable to implement and/or comply with any such changes 
 The Company is subject
to numerous tax and accounting requirements, and changes in existing accounting or taxation rules or practices, or varying interpretations of current rules or practices, could have a significant adverse effect on the Company’s financial
results, the manner in which it conducts its business or the marketability of any of its products. In the future, the geographic scope of the Company’s business may expand, and such expansion will require the Company to comply with the tax laws
and regulations of multiple jurisdictions. Requirements as to taxation vary substantially among jurisdictions. Complying with the tax laws of these jurisdictions can be time consuming and expensive and could potentially subject the Company to
penalties and fees in the future if the Company were to inadvertently fail to comply. In the event the Company was to inadvertently fail to comply with applicable tax laws, this could have a material adverse effect on the business, results of
operations and financial condition of the Company. 
 On March 27, 2018, the Federal government of Canada introduced the Budget Implementation Bill,
2018, No. 1, (amendments to the Excise Act, 2001 cannabis taxation), which proposed to implement a new framework for the taxation of cannabis, the majority of which had been previously published for consultation on
November 10, 2017, with some modifications. The proposed rules would effectively place cannabis producers within the existing rules that currently apply excise duties on tobacco, wine and spirits producers under the Excise Act, 2001
(Canada), with modifications as applicable. These rules include a new tax licensing regime for cannabis producers, stamping and marking rules, ongoing reporting requirements, and applicable excise duties payable by licensed cannabis producers on
both recreational cannabis products, in additional to goods and services tax/harmonized sales tax. The cannabis excise duty framework is proposed to generally come into force on the date that legal cannabis for
non-medical purposes becomes accessible for retail sale under the proposed Cannabis Act. The government has indicated that the implementation date may be postponed to the autumn of 2018. The rates of the
excise duty for cannabis products delivered in each province and territory and relevant exemptions from the excise tax are still subject to some uncertainty, and will only become known with precision when the law and regulations come into force.

  
 30 

 There can be no certainty that the Arrangement will be completed 

As more particularly described under “General Development of the Business – Developments Subsequent to the Financial Year-ended
March 31, 2018”, the Company has entered into the Arrangement Agreement with Aurora, pursuant to which Aurora will acquire all of the outstanding Common Shares. Completion of the Arrangement is subject to certain
conditions that may be outside the control of the Company, including without limitation, the requisite approvals of the Company’s and Aurora’s shareholders, the receipt of court and regulatory approvals, approval of the TSX and required
third party approvals. There can be no assurance that these conditions will be satisfied or that the Arrangement will be completed as currently contemplated, or at all. 

If the Arrangement is not completed, the market price of the Common Shares may decline and its business may suffer. In addition, MedReleaf will remain liable
for significant consulting, accounting and legal costs relating to the Arrangement and will not realize anticipated synergies, growth opportunities and other benefits of the Arrangement. If the Arrangement is delayed, the achievement of synergies
and the realization of growth opportunities could be delayed and may not be available to the same extent as anticipated. Additionally, if the Arrangement Agreement is terminated in certain circumstances, the Company would be required to pay a
termination fee of $80,000,000 in addition to $15,000,000 as reimbursement of certain expenses of Aurora, which could have an adverse effect on the Company’s financial position. These potential payment obligations may also discourage other
parties from attempting to acquire Common Shares, even if they might be willing to offer greater value than that offered under the Arrangement. 
 In
addition, since the completion of the Arrangement is subject to uncertainty, officers and employees of the Company may experience uncertainty about their future roles with the Company. This may adversely affect the Company’s ability to attract
or retain key management and personnel in the period until the Arrangement is completed or terminated. 
 If the Arrangement is completed, the
integration of Aurora and the Company may not occur as planned 
 The Arrangement Agreement has been entered into with the expectation that its
successful completion will result in enhanced production capacity, increased earnings and cost savings by taking advantage of operating and other synergies to be realized from the consolidation of Aurora and the Company and enhanced growth
opportunities for the combined company. These anticipated benefits will depend in part on whether Aurora and the Company’s operations can be integrated in an efficient and effective manner. Most operational and strategic decisions and certain
staffing decisions with respect to the combined company have not yet been made. These decisions and the integration of the two companies will present challenges to management, including the integration of systems and personnel of the two companies,
and special risks, including possible unanticipated liabilities, unanticipated costs, and the loss of key employees. The performance of operations acquired from the Company in the Arrangement after completion of the Arrangement could be adversely
affected if the combined company cannot retain key employees to assist in the integration and operation of the Company and Aurora. As a result of these factors, it is possible that the cost reductions and synergies expected from the combination of
Aurora and the Company will not be realized. 

  
 31 

 Risks Related to Ownership of Common Shares 

The price of the Common Shares in public markets may experience significant fluctuations 

The market price for Common Shares may be volatile and subject to wide fluctuations in response to numerous factors, many of which are beyond the
Company’s control, including the following: (i) actual or anticipated fluctuations in the Company’s quarterly results of operations; (ii) recommendations by securities research analysts; (iii) changes in the economic
performance or market valuations of other issuers that investors deem comparable to the Company; (iv) addition or departure of the Company’s executive officers and other key personnel; (v) release or expiration of lock-up or other transfer restrictions on Common Shares; (vi) sales or perceived sales of Common Shares; (vii) significant acquisitions or business combinations, strategic partnerships, joint ventures or
capital commitments by or involving the Company or its competitors; and (viii) news reports relating to trends, concerns, technological or competitive developments, regulatory changes and other related issues in the Company’s industry or
target markets. 
 Financial markets have recently experienced significant price and volume fluctuations that have particularly affected the market prices
of equity securities of public entities and that have, in many cases, been unrelated to the operating performance, underlying asset values or prospects of such entities. Accordingly, the market price of the Common Shares may decline even if the
Company’s operating results or prospects have not changed. Additionally, these factors, as well as other related factors, may cause decreases in asset values that are deemed to be other than temporary, which may result in impairment losses. As
well, certain institutional investors may base their investment decisions on consideration of the Company’s environmental, governance and social practices and performance against such institutions’ respective investment guidelines and
criteria, and failure to satisfy such criteria may result in limited or no investment in the Common Shares by those institutions, which could materially adversely affect the trading price of the Common Shares. There can be no assurance that
continuing fluctuations in price and volume will not occur. If such increased levels of volatility and market turmoil continue for a protracted period of time, there could be a material adverse effect on the Company’s business, financial
condition and results of operations, as well as the trading price of the Common Shares. 
 Holders of Common Shares may be subject to dilution
resulting from future offerings of Common Shares by the Company 
 If the Arrangement is not completed for any reason, MedReleaf may in the future
raise additional funds by issuing equity securities. Holders of Common Shares will have no pre-emptive rights in connection with such further issues. The Board of Directors has the discretion to determine if
an issuance of Common Shares is warranted, the price at which such issuance is effected and the other terms of issue of Common Shares. Such additional equity issuances could, depending on the price at which such securities are issued, substantially
dilute the interests of the holders of Common Shares. 
 It is not anticipated that any dividend will be paid to holders of Common Shares for the
foreseeable future 
 No dividends on the Common Shares have been paid to date. The Company anticipates that, for the foreseeable future, it will
retain future earnings and other cash resources for the operation and development of its business. Payment of any future dividends will be at the discretion of the Board of Directors after taking into account many factors, including the
Company’s earnings, operating results, financial condition, current and anticipated cash needs, and restrictions in financing agreements. 

  
 32 

 Significant holders of the Common Shares, may seek to sell all or a portion of their shareholdings in
the future, which could reduce the market price of the Common Shares 
 Sales of a substantial number of Common Shares in the public market could
occur at any time. These sales, or the market perception that the holders of a large number of Common Shares intend to sell Common Shares, could significantly reduce the market price of the Common Shares. The Company cannot predict the effect, if
any, that future public sales of its outstanding securities or the availability of its outstanding securities for sale will have on the market price of the Common Shares. If the market price of the Common Shares were to drop as a result, this might
impede the Company’s ability to raise additional capital and might cause remaining holders of Common Shares to lose all or part of their investments. 

Holders of options to purchase Common Shares will have an immediate income inclusion for tax purposes when they exercise their options (that is, tax is not
deferred until they sell the underlying Common Shares). As a result, these holders may need to sell Common Shares purchased on the exercise of options in the same year that they exercise their options. This might result in a greater number of Common
Shares being sold in the public market, and fewer long-term holdings of Common Shares by management of the Company and other employees. 

DIVIDENDS 
 MedReleaf has not paid
dividends since the date of its incorporation and it does not expect to pay dividends in the near future. The Board of Directors will determine if and when dividends should be declared and paid in the future and any such determination will be based
on the Company’s financial position, business environment, operating results, capital requirements, any contractual restrictions on the payment of dividends and any other factors that the Board may deem relevant at the time. 

DESCRIPTION OF CAPITAL STRUCTURE 
 As of
the date hereof, the authorized capital of the Company consists of: (i) an unlimited number of Common Shares of which 101,329,195 Common Shares are issued and outstanding; and (ii) 3,997.34 Class B Shares, all of which were issued and, on
March 23, 2018, converted into 464,054 Common Shares in accordance with their terms. No additional Class B Shares may be issued. 
 The holders of
the Common Shares are entitled to receive notice of, attend and vote, on the basis of one vote in respect of each Common Share held, at all meetings of holders of shares. The holders of the Common Shares are entitled to receive any dividends
declared by the Board in respect of the Common Shares. The holders of the Common Shares are entitled to receive, on a pro rata basis, the Company’s remaining property and assets available for distribution upon the liquidation,
dissolution or winding-up of the Company, whether voluntary or involuntary. 
 The Company adopted an incentive
stock option plan (the “Stock Option Plan”) under which options may be granted to employees, officers, and consultants, enabling them to acquire Common Shares. In addition, prior to the completion of the IPO, the Company had
granted options to purchase Common Shares to certain officers and employees pursuant to option agreements (the “Legacy Option Agreements”). The maximum number of Common Shares available for issuance under the Stock Option
Plan and all other security-based compensation arrangements (including the Legacy Option Agreements) at any given time cannot exceed 10% of the issued and outstanding Common Shares. As of the date hereof, there are options outstanding under the
Stock Option Plan and the Legacy Option Agreements to purchase, in aggregate, up to 5,918,871 Common Shares. 
 In addition, the Company has Warrants
outstanding to purchase an aggregate of 2,875,000 Common Shares at an exercise price of $34.50 per Common Share. 

  
 33 

 MARKET FOR SECURITIES 

The outstanding Common Shares are traded on the TSX under the trading symbol “LEAF” and began trading on June 7, 2017. Prior to June 7,
2017, no securities of the Company were traded or quoted on a Canadian marketplace. The following table sets out the price range (monthly high and low prices) and monthly trading volumes of the Common Shares on the TSX for the period beginning
June 7, 2017 to the close of the financial year ended March 31, 2018. 
  

													
	 Period
	  	High	 	  	Low	 	  	Volume	 
	 March 2018
	  	$	21.07	 	  	$	16.70	 	  	 	6,667,060	 
	 February 2018
	  	$	22.50	 	  	$	14.75	 	  	 	13,240,560	 
	 January 2018
	  	$	31.25	 	  	$	18.60	 	  	 	24,175,250	 
	 December 2017
	  	$	22.79	 	  	$	14.81	 	  	 	11,296,320	 
	 November 2017
	  	$	18.90	 	  	$	12.68	 	  	 	9,982,998	 
	 October 2017
	  	$	13.30	 	  	$	9.08	 	  	 	3,789,578	 
	 September 2017
	  	$	9.45	 	  	$	7.80	 	  	 	1,715,839	 
	 August 2017
	  	$	8.30	 	  	$	7.45	 	  	 	1,081,604	 
	 July 2017
	  	$	8.74	 	  	$	7.80	 	  	 	861,506	 
	 June (7-30)
	  	$	9.65	 	  	$	6.81	 	  	 	6,448,849	 

 PRIOR SALES 

The following table summarizes issuances of securities that are not listed or quoted on a marketplace during the financial year ended March 31, 2018.

  

											
	 	  	 	  	Number of Securities	 	 	Issuance / Exercise	 
	 Date of Issuance
	  	 Type of Security
	  	Issued	 	 	Price per Security	 
	 February 15. 2018
	  	Options to acquire Common Shares	  	 	369,000	 	 	$	19.46	 
	 February 1, 2018
	  	Warrants	  	 	375,000	(1)  	 	$	34.50	 
	 January 31, 2018
	  	Warrants	  	 	2,500,000	(1)  	 	$	34.50	 
	 November 16, 2017
	  	Options to acquire Common Shares	  	 	272,500	 	 	$	17.09	 
	 August 10, 2017
	  	Options to acquire Common Shares	  	 	124,827	 	 	$	9,50	 
	 June 7, 2017
	  	Options to acquire Common Shares	  	 	4,229,716	(2)  	 	$	9.50	 

 Notes: 
  

	(1)	 Issued pursuant to the January 2018 Offering. 

	(2)	 Represents options to purchase Common Shares granted on the closing of the IPO. 

ESCROWED SECURITIES AND SECURITIES SUBJECT TO RESTRICTION ON TRANSFER 

The following table sets out the number of securities of each class of securities of the Company that, to the knowledge of the Company, are held in escrow or
subject to a contractual restriction on transfer, and the percentage that number represents of the outstanding securities of that class as of the date of this Annual Information Form. 

  
 34 

									
	 	  	Number of Securities Held in Escrow	 	 	 	 
	Designation of	  	or that are Subject to a Contractual	 	 	Percentage of	 
	 Class
	  	Restriction on Transfer(1) 	 	 	Class(1) 	 
	 Common Shares
	  	 	488,313	(2)   	 	 	4.8	% 
	 Common Shares
	  	 	59,165,006	(3)  	 	 	58.4	% 

 Notes: 
  

	(1)	 Based on 101.329.195 Common Shares issued and outstanding as of the date hereof. 

	(2)	 These shares were issued by the Company to a counterparty as partial consideration for the acquisition by the
Company of certain assets and are subject to a contractual restriction on transfer, of which: (a) 244,157 Common Shares cannot be transferred until after December 8, 2018; and (b) the remaining 244,156 Common Shares cannot be transferred
until after June 8, 2019. 

	(3)	 In connection with the Arrangement Agreement, Aurora entered into voting agreements (the “Voting
Agreements”) with certain shareholders, directors and officers of the Company (the “Locked-up Persons”) pursuant to which the Locked-up
Persons agreed to vote in favour of the Arrangement. The Voting Agreements also, among other things, requires the Locked-up Persons to deliver proxies to MedReleaf in connection with the meeting of MedReleaf
shareholders to approve the Arrangement, prohibits the Locked-up Persons from exercising dissent rights in connection with the Arrangement or contest the approval of the Arrangement, prohibits the Locked-up Persons from taking actions that could adversely affect the success of the Arrangement, prohibits the Locked-up Persons from taking actions regarding an alternative
acquisition proposal to the Arrangement, and impose a contractual hold period on any securities of MedReleaf held by the Locked-up Persons other than pursuant to the Arrangement Agreement or the Voting
Agreements, provided that any sales must be made in an orderly fashion as market conditions permit, such restriction expiring upon the earlier of the termination of the Voting Agreements and the obtaining of a final order from the Ontario Superior
Court of Justice (Commercial List) in respect of the Arrangement. 

 DIRECTORS AND OFFICERS 

The following table sets out information regarding our directors and executive officers as at the date hereof. The Company’s directors are elected
annually and all of them are expected to hold office until the earlier of the completion of the Arrangement (following which it is expected that MedReleaf directors Norma Beauchamp and Ronald Funk will be appointed to the board of directors of
Aurora) and the next annual meeting of holders of Common Shares, at which time they may be re-elected or replaced. 
  

							
	Name and Place of	  	 	  	Date First	  	Principal Occupation(s)
	 Residence
	  	 Position(s)/Title
	  	 Became a Director
	  	 for the Past Five Years

	Board of Directors	  		  		  	
				
	 Norma Beauchamp(1)(2) 

Ontario, Canada
	  	Director	  	June 7, 2017	  	President and Chief Executive Officer of Cystic Fibrosis Canada; formerly Head of MS Patient-Centered Care at Sanofi Canada
				
	 Neil Closner(3) 

Ontario, Canada
	  	Director and Chief Executive Officer	  	February 28, 2013	  	Chief Executive Officer of the Company; formerly a consultant
				
	Ronald Funk(1)(3) 	  	Director	  	June 7, 2017	  	Consultant
	Ontario, Canada	  		  		  	
				
	Deborah Rosati(1)(2) 	  	Director	  	June 7, 2017	  	Corporate Director and Consultant
	Ontario, Canada	  		  		  	
				
	 Lloyd M. Segal(2)(3) 

Quebec, Canada
	  	Director and Chairman of the Board	  	June 7, 2017	  	President & CEO, Repare Therapeutics; Entrepreneur-in-residence at Versant Ventures; managing partner of Persistence Capital Partners;
Corporate Director

  
 35 

							
	Name and Place of	  	 	  	Date First	  	Principal Occupation(s)
	 Residence
	  	 Position(s)/Title
	  	 Became a Director
	  	 for the Past Five Years

	Executive Officers (excluding Neil Closner already listed above)	  	
				
	 Angelo Fefekos
 Ontario, Canada
	  	Senior Vice- President, Clinical Affairs and Quality Compliance	  	N/A	  	Senior Vice-President, Clinical Affairs and Quality Control of the Company, formerly Vice-President, Clinical Affairs and Quality Control of the Company. Prior to joining the Company, Mr. Fefekos was a Manager at Mount Sinai
Hospital
				
	 Igor Gimelshtein
 Ontario,
Canada
	  	Chief Financial Officer and Corporate Secretary	  	N/A	  	Chief Financial Officer and Corporate Secretary of the Company; formerly Vice- President at Birch Hill Equity Partners Management Inc.
				
	 Darren Karasiuk
 Ontario, Canada
	  	Senior Vice President/General Manager, Recreational	  	N/A	  	Senior Vice President/General Manager, Recreational of the Company; formerly Vice-President, Strategy of the Company. Prior to working with the Company, Mr. Karasiuk was Vice-President, Insight & Advisory at Deloitte and prior
to that Vice-President, Strategy, Corporate and Public Affairs at Environics Research
				
	 Ivan Latysh
 Ontario, Canada
	  	Vice-President, Information Technology	  	N/A	  	Vice-President, Information Technology of the Company; formerly Director of Technology at Sapient Canada and prior to that Principal Software Engineer at Infor Canada

 Notes: 
  

	(1)	 Member of the Audit Committee. 

	(2)	 Member of the Corporate Governance and Compensation Committee. (3) Member of the Quality, Safety, Health
and Public Policy Committee. 

 The directors and executive officers (as a group) beneficially own, or exercise control or direction over,
a total of 4,767,767 Common Shares, representing approximately 4.71% of the total outstanding Common Shares on the date hereof. 
 Applicable corporate law
permits the Board of Directors to appoint directors to fill any casual vacancies that may occur. The Board of Directors is permitted to add additional directors between successive annual meetings of holders of Common Shares so long as the number
appointed does not exceed more than one-third of the number of directors appointed at the previous annual meeting. Individuals appointed as directors to fill casual vacancies on the Board of Directors or added
as additional directors hold office like any other director until the next annual meeting at which time they may be re-elected or replaced. 

Biographies 
 The following is a brief biography of
each of the individuals who comprise our directors and executive officers: 
 Non-Executive Directors 

Norma Beauchamp, Director 
 Norma Beauchamp is the
President and Chief Executive Officer of Cystic Fibrosis Canada, as well as director of Acerus Pharmaceuticals Corporation, where she is a member of both the audit and corporate governance and nominating committees. Ms. Beauchamp brings over
three decades of experience in the corporate and non-profit sectors to her role with the Company, having held senior leadership positions in Canada and Germany, including executive positions at Bayer, Sanofi,
and the Canadian Foundation for Women’s Health. Ms. Beauchamp has served on the boards of St. Joseph’s Health Centre Foundation, Providence Healthcare Foundation and the Breast Cancer Society of Canada. Throughout her career she has
been a patient advocate, working with patient and healthcare organizations to enhance access to care. Ms. Beauchamp has completed the University of Toronto’s Rotman School of Management Directors Education Program (ICD.D), and holds a
Bachelor of Business Administration in Marketing from Bishop’s University. 

  
 36 

 Ronald Funk, Director 

Ronald Funk brings over 30 years of experience in business and consulting to his role with the Company. Since 2009, he has managed his own consulting practice,
working with clients on acquisitions, restructurings, strategy development and government relations. Mr. Funk has worked on projects in various locations around the world, with clients engaged in a range of industries, including heavily
regulated consumer products such as tobacco, alcohol, and food products. Other industries in which he has consulted include retail, advanced data analytics, gaming, and real estate development. Before opening his consulting practice, Mr. Funk
was employed for approximately 30 years by Rothmans, Benson & Hedges Inc., serving in various roles and capacities, including Vice President of Sales, Human Resources, Corporate Affairs and Competitive Improvement. In these senior roles, he
developed and executed a number of strategies that resulted in material growth in both market share and profitability. Mr. Funk currently serves as an independent director of Carey Management Inc., a privately held business that owns
Canada’s largest independent wholesale distributor. Mr. Funk has also served as the Chairman of the Ontario Convenience Stores Association and Treasurer of the Canadian Convenience Stores Association. Mr. Funk holds a Kellogg-Schulich
MBA from the Kellogg School of Management and the Schulich School of Business. 
 Deborah Rosati, Director 

Deborah Rosati brings over 30 years of experience in technology, consumer, retail, private equity, and venture capital spaces to her role with the Company.
Ms. Rosati has extensive knowledge and experience as a corporate director, particularly in the areas of financial and enterprise risk management, corporate strategy, transformational changes, mergers and acquisitions, corporate governance, and
CEO and board succession planning. Currently, Ms. Rosati serves as a director and chair of the nominating and corporate governance committee for Sears Canada Inc. (TSX:SCC), and director and chair of the audit committee for NexJ Systems Inc.
(TSX: NXJ). She is also a co-founder and CEO of Women Get On Board, a leading member-based company that connects, promotes, and empowers women to corporate boards. She has been recognized as a Diversity 50
candidate in 2014, and as one of WXN’s Top 100 Canada’s Most Powerful Women in the corporate director award category in 2012. Ms. Rosati’s community engagements include serving as a member of the Adrenalys Advisory Council and
the Advisory Council at the Goodman School of Business at Brock University, from which she holds an HBA in business administration. Ms. Rosati became a Certified Director in 2008 (ICD.D) and has been a Chartered Professional Accountant (CPA)
for over 30 years. In 2009, she was named as a Fellow Chartered Professional Accountant (FCPA). 
 Lloyd M. Segal, Director, Chairman 

Lloyd M. Segal is President & CEO of Repare Therapeutics, a cancer drug development company, and also serves as an Entrepreneur-in-residence at Versant Ventures, a leading global healthcare venture capital firm. Previously, Mr. Segal was a managing partner of Persistence Capital Partners and a director of Biovail
Inc. and, subsequently, Valeant Pharmaceuticals International from 2007-2014. In 2013, Mr. Segal was honored by the Financial Times as Outstanding Director of the Year. Mr. Segal also serves on the board of The GBC American Growth Fund
Inc. He has previously served as a director of several public and private corporations in the U.S. and Canada, and has served as CEO of public and private healthcare companies. He served as CEO of Thallion Pharmaceuticals, sold to Bellus Health in
2013; as founding CEO of Caprion Pharmaceuticals (now Caprion Biosciences), a leading healthcare CRO; and CEO of Advanced Bioconcept, an early innovator in the development and sale of novel discovery tools for life science research, which was sold
to NEN Life Sciences Products (now PerkinElmer Inc.) in 1998. Mr. Segal holds a BA from Brandeis University and an MBA from Harvard Business School. 

  
 37 

 Executive Director 

Neil Closner, Chief Executive Officer and Director 

Neil Closner has been a key driver of the Company’s growth and vision. His responsibilities include oversight of all general management for the
organization, strategic leadership on growth opportunities and fostering an entrepreneurial spirit throughout the Company. Mr. Closner brings two decades of start-up, technology and health care experience
to the MedReleaf team. Previously, he was a member of the senior leadership team at Toronto’s Mount Sinai Hospital where he served as Vice-President of Business Development. Mr. Closner began his career as a health-care focused investment
banker with Salomon Smith Barney (now Citigroup) and has also served as the founder, Chief Executive Officer or on the board of directors for more than half a dozen technology and health-care related start-up
companies. Mr. Closner is the former Chairman of the Board of the Cannabis Canada Association (now Cannabis Canada Council), the national trade association of Canada’s Licensed Producers and was a Finalist for the 2017 Ernst &
Young Entrepreneur of the Year. He also sits on the board of directors of Technion Canada. Mr. Closner studied economics at the London School of Economics and Political Science in London, England, and holds a BA from McGill University and an
MBA from The Wharton School at the University of Pennsylvania. 
 Executive Officers 

Angelo Fefekos, Senior Vice-President, Clinical Affairs and Quality Compliance 

Angelo Fefekos is responsible for the development, implementation and oversight of the Company’s quality assurance and control systems and processes,
regulatory compliance, as well as the development and design of new cannabis products. Mr. Fefekos also oversees the design and management of clinical trials, which meet standards of excellence for ethics, scientific merit and regulatory
compliance. Mr. Fefekos brings over a decade of healthcare experience in quality assurance, laboratory technology and clinical management skills to the Company. Prior to joining MedReleaf, Mr. Fefekos managed a team of 40 scientific staff
in the Division of Diagnostic Medical Genetics at Mount Sinai Hospital in Toronto. In this role, he was responsible for all aspects of the division’s diagnostic operations. While at Mount Sinai, Mr. Fefekos also managed Allograft
Technologies, one of Canada’s largest tissue banks, and was responsible for the redesign and implementation of protocols related to the recovery, processing, distribution, sterility assurance and post-market surveillance activities of
transplanted human tissues. Throughout Mr. Fefeko’s career, he has developed and implemented standardized workflow processes designed to increase patient safety. Mr. Fefekos has extensive knowledge and experience with accreditation
and regulatory requirements in the production of health products, medical laboratory testing and health services. Mr. Fefekos is a member of the College of Medical Laboratory Technologists of Ontario and holds an MBA from Athabasca University.

 Igor Gimelshtein, Chief Financial Officer and Corporate Secretary 

Igor Gimelshtein provides leadership on financial matters, including capital structure, forecasting, budgeting and reporting, as well as corporate development
and data-driven business optimization. Previously, he was a Vice-President at Birch Hill Equity Partners, a Canadian mid-market private equity firm. While at Birch Hill, Mr. Gimelshtein worked on the
development and management of a number of the portfolio companies and potential investments across a wide range of industries, each of which was aimed at generating significant growth and value-creation. Mr. Gimelshtein played a key role in
Birch Hill’s investments in companies such as Softchoice, Shred-it, DHX Media (formerly Cookie Jar Entertainment), Carmanah Design and Manufacturing, and Mastermind Toys. Prior to joining Birch Hill,
Mr. Gimelshtein worked in San Francisco and New York for Union Square Advisors as an investment banker focused on the technology sector. At Union Square he evaluated and executed mergers and acquisitions and financing transactions across the
software, internet and digital media, and hardware sectors. Mr. Gimelshtein is an active philanthropist, spending the majority of his volunteer time working with the executive team and board of directors of the Toronto Foundation on various
initiatives. Mr. Gimelshtein holds an HBA (Ivey Scholar) from the Richard Ivey School of Business at Western University. 

  
 38 

 Darren Karasiuk, Senior Vice-President/General Manager, Recreational 

Darren Karasiuk is responsible for business development and preparing the Company for the potential introduction of a recreational cannabis market in Canada,
while ensuring that MedReleaf’s business strategy and growth plan is founded in industry-leading analytics and data-driven insights. Mr. Karasiuk brings over 15 years of insight generation, marketing strategy and public affairs experience
to his role. Prior to joining MedReleaf, Mr. Karasiuk was Vice-President, Insights and Advisory at Deloitte where he was a leader in the firm’s cannabis practice, co-authoring the firm’s seminal
study, “Recreational Marijuana: Insights and Opportunities”. Previously, Mr. Karasiuk was Vice-President, Strategy, Corporate and Public Affairs at Environics Research, where he conducted many of Canada’s earliest
studies on pharmacist and physician perceptions of medical cannabis. He has also been the Canadian associate for the Marijuana Policy Group, a leading Denver-based economic and policy consulting firm specializing in helping to shape regulated
medical and recreational cannabis markets. Mr. Karasiuk’s advisory experience has focused largely on the integration of consumer and marketplace data, financial modeling, corporate strategy and behavioural science, with a view to
uncovering drivers of consumer behaviour and uncovering hidden market segments, as well as informing price, brand, product portfolio, communications and public affairs strategies. Mr. Karasiuk is also experienced working within highly regulated
industries including private and public healthcare, pharma, tobacco, consumer packaged goods, and energy, as well as all three levels of government. Mr. Karasiuk holds an MA from Western University and an MBA from Kellogg-Schulich. 

Ivan Latysh, Vice-President, Information Technology 

Ivan Latysh has over 30 years of experience in information technology across multiple verticals and provides leadership for the continued development of an
innovative, robust and secure information technology environment at MedReleaf. Prior to joining the Company, Mr. Latysh held a number of senior positions within the marketing and professional services industries. Most recently, he was Director
of Technology at Sapient Nitro, a leading technology, marketing and insights consultancy. At Sapient-Nitro, Mr. Latysh acted as a delivery lead for e-commerce implementations for some of North
America’s most well-known retail brands. Previously, Mr. Latysh was Principal Software Engineer at Infor and Chief Technology Officer at RefineData Solutions Inc. This experience has provided Mr. Latysh with a deep understanding of
various technical environments, information security and software development methodologies. Throughout his career, Mr. Latysh has also effectively managed and led software development initiatives. Mr. Latysh holds an MA in Electronics
Engineering and Computer Programming from Dnepropetrovsk State University, Ukraine. 
 Corporate Cease Trade Orders 

To the Company’s knowledge, no director or executive officer (nor any personal holding company of any of such individuals) is, as at the date of the
Annual Information Form, or was within 10 years before the date of the Annual Information Form, a director, chief executive officer or chief financial officer of any company (including the Company) that: 

 

	(a)	 was subject to a cease trade order or similar order or an order that denied the company access to any statutory
exemptions, that was in effect for a period of more than 30 consecutive days; or 

  

	(b)	 was subject to a cease trade order or similar order or an order that denied the company access to any statutory
exemptions, that was in effect for a period of more than 30 consecutive days, that was issued after the director or executive officer ceased to be a director, chief executive officer or chief financial officer and which resulted from an event that
occurred while that person was acting in the capacity as director, chief executive officer or chief financial officer. 

  
 39 

 Bankruptcies 

To the Company’s knowledge, other than as set out below, no director or executive officer (nor any personal holding company of any of such individuals) or
shareholder holding a sufficient number of securities of the Company to affect materially the control of the Company: 
  

	(a)	 is, as at the date of the Annual Information Form, or has been within the 10 years before the date of the
Annual Information Form, a director or executive officer of any company (including the Company) that, while that person was acting in that capacity, or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal
under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets; or

  

	(b)	 has, within the 10 years before the date of the Annual Information Form, became bankrupt, made a proposal under
any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold assets of the director, executive
officer or shareholder. 

 Deborah Rosati is a director of Sears Canada Inc. which applied for and, on June 22, 2017, obtained an
initial order from the Ontario Superior Court of Justice (Commercial List) under the Companies’ Creditors Arrangement Act (Canada) (the “CCAA”) providing for, among other things, a stay of proceedings in
favour of Sears Canada Inc. and certain of its subsidiaries, for an initial period of 30-days, and appointing FTI Consulting Canada Inc. as monitor. FTI Consulting Canada Inc.’s responsibilities are
prescribed by the CCAA and the court’s order, and include monitoring Sears Canada Inc.’s restructuring initiatives and reporting to the court on the progress of the CCAA proceedings. The CCAA proceedings of Sears Canada Inc. are ongoing
and the stay of proceedings was most recently extended until July 31, 2018. 
 Penalties or Sanctions 

To the Company’s knowledge, no director or executive officer or a shareholder holding a sufficient number of securities of the Company to affect
materially the control of the Company (nor any personal holding company of any of such individuals), has been subject to: 
  

	(a)	 any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory
authority or has entered into a settlement agreement with a securities regulatory authority; or 

  

	(b)	 any other penalties or sanctions imposed by a court or regulatory body that would likely be considered
important to a reasonable investor making an investment decision. 

 Conflicts of Interest 

The members of the Board of Directors are required by law to act honestly and in good faith with a view to the best interests of the Company and to disclose
any interests, which they may have in any project or opportunity of the Company. If a conflict of interest arises at a meeting of the Board of Directors, any director in a conflict is required to disclose his or her interest and abstain from voting
on such matter. 
 Other than disclosed herein, there are no known existing or potential conflicts of interest among the Company, its directors and officers
or other members of management of the Company as a result of their outside business interests except that certain of the directors and officers serve as directors and officers of other companies, and therefore it is possible that a conflict may
arise between their duties to the Company and their duties as a director or officer of such other companies. See “Risk Factors”. 

  
 40 

 LEGAL PROCEEDINGS AND REGULATORY ACTIONS 

Except as described below, the Company is not aware of: (a) any legal proceedings to which the Company is a party, or by which any of the Company’s
property is subject, which would be material to the Company and the Company is not aware of any such proceedings being contemplated; (b) any penalties or sanctions imposed by a court relating to securities legislation, or other penalties or
sanctions imposed by a court or regulatory body against the Company during the most recently completed financial year or that would otherwise likely be considered important to a reasonable investor making an investment decision; and (c) any
settlement agreements that the Company has entered into before a court relating to securities legislation or with a securities regulatory authority. 
 The
Company is, from time to time, involved in legal proceedings of a nature considered normal to its business. In addition, the Company is currently engaged in a dispute before the AFRAA Tribunal in connection with an unsuccessful unionization effort
by UFCW Canada at the Markham Facility. In 2015, UFCW Canada filed applications for union certification before the Ontario Labour Relations Board (the “OLRB”) and the Canada Industrial Relations Board (the “CIRB”).
The OLRB ordered that a vote of employees be held, which received a majority of votes against unionization. The OLRB also found that it lacked jurisdiction to consider the UFCW Canada’s application for certification because the Company is not
governed by the Labour Relations Act (Ontario) and is instead governed by the AEPA. UFCW Canada’s application for certification to the CIRB was similarly dismissed on the basis that the CIRB lacked jurisdiction. UFCW Canada subsequently
initiated the current complaint before the AFRAA Tribunal, which includes a challenge of the constitutionality of the AEPA. 
 MedReleaf believes that the
ultimate amount of liability, if any, for any pending claims of any type (either alone or combined, and including the application before the AFRAA Tribunal) will not materially affect its financial position or results of operations. However, the
ultimate outcome of any litigation is uncertain and, regardless of outcome, litigation can have an adverse impact on the Company’s business because of defence costs, negative publicity, diversion of management resources and other factors. See
“Risk Factors”. 
 INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS 

Other than as disclosed in this Annual Information Form or in the financial statements of the Company for the financial year ended March 31, 2018, none
of the directors or executive officers of the Company, nor any person or company that beneficially owns, or controls or directs, directly or indirectly, more than 10% of any class or series of the Company’s outstanding voting securities, nor
any associate or affiliate of the foregoing persons, has or has had any material interest, direct or indirect, in any transaction within the three years prior to the date of this Annual Information Form that has materially affected or is reasonably
expected to materially affect the Company or its subsidiaries. 
 TRANSFER AGENT AND REGISTRAR 

The transfer agent and registrar for the Common Shares and the Warrants is TSX Trust Company of Canada at its offices in Toronto, Ontario. 

  
 41 

 MATERIAL CONTRACTS 

Except for contracts made in the ordinary course of business, the following are the only material contracts entered into by the Company to the date hereof
which are currently in effect and considered to be currently material: 
  

	1.	 the MedReleaf Licences; 

 

	2.	 the Credit Agreement; 

 

	3.	 the Markham Lease; 

  

	4.	 the Warrant Indenture; and 

 

	5.	 the Arrangement Agreement. 

The material contracts described above are available on the Company’s SEDAR profile at www.sedar.com. Any summaries of such material contracts in
this Annual Information Form are qualified in their entirety by reference to the express terms of the material contract. 
 AUDIT
COMMITTEE INFORMATION 
 The Audit Committee is currently comprised of Deborah Rosati (Chair), Norma Beauchamp, and Ronald Funk, each of whom are
“independent” and “financially literate” within the meaning of National Instrument 52-110—Audit Committees (“NI
52-110”). Each member of the Audit Committee has an understanding of the accounting principles used to prepare MedReleaf’s financial statements, experience preparing, auditing, analyzing or
evaluating comparable financial statements and experience as to the general application of relevant accounting principles, as well as an understanding of the internal controls and procedures necessary for financial reporting. For more information
about the relevant education and experience of each member of the Audit Committee, see “Directors and Officers – Biographies”. 

During the most recently completed financial year but prior to the completion of the IPO, Neil Closner was a member of the Audit Committee. Neil Closner was
not “independent” within the meaning of NI 52-110, however the Company relied on the exemption set forth in Section 3.2 of NI 52-110 in respect of the
membership of Neil Closner on the Audit Committee. The current Audit Committee was constituted upon completion of the IPO. 
 The role of the Audit
Committee is to assist the Board in fulfilling its financial oversight obligations, including the responsibility: (i) to assist the Board in fulfilling its responsibility to oversee the Company’s accounting and financial reporting
processes and audits of the Company’s financial statements; (ii) to review the Company’s financial reports and other financial information, disclosure controls and procedures and internal accounting and financial controls;
(iii) to oversee the work of the external auditor in preparing or issuing an audit report or related work, monitor the independence of the external auditor and pre-approve all auditing services and
permitted non-audit services provided by the external auditor; and (iv) to serve as an independent and objective party to monitor the Company’s financial reporting processes and internal control
systems. A copy of the charter of the Audit Committee is attached as Appendix “A” to this Annual Information Form. 
 Pre-Approval Policies and Procedures 
 The Audit Committee charter includes responsibilities regarding the
provision of non-audit services by MedReleaf’s external auditors. This policy encourages consideration of whether the provision of services other than audit services is compatible with maintaining the
auditor’s independence and requires Audit Committee pre approval of permitted audit and audit-related services. 

  
 42 

 External Auditor Service Fees 

Fees billed by KPMG LLP in the years ended March 31, 2018 and 2017 were approximately $467,500 and $195,000 respectively, as detailed below. “Audit
fees” refers to the aggregate fees billed by the external auditor for audit services. “Audit related fees” refers to aggregate fees billed for assurance and related services by the Company’s external auditor that are reasonably
related to the performance of the audit or review of the Financial Statements and not reported under Audit Fees including the review of interim filings and travel related expenses for the annual audit. “Tax fees” includes fees for
professional services rendered by the external auditor for tax compliance, tax advice, and tax planning. “All other fees” includes all fees billed by the external auditors for services not covered in the other three categories. 

 

									
	 	  	Year	 	  	Year	 
	 	  	ended	 	  	ended	 
	 	  	March 31,	 	  	March 31,	 
	 	  	2018	 	  	2017	 
	 Audit fees
	  	 	316,000	 	  	$	180,000	 
	 Audit-related fees
	  	 	132,000	 	  	 	—  	 
	 Tax fees
	  	 	19,500	 	  	$	15,000 	 
	 All other fees
	  	 	—  	 	  	 	—  	 
		  	  
	  
	 	  	  
	  
	 
	 Total
	  	$	467,500	 	  	$	195,000	 
		  	  
	  
	 	  	  
	  
	 

 INTERESTS OF EXPERTS 

KPMG LLP are the external auditors of the Company and have confirmed that they are independent of the Company within the meaning of the Rules of Professional
Conduct of the Chartered Professional Accountants of Ontario (registered name of the Institute of Chartered Accountants of Ontario). 

ADDITIONAL INFORMATION 
 Additional
information relating to the Company may be found on SEDAR at www.sedar.com. Additional information, including directors’ and officers’ remuneration and indebtedness, principal holders of the Company’s securities and securities
authorized for issuance under equity compensation plans, will be contained in the Company’s management information circular in connection with its next annual meeting of shareholders at which directors are to be elected. Additional financial
information is also provided in the Company’s financial statements and related management’s discussion and analysis for the financial year ended March 31, 2018. 

  
 43 

 GLOSSARY 

This glossary defines certain business, industry, technical and legal terms used in this Annual Information Form for the convenience of the reader. It is not
a comprehensive list of all defined terms used in this Annual Information Form. 
 “AEPA” means the Agricultural Employees Protection
Act, 2002 (Ontario). 
 “AFRAA Tribunal” means the Agricultural, Food and Rural Affairs Appeal Tribunal of Ontario. 

“Arrangement” has the meaning given to such term under “General Development of the Business – Developments Subsequent to the
Financial Year ended March 31, 2018”. 
 “Arrangement Agreement” has the meaning given to such term under
“General Development of the Business – Developments Subsequent to the Financial Year ended March 31, 2018”. 

“Aurora” has the meaning given to such term under “General Development of the Business – Developments Subsequent to the
Financial Year ended March 31, 2018”. 
 “Board of Directors” or “Board” means the board of
directors of the Company. 
 “Bradford Facility” has the meaning given to such term under “General Development of the Business
– Developments during the Financial Year ended March 31, 2017”. 
 “Bradford Licence” has the meaning
given to such term under “General Development of the Business – Developments during the Financial Year ended March 31, 2018”. 

“cannabis” means cannabis, its preparations and derivatives, as set out in item 1 of Schedule II to the Controlled Drugs and Substances
Act (Canada). 
 “Cannabis Act” means An Act respecting cannabis and to amend the Controlled Drugs and Substances Act, the Criminal
Code and other Acts. 
 “cannabis oil” means an oil, in liquid form at room temperature of 22 ±2°C, that contains cannabis
in its natural form. 
 “Capital Reorganization” has the meaning given to such term under “Corporate Structure”. 

“Class B Shares” has the meaning given to such term under “Corporate Structure”. 

“Common Shares” has the meaning given to such term under “Corporate Structure”. 

“Credit Agreement” has the meaning given to such term under “General Development of the Business – Developments during the
Financial Year ended March 31, 2018”. 
 “Credit Facilities” has the meaning given to such term under
“General Development of the Business – Developments during the Financial Year ended March 31, 2018”. 

“December 2017 Offering” has the meaning given to such term under “General Development of the Business – Developments during the
Financial Year ended March 31, 2018”. 
 “dried cannabis” means harvested cannabis that has been subjected to
any drying process, but does not include seeds. 

  
 44 

 “Exeter Property” has the meaning given to such term under “General
Development of the Business – Developments Subsequent to the Financial Year ended March 31, 2018”. 
 “fresh
cannabis” means freshly harvested cannabis buds and leaves, but does not include plant material that can be used to propagate cannabis. 

“Indica” has the meaning given to such term under “General Development of the Business – Developments during the
Financial Year ended March 31, 2017”. 
 “IPO” has the meaning given to such term under
“Corporate Structure”. 
 “ISO” means the International Organization for Standardization. 

“January 2018 Offering” has the meaning given to such term under “General Development of the Business –
Developments during the Financial Year ended March 31, 2018”. 
 “Licensed Producer” means the holder of
a licence issued under Section 35 of the ACMPR or any similar licence issued under predecessor legislation. 

“Locked-up Persons” has the meaning given to such term under “Escrowed
Securities And Securities Subject To Restriction On Transfer”. 
 “Markham Facility” has the meaning given to such term
under “General Development of the Business – Early Developments”. 
 “Markham Lease” has the meaning
given to such term under “Description of the Business – MedReleaf’s Facilities – Markham Facility”. 

“Markham Licence” has the meaning given to such term under “Description of the Business – Developments during the
Financial Year ended March 31, 2017”. 
 “medical cannabis product” means any fresh cannabis or dried
cannabis and/or cannabis oil that a Licensed Producer is licensed to sell or provide to patients pursuant to, and in accordance with, the ACMPR or any similar predecessor regulations. 

“MedReleaf Facilities” has the meaning given to such term under “Description of the Business – Overview”.

 “MedReleaf Licences” has the meaning given to such term under “General Development of the Business –
Developments during the Financial Year ended March 31, 2018”. 
 “MMPR” has the meaning given to such term under
“General Development of the Business – Early Developments”. 
 “MMPR Licence” has the meaning given to such
term under “General Development of the Business – Early Developments”. 
 “OBCA” has the meaning given to such
term under “Corporate Structure”. 
 “patient” means a person registered as a “client” with a Licensed
Producer under the ACMPR. 
 “SAQ” has the meaning given to such term under “General Development of the Business –
Developments Subsequent to the Financial Year ended March 31, 2018”. 

  
 45 

 “Security Directive” has the meaning given to such term under “Description
of the Business – MedReleaf’s Facilities”. 
 “Supplemental Licence” has the meaning given to such term under
“General Development of the Business – Developments during the Financial Year ended March 31, 2016”. 

“Tikun Olam” has the meaning given to such term under “General Development of the Business – Early
Developments”. 
 “TSX” means the Toronto Stock Exchange. 

“UFCW Canada” means the United Food and Commercial Workers Union. 

“Warrant” has the meaning given to such term under “General Development of the Business Developments during the Financial Year
ended March 31, 2018”. 
 “Warrant Indenture” has the meaning given to such term under “General
Development of the Business Developments during the Financial Year ended March 31, 2018”. 

  
 46 

 Schedule A 

AUDIT COMMITTEE CHARTER 
  

	1	 PURPOSE 

The purpose of the Audit Committee (the “Committee”) of the Board of Directors (the “Board”) of MedReleaf Corp. (the
“Corporation”) is to: 
  

	 	(a)	 assist the Board in fulfilling its responsibility to oversee the Corporation’s accounting and financial
reporting processes and audits of the Corporation’s financial statements; 

  

	 	(b)	 review the Corporation’s financial reports and other financial information, disclosure controls and
procedures and internal accounting and financial controls; 

  

	 	(c)	 review the Corporation’s financial statements, management’s discussion and analysis and annual and
interim profit or loss press releases before public release; 

  

	 	(d)	 serve as an independent and objective party to monitor the Corporation’s financial reporting processes and
internal control systems; 

  

	 	(e)	 recommend to the Board of Directors the appointment of the external auditors, to be approved by the
shareholders, compensation, and retention (and where appropriate, replacement) of the external auditors; 

  

	 	(f)	 oversee the work of the external auditor in preparing or issuing an audit report or related work, monitor the
independence of the external auditor and pre-approve all auditing services and permitted non-audit services provided by the external auditor; 

 

	 	(g)	 receive direct reports from the external auditor and resolve any disagreements between management and the
external auditor regarding financial reporting; 

  

	 	(h)	 review the Corporation’s hiring policies regarding partners, employees and former partners and employees
of the present and former external auditor of the Corporation; and 

  

	 	(i)	 carry out the specific responsibilities set forth below in furtherance of this stated purpose.

  

	2	 COMPOSITION AND TERM 

Committee members shall be appointed by the Board, and shall serve at the pleasure of the Board. Any member of the Committee may be removed or replaced at any
time by the Board and shall, in any event, cease to be a member of the Committee upon ceasing to be a member of the Board. The Board shall designate one member as chair of the Committee (the “Chair”). 

The Committee shall be comprised of three or more directors, each of whom shall be “independent” and “financially literate”, as required
by and defined in National Instrument 52-110 Audit Committees (“NI 52-110”), subject to any exceptions permitted under NI 52-110. 
  

	3	 MANDATE AND RESPONSIBILITIES 

The Committee’s role is one of oversight of the integrity of the Corporation’s accounting and financial reporting process, including financial
reporting processes, internal controls over financial reporting and disclosure controls procedures. It is recognized that the Corporation’s management is responsible for preparing the financial statements and notes thereto and that the
Corporation’s external auditor is ultimately accountable to the Board and the Committee, as representatives of the shareholders and other stakeholders, for providing an audit opinion on the financial statements and notes. 

  
 A-1 

 The mandate and responsibilities of the Committee are as follows: 

 

	 	(a)	 Appointment of External auditor. The Committee shall have direct responsibility for recommending the
appointment, compensation, retention (and where appropriate, replacement), and oversight of the work of any accounting firm selected to be the Corporation’s external auditor for the purpose of preparing or issuing an audit report or performing
other audit, review or attestation services for the Corporation, and to review the performance of the external auditors. 

  

	 	(b)	 Appointment of Chief Financial Officer and Internal Auditor. The Committee shall participate in the
identification of candidates for the positions of Chief Financial Officer and the manager of the Corporation’s internal auditing function, if any, and shall advise management with respect to the decision to hire a particular candidate.

  

	 	(c)	 Disclosure Controls and Procedures. The Committee shall review periodically with management the
Corporation’s disclosure controls and procedures. 

  

	 	(d)	 Internal Controls. The Committee shall discuss periodically with management and the external auditor the
quality and adequacy of the Corporation’s internal controls and internal auditing procedures, if any, including any significant deficiencies in the design or operation of those controls which could adversely affect the Corporation’s
ability to record, process, summarize and report financial data and any fraud, whether or not material, that involves management or other employees who have a significant role in the Corporation’s internal controls. The Committee shall also
discuss with the external auditor how the Corporation’s financial systems and controls compare with industry practices. 

  

	 	(e)	 Accounting Policies. The Committee shall review periodically with management and the external auditor
the quality, as well as acceptability, of the Corporation’s accounting policies, and discuss with the external auditor how the Corporation’s accounting policies compare with those in the industry. The Committee shall discuss with the
external auditors the quality and not just the acceptability of the Corporation’s accounting principles, including all critical accounting policies and estimates used, any alternate treatment of financial information that have been discussed
with management, the ramifications of use of such alternative classifications, recognitions, derecognitions, measurements, presentations and disclosures and treatments and the auditor’s preferred treatment, as well as any other material
communications with management. 

  

	 	(f)	 Pre-approval of All Audit Services and Permitted Non-Audit Services. The Committee shall approve, in advance, all audit services and all permitted non-audit services to be provided to the Corporation by the external
auditor; provided that any non-audit services performed pursuant to an exception to the pre-approval requirement permitted by applicable securities regulators shall not
be deemed unauthorized and as permitted under the rules of professional conduct of the Chartered Professional Accountants of Ontario. 

  

	 	(g)	 Annual Audit. In connection with the annual audit of the Corporation’s financial statements, the
Committee shall: 

  

	 	(i)	 request from the external auditor a formal written statement delineating all relationships between the external
auditor and the Corporation; 

  
 A-2 

	 	(ii)	 discuss with the external auditor any disclosed relationships and their impact on the external auditor’s
objectivity and independence, and take appropriate action to oversee the independence of the external auditor; 

  

	 	(iii)	 approve the selection, and the terms of the engagement, of the external auditor; 

 

	 	(iv)	 review with management and the external auditor the audited financial statements to be filed on the System for
Electronic Document Analysis and Retrieval (“SEDAR”) and review and consider with the external auditor the matters required to be discussed under applicable statements of auditing standards; 

 

	 	(v)	 perform the procedures set forth under the heading “Financial Reporting Procedures”
below with respect to the annual financial statements; 

  

	 	(vi)	 review with the Corporation’s counsel, external auditors and management any legal or regulatory matter
that could have a significant impact on the Corporation’s financial statements; 

  

	 	(vii)	 review and make recommendations with respect to any litigation, claim or contingency that could have a material
effect upon the financial position of the Corporation and the appropriateness of the disclosure thereof in the documents reviewed by the Committee; and 

  

	 	(viii)	 review with management and the external auditor the Corporation’s critical accounting policies and
estimates. 

  

	 	(h)	 Financial Reporting Procedures. In connection with the Committee’s review of each reporting of the
Corporation’s annual financial information, the Committee shall: 

  

	 	(i)	 discuss with the external auditor whether all material correcting adjustments identified (if any) by the
external auditor in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board of London, England and adopted by the Canadian Accounting Standards Board, Generally Accepted Auditing
Standards of Canada and the rules of the applicable securities regulators, as may be amended from time to time, are reflected in the Corporation’s financial statements; 

 

	 	(ii)	 review with the external auditor all material communications between the external auditor and management, such
as any management letter or schedule of unadjusted differences (if any); 

  

	 	(iii)	 review with management and the external auditor any significant financial or other arrangements of the
Corporation which do not appear on the Corporation’s financial statements and any transactions or courses of dealing with third parties that are significant in size or involve terms or other aspects that differ from those that would likely be
negotiated with independent parties, and which arrangements or transactions are relevant to an understanding of the Corporation’s financial statements; and 

 

	 	(iv)	 resolve any disagreements, if any, between management and the external auditor regarding financial reporting.

  

	 	(i)	 Insurance Coverage. Review and make recommendation regarding insurance coverage (annually or as may be
otherwise appropriate). 

  
 A-3 

	 	(j)	 Audit Committee Charter. The Committee shall review and reassess at least annually the adequacy of this
Audit Committee Charter and recommend any proposed changes to the Board for approval. 

 The foregoing responsibilities are set forth as a
guide and may be varied and supplemented from time to time as appropriate under the circumstances. 
  

	4	 MEETINGS AND PROCEDURES 

 

	4.1	 Meetings 

The time at which and the place where the meetings of the Committee shall be held, the calling of meetings and the procedure at such meetings shall be
determined by the Chair. The Committee shall meet as many times as it considers necessary to carry out its responsibilities effectively and shall, in any event, meet at least once per quarter. 

 

	4.2	 Quorum 

Unless otherwise determined by the Committee, two or more members of the Committee shall constitute a quorum. 

 

	4.3	 Attendance 

The Committee may invite such officers, directors or employees of the Corporation, external auditors, insurance agents and brokers, financial, technical or
legal advisors, or other persons as it sees fit, from time to time, to attend at meetings of the Committee and to assist in the discussion of matters being considered by the Committee. 

 

	4.4	 Chair 

The Chair shall preside at all meetings of the Committee. In the Chair’s absence, or if the position is vacant, the Committee may select another member as
Chair. The Chair will have the right to exercise all powers of the Committee between meetings but will attempt to involve all other members as appropriate prior to the exercise of any powers and will, in any event, advise all other members of any
decisions made or powers exercised. In case of an equality of votes on any matter voted on by the Committee, the Chair shall have a second casting vote. 
  

	4.5	 Decisions 

Decisions of the Committee shall be evidenced by resolutions passed at meetings of the Committee and recorded in the minutes of such meetings or by an
instrument in writing signed by all of the members of the Committee. 
  

	4.6	 Secretary and Minutes 

The Chair shall appoint a secretary for each meeting to keep minutes of such meeting. The minutes of the Committee will be in writing and duly entered into the
books of the Corporation. The minutes of the Committee will be circulated to all members of the Board, redacted as may be determined necessary by the Chair to remove any sensitive personnel information not otherwise material to the Board. 

 

	4.7	 Authority to Engage Advisors 

The Committee shall have the authority to engage, at the expense of the Corporation, such outside advisors as it determines necessary or advisable to carry out
its duties, including legal, financial, tax, technical and accounting advisors, and establish the compensation of such advisors. 

  
 A-4 

	4.8	 Reporting to the Board 

The Committee shall report to the Board on such matters and questions relating to the mandate and activities of the Committee as the Committee may deem
appropriate or as the Board may from time to time request or refer to the Committee. 
  

	4.9	 Complaints 

Any issue of significant financial misconduct shall be brought to the attention of the Committee for its consideration. In this regard, the Committee shall
establish and maintain procedures for (i) the receipt, retention and treatment of complaints received by the Corporation regarding accounting, internal accounting controls or auditing matters and (ii) the confidential, anonymous submission
by employees of the Corporation of concerns regarding questionable accounting or auditing matters. 
  

	5	 RESOURCES AND AUTHORITY 

The Committee is granted all authority required by NI 52-110, including without limitation the authority to: 

 

	 	(a)	 investigate any matter brought to its attention with full access to all books, records, facilities and
personnel of the Corporation; 

  

	 	(b)	 engage independent legal, tax, accounting or other advisors to obtain such advice and assistance as the
Committee determines necessary to carry out its duties and set and pay the compensation for any advisors so engaged; and 

  

	 	(c)	 communicate directly with the external auditors (and internal auditors, if any). 

The Committee may request any officer or employee of the Corporation or the Corporation’s counsel or other advisors to attend a meeting of the Committee
or to meet with any member of, or consultants to, the Committee. 
 The Corporation shall provide the Committee all appropriate funding, as determined by
the Committee, for payment of compensation to any such advisors and any external auditor, as well as for any ordinary administrative expenses of the Committee that it determines are necessary or appropriate in carrying out its responsibilities. 

This Charter is not intended to give rise to civil liability on the part of the Corporation or its directors or officers to shareholders, other security
holders, customers, suppliers, competitors, employees or other persons or to any other liability whatsoever on their part. 
 Effective Date:
May 30, 2017 

  
 A-5EX-4.19

 Exhibit 4.19 

                          
                          Consolidated Financial Statements 

                          
                          (In Canadian dollars) 

                          
                          MEDRELEAF CORP. 

                          
                          Years ended March 31, 2018 and 2017 

 

 
 INDEPENDENT AUDITORS’ REPORT 

Management’s Responsibility for the To the Shareholders of MedReleaf Corp. 

We have audited the accompanying consolidated financial statements of MedReleaf Corp., which comprise the consolidated statements of financial position as at
March 31, 2018 and 2017, the consolidated statements of comprehensive (loss) income, shareholders’ equity and cash flows for the years then ended, and notes, comprising a summary of significant accounting policies and other explanatory
information. 
 Consolidated Financial Statements 

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial
Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. 

Auditors’ Responsibility 
 Our responsibility is to
express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan
and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. 
 An audit
involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the
consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to
design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. 

We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion. 

Opinion 
 In our opinion, the consolidated financial
statements present fairly, in all material respects, the consolidated financial position of MedReleaf Corp. as at March 31, 2018 and 2017, and its consolidated financial performance and its consolidated cash flows for the years then ended in
accordance with International Financial Reporting Standards. 
  
 

 
 /s/ KPMG LLP 
 Chartered
Professional Accountants, Licensed Public Accountants 
 Toronto, Canada 

June 18, 2018 

 MEDRELEAF CORP. 

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

													
	 	  	Note	 	  	2018	 	 	2017	 
	 Assets
	  				  				 			
	 Current assets:
	  				  				 			
	 Cash and cash equivalents
	  				  	$	215,868	 	 	$	12,899	 
	 Accounts receivable
	  	 	4	 	  	 	10,750	 	 	 	9,953	 
	 Inventories
	  	 	9	 	  	 	32,856	 	 	 	9,511	 
	 Biological assets
	  	 	10	 	  	 	3,202	 	 	 	2,809	 
	 Advances to shareholder
	  				  	 	341	 	 	 	211	 
	 Prepaid expenses
	  				  	 	2,336	 	 	 	730	 
	 Letter of credit
	  	 	5	 	  	 	845	 	 	 	—  	 
	 Income taxes receivable
	  	 	8	 	  	 	8,074	 	 	 	—  	 
	 Other current assets
	  	 	7	 	  	 	300	 	 	 	—  	 
	 Convertible note receivable
	  	 	6	 	  	 	—  	 	 	 	132	 
	 Loan receivable
	  	 	6	 	  	 	—  	 	 	 	307	 
		  				  	  
	  
	 	 	  
	  
	 
		  				  	 	274,572	 	 	 	36,552	 
	 Non-current assets:
	  				  				 			
	 Property, plant and equipment
	  	 	11	 	  	 	73,770	 	 	 	37,780	 
	 Intangible assets
	  	 	12	 	  	 	9,143	 	 	 	13	 
	 Security deposit
	  				  	 	241	 	 	 	239	 
	 Prepaid expenses
	  				  	 	264	 	 	 	301	 
		  				  	  
	  
	 	 	  
	  
	 
		  				  	$	357,990	 	 	$	74,885	 
		  				  	  
	  
	 	 	  
	  
	 
	 Liabilities and Shareholders’ Equity
	  				  				 			
	 Current liabilities
	  				  				 			
	 Accounts payable and accrued liabilities
	  	 	18	 	  	$	16,989	 	 	$	7,235	 
	 Taxes payable
	  	 	20	 	  	 	—  	 	 	 	1,798	 
	 Revolving line of credit
	  	 	16	 	  	 	845	 	 	 	—  	 
	 Term credit facility
	  	 	16	 	  	 	1,000	 	 	 	—  	 
	 Collateralized credit facility
	  	 	16	 	  	 	—  	 	 	 	625	 
	 Shareholder loans payable
	  	 	14	 	  	 	—  	 	 	 	2,189	 
		  				  	  
	  
	 	 	  
	  
	 
		  				  	 	18,834	 	 	 	11,847	 
	 Non-current liabilities:
	  				  				 			
	 Deferred tax liability
	  	 	20	 	  	 	2,477	 	 	 	3,726	 
	 Asset retirement obligation
	  	 	15	 	  	 	214	 	 	 	204	 
	 Term credit facility
	  	 	16	 	  	 	8,421	 	 	 	—  	 
	 Collateralized credit facility
	  	 	16	 	  	 	—  	 	 	 	6,788	 
		  				  	  
	  
	 	 	  
	  
	 
		  				  	 	29,946	 	 	 	22,565	 
	 Shareholders’ equity:
	  				  				 			
	 Share capital
	  	 	13	 	  	 	299,078	 	 	 	38,700	 
	 Contributed surplus
	  	 	17	 	  	 	12,052	 	 	 	1,408	 
	 Warrants
	  	 	13	 	  	 	12,240	 	 	 	—  	 
	 Retained earnings
	  				  	 	4,681	 	 	 	12,212	 
	 Accumulated other comprehensive income
	  				  	 	(7	) 	 	 	—  	 
		  				  	  
	  
	 	 	  
	  
	 
		  				  	 	328,044	 	 	 	52,320	 
		  				  	  
	  
	 	 	  
	  
	 
		  				  	$	357,990	 	 	$	74,885	 
		  				  	  
	  
	 	 	  
	  
	 

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

 

							
	On behalf of the Board:	  		  		  	
	 (signed) “Lloyd Segal”
	  	Director	  	 (signed) “Neil Closner”
	  	Director

  
 1 

 MEDRELEAF CORP. 

Consolidated Statements of Comprehensive (Loss) Income 
 (In
thousands of Canadian dollars, except share and per share amounts, unless otherwise noted) 
  

													
	 	  	Note	 	  	2018	 	 	2017	 
	 Sales
	  				  	$	43,646	 	 	$	40,339	 
	 Production costs
	  	 	9	 	  	 	13,212	 	 	 	9,436	 
		  				  	  
	  
	 	 	  
	  
	 
	 Gross profit before fair value adjustments on biological assets
	  				  	 	30,434	 	 	 	30,903	 
	 Fair value adjustments:
	  				  				 			
	 On biological assets
	  	 	10	 	  	 	44,098	 	 	 	31,252	 
	 On inventory sold
	  	 	9	 	  	 	(26,553	) 	 	 	(24,216	) 
	 On carrying amount of inventory
	  	 	9	 	  	 	(1,309	) 	 	 	—  	 
		  				  	  
	  
	 	 	  
	  
	 
	 Gross profit
	  				  	 	46,670	 	 	 	37,939	 
	 Expenses:
	  				  				 			
	 Selling and marketing
	  				  	 	11,438	 	 	 	7,181	 
	 General and administrative
	  	 	17 , 22	 	  	 	34,482	 	 	 	13,700	 
	 Research and development
	  				  	 	1,128	 	 	 	875	 
	 Amortization of property, plant and equipment
	  	 	11	 	  	 	1,983	 	 	 	495	 
	 Amortization of intangible assets
	  	 	12	 	  	 	632	 	 	 	—  	 
	 Initial public offering related costs
	  	 	13	 	  	 	2,611	 	 	 	—  	 
	 Fair value loss on shareholder loans
	  	 	14	 	  	 	192	 	 	 	—  	 
	 Fair value loss on deferred share units
	  	 	18	 	  	 	428	 	 	 	—  	 
	 Interest income
	  	 	7	 	  	 	(1,271	) 	 	 	(75	) 
	 Finance costs
	  	 	16	 	  	 	694	 	 	 	121	 
		  				  	  
	  
	 	 	  
	  
	 
		  				  	 	52,317	 	 	 	22,297	 
		  				  	  
	  
	 	 	  
	  
	 
	 (Loss) income before income taxes
	  				  	 	(5,647	) 	 	 	15,642	 
	 Income tax (recovery) expense:
	  				  				 			
	 Current
	  	 	20	 	  	 	(1,246	) 	 	 	1,798	 
	 Deferred
	  	 	20	 	  	 	3,130	 	 	 	2,886	 
		  				  	  
	  
	 	 	  
	  
	 
		  				  	 	1,884	 	 	 	4,684	 
		  				  	  
	  
	 	 	  
	  
	 
	 Net (loss) income
	  				  	 	(7,531	) 	 	 	10,958	 
	 Other comprehensive loss
	  				  				 			
	 Items that may subsequently be reclassified to earnings:
	  				  				 			
	 Foreign currency translation differences for foreign operations
	  				  	 	(7	) 	 	 	—  	 
		  				  	  
	  
	 	 	  
	  
	 
	 Total comprehensive (loss) income
	  				  	$	(7,538	) 	 	$	10,958	 
		  				  	  
	  
	 	 	  
	  
	 
	 Weighted average number of shares—basic1

	  	 	13	 	  	 	91,119,745	 	 	 	77,789,726	 
	 Weighted average number of shares—diluted
	  	 	13	 	  	 	93,676,996	 	 	 	81,701,757	 
		  				  	  
	  
	 	 	  
	  
	 
	 (Loss) earnings per share—basic
	  	 	13	 	  	$	(0.08	) 	 	$	0.14	 
	 (Loss) earnings per share—diluted
	  	 	13	 	  	 	(0.08	) 	 	 	0.13	 

  

	1	 Weighted average number of shares, basic and diluted, for the year ended March 31, 2017 are presented on a
converted basis of 116.0909:1 to reflect the capital reorganization (note 13). 

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

  
 2 

 MEDRELEAF CORP. 

Consolidated Statements of Shareholders’ Equity 
 (In
thousands of Canadian dollars) 
  

																													
	 	  	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	Accumulated other	 	 	 	 
	 Year ended March 31, 2017
	  	Note	 	  	Share
capital	 	 	Contributed
surplus	 	 	Warrants	 	 	Retained
earnings	 	 	comprehensive
income	 	 	Total	 
	 Balances, March 31, 2016
	  				  	$	11,595	 	 	$	765	 	 	$	—  	 	 	$	 1,254	 	 	$	—  	 	 	$	13,614	 
	 Net income
	  				  	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	10,958	 	 	 	—  	 	 	 	10,958	 
	 Other comprehensive income
	  				  	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 
	 Exercise of stock options
	  	 	17	 	  	 	2,411	 	 	 	(2,410	) 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	1	 
	 Stock-based compensation
	  	 	17	 	  	 	—  	 	 	 	3,053	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	3,053	 
	 Issuance of Class A common shares
	  	 	13	 	  	 	24,694	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	24,694	 
		  				  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Balances, March 31, 2017
	  				  	$	38,700	 	 	$	1,408	 	 	$	—  	 	 	$	 12,212	 	 	$	—  	 	 	$	52,320	 
		  				  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
								
	 	  	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	Accumulated other	 	 	 	 
	 Year ended March 31, 2018
	  	Note	 	  	Share
capital	 	 	Contributed
surplus	 	 	Warrants	 	 	Retained
earnings	 	 	comprehensive
income	 	 	Total	 
	 Balances, March 31, 2017
	  				  	$	38,700	 	 	$	1,408	 	 	$	—  	 	 	$	 12,212	 	 	$	—  	 	 	$	52,320	 
	 Net loss
	  				  	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	(7,531	) 	 	 	—  	 	 	 	(7,531	) 
	 Other comprehensive income
	  				  	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	(7	) 	 	 	(7	) 
	 Shareholder loans converted to equity
	  	 	13	 	  	 	2,400	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	2,400	 
	 Issuance of common shares
	  	 	13	 	  	 	260,702	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	260,702	 
	 Issuance of warrants
	  	 	13	 	  	 	—  	 	 	 	—  	 	 	 	12,838	 	 	 	—  	 	 	 	—  	 	 	 	12,838	 
	 Shares issued for intangible assets
	  	 	12	 	  	 	7,862	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	7,862	 
	 Shares issued for Woodstock licence
	  	 	13	 	  	 	350	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	350	 
	 Share issuance costs
	  	 	13	 	  	 	(16,753	) 	 	 	—  	 	 	 	(782	) 	 	 	—  	 	 	 	—  	 	 	 	(17,535	) 
	 Exercise of stock options
	  	 	17	 	  	 	1,405	 	 	 	(556	) 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	849	 
	 Class C conversion to Class B 1

	  	 	13	 	  	 	218	 	 	 	(218	) 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 
	 Stock-based compensation
	  	 	17	 	  	 	—  	 	 	 	11,418	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	11,418	 
	 Tax effect of share issuance costs
	  	 	13	 	  	 	4,194	 	 	 	—  	 	 	 	184	 	 	 	—  	 	 	 	—  	 	 	 	4,378	 
		  				  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Balances, March 31, 2018
	  				  	$	299,078	 	 	$	12,052	 	 	$	12,240	 	 	$	 4,681	 	 	$	(7	) 	 	$	328,044	 
		  				  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 

  

	1 	 Prior to the closing of the Company’s initial public offering on June 7, 2017 (note 13), the
outstanding Class C shares were converted to Class B and any remaining contributed surplus attributable to the deemed conversion option on Class C shares was reallocated to Class B share capital. 

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

  
 3 

 MEDRELEAF CORP. 

Consolidated Statements of Cash Flows 
 (In thousands of Canadian
dollars, except share and per share amounts, unless otherwise noted) 
  

									
	 	  	2018	 	 	2017	 
	 Cash provided by (used in):
	  				 			
	 Operating activities:
	  				 			
	 Net (loss) income
	  	$	 (7,531	) 	 	$	 10,958	 
	 Items not involving cash:
	  				 			
	 Fair value adjustment on biological assets
	  	 	(44,098	) 	 	 	(31,252	) 
	 Fair value adjustment on inventory sold
	  	 	26,553	 	 	 	24,216	 
	 Depreciation and amortization
	  	 	5,592	 	 	 	1,706	 
	 Stock-based compensation
	  	 	11,418	 	 	 	3,053	 
	 Unrealized foreign exchange loss
	  	 	6	 	 	 	—  	 
	 Finance costs expensed
	  	 	694	 	 	 	121	 
	 Finance costs paid
	  	 	(527	) 	 	 	(2	) 
	 Interest income earned
	  	 	(1,271	) 	 	 	(75	) 
	 Interest income received
	  	 	900	 	 	 	34	 
	 Fair value loss on shareholder loans
	  	 	192	 	 	 	—  	 
	 Fair value adjustment on carrying amount of inventory
	  	 	1,309	 	 	 	—  	 
	 Convertible note impairment
	  	 	143	 	 	 	—  	 
	 Common shares issued for licensing royalties
	  	 	350	 	 	 	—  	 
	 Current income taxes recoverable
	  	 	(1,246	) 	 	 	1,798	 
	 Deferred income taxes
	  	 	3,130	 	 	 	2,886	 
	 Changes in non-cash operating working capital:
	  				 			
	 Accounts receivable
	  	 	(788	) 	 	 	(3,390	) 
	 Inventories
	  	 	(7,502	) 	 	 	(1,825	) 
	 Prepaid expenses
	  	 	(1,606	) 	 	 	(308	) 
	 Income tax receivable
	  	 	(6,828	) 	 	 	—  	 
	 Security deposit
	  	 	(2	) 	 	 	(130	) 
	 Accounts payable and other
	  	 	9,754	 	 	 	4,398	 
	 Taxes payable
	  	 	(1,798	) 	 	 	—  	 
		  	  
	  
	 	 	  
	  
	 
		  	 	(13,156	) 	 	 	12,188	 
	 Financing activities
	  				 			
	 Shareholder loans repaid
	  	 	—  	 	 	 	(120	) 
	 Deferred finance costs paid
	  	 	(364	) 	 	 	(101	) 
	 Interest paid
	  	 	62	 	 	 	(259	) 
	 Term credit facility
	  	 	10,000	 	 	 	—  	 
	 Revolving line of credit
	  	 	845	 	 	 	—  	 
	 Repayment of term credit facility
	  	 	(250	) 	 	 	—  	 
	 Collateralized credit facility
	  	 	(7,500	) 	 	 	7,500	 
	 Exercise of stock options
	  	 	849	 	 	 	—  	 
	 Issuance of share capital
	  	 	260,702	 	 	 	24,694	 
	 Share issuance costs
	  	 	(16,753	) 	 	 	—  	 
	 Issuance of warrants
	  	 	12,838	 	 	 	—  	 
	 Warrant issuance costs
	  	 	(782	) 	 	 	—  	 
		  	  
	  
	 	 	  
	  
	 
		  	 	259,647	 	 	 	31,714	 
	 Investing activities
	  				 			
	 Loan receivable
	  	 	250	 	 	 	—  	 
	 Convertible note receivable
	  	 	—  	 	 	 	(132	) 
	 Advances to shareholder
	  	 	(130	) 	 	 	(184	) 
	 Additions to intangible assets
	  	 	(1,900	) 	 	 	—  	 
	 Prepaid expenses
	  	 	—  	 	 	 	(298	) 
	 Letter of credit issuance
	  	 	(845	) 	 	 	—  	 
	 Additions to property, plant and equipment
	  	 	(40,897	) 	 	 	(31,306	) 
		  	  
	  
	 	 	  
	  
	 
		  	 	(43,522	) 	 	 	(31,920	) 
		  	  
	  
	 	 	  
	  
	 
	 Increase in cash and cash equivalents
	  	 	202,969	 	 	 	11,982	 
	 Cash and cash equivalents, beginning of period
	  	 	12,899	 	 	 	917	 
		  	  
	  
	 	 	  
	  
	 
	 Cash and cash equivalents, end of period
	  	$	 215,868	 	 	$	 12,899	 
		  	  
	  
	 	 	  
	  
	 
	 Supplemental Information:
	  				 			
	 Royalties applied to share purchase loan
	  	$	—  	 	 	$	 280	 
	 Capitalized property, plant and equipment interest paid
	  	 	—  	 	 	 	212	 
	 Intangible assets acquired in exchange for common shares
	  	 	7,862	 	 	 	—  	 
	 Shareholder loans contributed to common share capital
	  	 	2,400	 	 	 	—  	 
	 Income taxes paid:
	  				 			
	 Income taxes paid related to year ended March 31, 2017
	  	 	2,082	 	 	 	—  	 
	 HST refunds transferred to income tax account related to year ended March 31, 2017
	  	 	2,397	 	 	 	—  	 
	 Income taxes installments paid related to year ended March 31, 2018
	  	 	4,147	 	 	 	—  	 

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

  
 4 

 MEDRELEAF CORP. 

Notes to Consolidated Financial Statements 
 (In thousands of
Canadian dollars, except share and per share amounts, unless otherwise noted) 
 Years ended March 31, 2018 and 2017 

 
  
  

	1.	 NATURE OF OPERATIONS 

MedReleaf Corp. (the “Company”) is a publicly listed company on the Toronto Stock Exchange (“TSX”) under the symbol “LEAF” and
was incorporated on February 28, 2013 under the Ontario Business Corporations Act (“OBCA”). The principal activities of the Company are the production and sale of medical cannabis as regulated by the Access to Cannabis for Medical
Purposes Regulations (Canada) (the “ACMPR”), pursuant to: (i) a licence authorizing the sale of substances listed in the licence, issued by Health Canada to the Company on February 14, 2014, pursuant to the ACMPR in respect of
the Company’s facility located in Markham, Ontario (the “Markham Facility”, and such licence is referred to as the “Markham Licence”); and (ii) a licence authorizing the sale of substances listed in the licence, issued
by Health Canada to the Company on April 12, 2017, pursuant to the ACMPR in respect of the Company’s facility located in Bradford, Ontario (the “Bradford Facility”, and such licence is referred to as the “Bradford
Licence” and, together with the Markham Licence, the “Licences”). Prior to the expiry of the term of each of the Licences, the Company must apply for renewal to Health Canada which contains information prescribed by the ACMPR. The
Company has renewed the Markham Licence and its current term will expire on February 14, 2020. The current term of the Bradford Licence expires on April 10, 2020. The Company’s head office is located at Markham Industrial Park,
Markham, Ontario L3R 6G4 and its registered and records office is located at Suite 3800, Royal Bank Plaza, South Tower, 200 Bay Street, Toronto, Ontario M5J 2Z4. 

MedReleaf Holdings (Australia) Ltd. (“Holdings Australia”), a wholly owned subsidiary of the Company, was incorporated on January 23, 2017
under the OBCA. Holdings Australia has the same head office and registered office as the Company. 
 In February 2017, the Company licensed certain of its
intellectual property to an Australian corporation in order to support an application for Australian cannabis cultivation and manufacturing licences by such corporation (the “licence agreements”). Under the terms of the licence agreements,
the Company, through its subsidiary, Holdings Australia, acquired a 10% equity interest in the Australian corporation, for a nominal amount, which will operate as “MedReleaf Australia”. As well, subject to the execution of additional
documentation, it is contemplated that the Company would become entitled to receive certain royalties on the gross revenue of MedReleaf Australia, as well as Holdings Australia receiving potential additional equity in MedReleaf Australia. The
Company’s interest in MedReleaf Australia is recorded at cost which is equivalent to its fair value. On November 14, 2017 the Company’s Australian partners received a license from the Australian Government Office of Drug Control for
the cultivation and production of medical cannabis. The license to undertake authorized cannabis activities commences on November 10, 2018 in order to allow time to complete infrastructure development of the facility. 

MedReleaf Germany GmbH, registered at Prinzenpark, 3rd and 5th Floor, Prinzenallee 7, 40549 Dusseldorf, Germany, a wholly owned subsidiary of the Company, was
incorporated on June 2, 2017 in Germany with the main objective of cultivation, harvesting, marketing and distribution of cannabis and cannabis products for medical purposes. On June 6, 2017, MedReleaf Germany GmbH, submitted an
application for Phase 1 of the domestic cultivation licensing process to the German Federal Institute for Drugs and Medical Devices (“BfArM”). 

  
 5 

 MEDRELEAF CORP. 

Notes to Consolidated Financial Statements (continued) 
 (In
thousands of Canadian dollars, except share and per share amounts, unless otherwise noted) 
 Years ended March 31, 2018 and 2017 

 
  
  

 On June 13, 2017, 2582394 Ontario Inc. (“Holdco”), registered at 5 Hazelton Avenue Suite 200,
Toronto, Ontario M5R 2E1, a wholly owned subsidiary of the Company, was incorporated under the OBCA, for the purpose of owning property to be used by the Company in the production and sale of medical cannabis. 

 

	2.	 BASIS OF PRESENTATION 

 

	(a)	 Statement of compliance 

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the
International Accounting Standards Board (“IASB”). 
 These consolidated financial statements were authorized for issuance by the Company’s
Board of Directors (the “Board”) on June 18, 2018. 
  

	(b)	 Basis of measurement 

The consolidated financial statements were prepared on a historical cost basis, except for biological assets and certain financial instruments, which are
measured at fair value as explained in the accounting policies below. Other measurement bases are described in the applicable notes. 
  

	(c)	 Basis of consolidation 

Subsidiaries for the purpose of preparing these consolidated financial statements are entities controlled by the Company. Control exists when the Company has
power over a subsidiary that exposes or gives rights to variable returns that are related to its involvement in the subsidiary and can use its power to affect, either directly or indirectly, the amount of those returns. On the date that control
commences, the financial statements of the subsidiary are included in the consolidated financial statements of the Company until the date that control ceases. 
  

			
	 Subsidiary
	  	 Jurisdiction of incorporation

	MedReleaf Holdings (Australia) Ltd.	  	Ontario
	MedReleaf Germany GmbH	  	Germany
	2582394 Ontario Inc.	  	Ontario

  
 6 

 MEDRELEAF CORP. 

Notes to Consolidated Financial Statements (continued) 
 (In
thousands of Canadian dollars, except share and per share amounts, unless otherwise noted) 
 Years ended March 31, 2018 and 2017 

 
  
  

	(d)	 Use of judgments and estimates 

The preparation of the consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect
the application of accounting policies and the reported amounts of assets, liabilities, sales and expenses, and the related disclosures of contingent liabilities. Actual results may differ from these estimates. 

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the year in which the estimates are
revised and in any future periods affected. Significant estimates used in the preparation of these consolidated financial statements include, but are not limited to the following: 

 

	 	i.	 Valuation of biological assets: 

Biological assets, consisting of cannabis plants, are measured at fair value less costs to sell up to the point of harvest. 

Determination of the fair values of the biological assets requires the Company to make assumptions about how market participants assign fair
values to these assets. These assumptions primarily relate to the level of effort required to bring the cannabis up to the point of harvest, sales price, and expected remaining future yields for the cannabis plants. 

 

	 	ii.	 Valuation of inventory: 

Inventory, consists of harvested goods, cannabis oil extracts and accessories and is measured at the lower of cost and net realizable value,
which includes the deemed costs arising from the fair value measurement gains on the transformation of biological assets. These deemed costs are estimated using assumptions that include, but are not limited to, average selling prices, remaining
costs to complete, the allocation rate and method of production costs, the stage of plant growth and cycles, and expected yields. Any change in these assumptions could negatively impact operational results, the actual realizable value of inventory
and future expected gains. 
 Cannabis is measured and weighed at various stages throughout its life and production cycle. Due to its
biological nature, cannabis loses moisture, and therefore weight over time. The Company, in measuring inventory, must make assumptions as to the amount of loss attributable to moisture loss or evaporation, which may result in an actual finished
product weight less than was estimated. 
 Extracts are a by-product that are derived from dried
cannabis. Extracts are added to oils and sold as cannabis oil in vials or capsules and are priced based on the total combined amount of tetrahydrocannabinol (“THC”) and cannabidiol (“CBD”) content. The Company estimates the
amount of THC and CBD expected to be derived from each gram of dried cannabis. The Company assumes that product mix is consistent throughout the period and so the estimate is obtained by applying the average selling price on an aggregate basis. 

  
 7 

 MEDRELEAF CORP. 

Notes to Consolidated Financial Statements (continued) 
 (In
thousands of Canadian dollars, except share and per share amounts, unless otherwise noted) 
 Years ended March 31, 2018 and 2017 

 
  
  

	 	iii.	 Estimated useful lives and amortization of property, plant and equipment: 

Amortization of property, plant and equipment is dependent upon estimates of useful lives, which are determined through the exercise of
judgment. The assessment of any impairment of these assets is dependent upon estimates of recoverable amounts that consider factors such as economic and market conditions and the useful lives of assets. 

 

	 	iv.	 Estimated useful lives of finite intangible assets: 

Amortization of intangible assets with finite lives is dependent upon estimates of useful lives, which are determined through the exercise of
judgment. The assessment of any impairment of these assets is dependent upon estimates of recoverable amounts that consider factors such as economic and market conditions, future cash flows and the useful lives of the assets. 

 

	 	v.	 Share-based compensation: 

In calculating the share-based compensation expense, key estimates such as the value of the common shares, the rate of forfeiture of options
granted, the expected life of the option, the volatility of the value of the Company’s common shares and the risk-free interest rate are used. 
  

	 	vi.	 Non-interest bearing shareholder loans: 

Non-interest bearing shareholder loans are recorded at amortized cost, using estimates of rates that
would be charged for similar instruments. The determination of a market interest rate considers, loans with similar maturities, cash flow patterns, currency, credit risk and interest rates. If there are no specified repayment dates on the
shareholder loans, estimates of maturity and repayment are taken into consideration. 
  

	 	vii.	 Asset retirement obligations: 

Asset retirement obligations (“AROs”) represent the estimated future costs required to remediate the Company’s leased building
upon termination of the lease agreement. The estimated costs are recorded at fair value, using estimates of historical borrowing rates charged to the Company. The estimated valuation of the Company’s ARO are based on management’s best
judgment, and where available third-party estimates of the expected abandonment costs to be incurred in the future. The valuation of the ARO requires the Company to make assumptions including the existence and extent of any legal obligations, the
likelihood that an obligation will be incurred, the settlement amounts and timing. 

  
 8 

 MEDRELEAF CORP. 

Notes to Consolidated Financial Statements (continued) 
 (In
thousands of Canadian dollars, except share and per share amounts, unless otherwise noted) 
 Years ended March 31, 2018 and 2017 

 
  
  

	 	viii.	 Investment tax credits: 

The Company claims investment tax credits as a result of incurring scientific research and experimental development expenditures. Investment
tax credits are recognized when the related expenditures are incurred, and there is reasonable assurance of their realization. Management has made a number of estimates and assumptions in determining the expenditures eligible for the investment tax
credit claim. It is possible that the allowed amount of the investment tax credit could be materially different from the recorded amount upon assessment by the Canada Revenue Agency. 

 

	 	ix.	 Income taxes: 

The Company estimates the amount of current and deferred income tax expenses, liabilities and assets, each reporting period. In estimating tax
expense, management must use judgment in making estimates and assumptions including but not limited to, the timing of when future liabilities or benefits will be realized, the tax rates expected to be in effect and applicable to temporary
differences when they reverse, taxable income, and the utilization of tax loss carry forwards and credits available, if any. 
  

	 	x.	 Costs relating to the issuance of new common shares: 

In connection with the Company’s Offering and listing of the Company’s existing shares on the TSX (the “Listing”) (note
13), the Company incurred underwriters’ fees, legal costs, consulting fees, initial listing fees, travel and other professional fees. All costs that were incremental and directly attributable to the issuance of new common shares were recorded
as a reduction to share capital. All other costs incurred in relation to the Company’s listing of existing shares and preparing the Company to operate and report as a publicly listed Company were expensed to initial public offering costs. The
Company’s management applied judgment in determining which costs to attribute to the Offering and which to attribute to the Listing, where costs were incurred jointly, the Company allocated the costs based on the percentage (9%) of common
shares applicable to the Offering (8,494,742 common shares) and the percentage (91%) applicable to the Listing (81,880,206 common shares). 
  

	 	xi.	 Assessing control over investees: 

Control exists when the Company has power over a subsidiary that exposes or gives rights to variable returns that are related to its
involvement in the subsidiary and can use its power to affect, either directly or indirectly, the amount of those returns. The Company has applied judgement in determining whether control exists with regards to its subsidiaries by assessing its
involvement and its ability to influence the subsidiaries’ operations. 

  
 9 

 MEDRELEAF CORP. 

Notes to Consolidated Financial Statements (continued) 
 (In
thousands of Canadian dollars, except share and per share amounts, unless otherwise noted) 
 Years ended March 31, 2018 and 2017 

 
  
  

	3.	 SIGNIFICANT ACCOUNTING POLICIES: 

The accounting policies described below have been applied consistently to all years presented in these consolidated financial statements. 

 

	(a)	 Biological assets 

The Company measures biological assets consisting of cannabis plants at fair value less costs to sell up to the point of harvest. Production costs related to
the transformation of biological assets to the point of harvest are capitalized and included in the fair value measurement of biological assets. Agricultural produce consisting of cannabis is measured at fair value less costs to sell at the point of
harvest, which becomes the basis for the cost of harvested goods inventories after harvest. 
 Gains or losses arising from changes in fair value less costs
to sell during the years, exclusive of capitalized production costs, are included in gross profit under fair value adjustments within the results of operations of the related year. Upon harvest, capitalized production costs are transferred to
finished harvest and are included in the fair value adjustments on inventory sold within the results of operations during the year in which the harvested cannabis is sold and revenue recognized. Fair value adjustments relating to the net recoverable
value of inventory at the end of the year is included in the fair value adjustments on carrying amount of inventory within the results of operations during the year. 

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

	(b)	 Inventories 

Inventories, consisting of harvested goods and accessories are measured at the lower of cost and net realizable value. Inventories of harvested cannabis are
transferred from biological assets at their fair value less costs to sell at harvest, which becomes deemed cost. Cost is determined using the weighted average method. Any subsequent post harvest costs are capitalized to inventories to the extent
that cost is less than net realizable value. Net realizable value is the estimated average selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. 

  
 10 

 MEDRELEAF CORP. 

Notes to Consolidated Financial Statements (continued) 
 (In
thousands of Canadian dollars, except share and per share amounts, unless otherwise noted) 
 Years ended March 31, 2018 and 2017 

 
  
  

 Production costs relating to inventory sold represent all cost of inventories recognized as expense in the
years, except deemed costs of inventory that arise from the fair value measurement of biological assets transferred to finished harvest inventory. Fair value adjustments on inventory sold represents the deemed costs of inventory sold that arises
from the fair value measurement of biological assets, exclusive of any capitalized costs. 
  

	(c)	 Property, plant and equipment 

Property, plant and equipment are recorded at cost less accumulated amortization and accumulated impairment losses. Cost includes expenditures that are
directly attributable to the acquisition of the asset, including any related capitalized borrowing costs. When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components)
of property, plant and equipment. 
 Amortization is recognized on a straight-line basis, over the estimated useful lives of each component of an item of
property, plant and equipment from the date that they are available for use. Land is not amortized as its useful life is deemed to be indefinite. Amortization methods, useful lives and residual values are reviewed at each annual reporting date and
adjusted, prospectively, if appropriate. 
 The estimated useful lives for the current and comparative years are as follows: 

 

					
	 Computer hardware
	  	 	3 years	 
	 Computer software
	  	 	3 years	 
	 Furniture and equipment
	  	 	5 years	 
	 Motor Vehicles
	  	 	5 years	 
	 Leasehold improvements
	  	 	Term of lease	 
	 Production rooms
	  	 	10 years	 
	 Building improvements
	  	 	20 years	 
	 Building
	  	 	20 years	 
	 Land
	  	 	Indefinite	 

 Gains and losses on disposal of an item of equipment are determined by comparing the proceeds from disposal with the carrying
amount of the equipment and are recognized in the consolidated statements of comprehensive income. 
  

	(d)	 Intangible assets 

Intangible assets are comprised of trademarks, patents, and other intangible assets. Trademarks and patents are considered to have an indefinite useful life.
Other intangible assets are considered to have a useful life of 5 years. Trademarks and patents are measured at cost and no amortization is recognized for these indefinite useful life intangible assets. Other intangible assets are measure at cost
less accumulated amortization. Amortization on other intangible assets is recognized on a straight-line basis over its useful life. 

  
 11 

 MEDRELEAF CORP. 

Notes to Consolidated Financial Statements (continued) 
 (In
thousands of Canadian dollars, except share and per share amounts, unless otherwise noted) 
 Years ended March 31, 2018 and 2017 

 
  
  

	(e)	 Impairment of assets 

Long-lived assets and intangible assets with infinite lives are tested for impairment annually or whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. Long-lived assets with finite lives are tested for impairment whenever events or changes in circumstances indicate the carrying amount may not be recoverable. Events or changes in circumstances which may
indicate impairment include: a significant change to the Company’s operations, a significant decline in performance or a change in market conditions which adversely affects the Company. An impairment loss is recognized for the amount by which
the asset’s carrying amount exceeds its recoverable amount. 
 For purposes of measuring recoverable amounts, assets are grouped at the lowest levels
for which there are separately identifiable cash flows (“cash-generating units” or “CGU”). The recoverable amount is the greater of an asset’s fair value less costs to sell and value in use (being the present value of the
expected future cash flows of the relevant asset or CGU). Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the lesser of the revised estimate of recoverable amount, and the carrying amount that would
have been recorded had no impairment loss been recognized previously. 
  

	(f)	 Revenue recognition 

Revenue from the sale of cannabis is recognized when the Company has transferred the significant risks and rewards of ownership to the patient and it is
probable that the Company will receive the previously agreed upon payment. Significant risks and rewards are generally considered to be transferred when the Company has delivered the product to the patient. Revenue is recognized at the fair value of
consideration received or receivable. 
 At each reporting period, the Company assess accounts receivable for impairment by grouping its receivables based
on the nature of the receivable and their respective expected credit losses incorporating historical default rates, aging of receivables and other forecasted factors. Bad debt allowance is calculated by multiplying the provision rates against the
aged accounts receivable for each grouping and is recorded through profit and loss in general and administrative (“G&A”) expense. 
 Based on
historical sales return information, the Company has determined that a refund liability equivalent to 1% of the most recent two months delivered sales will be recognized at each reporting date and offset against accounts receivable. Per Health
Canada’s ACMPR guidelines, returned product must be destroyed and therefore, the Company does not recognize an asset for its right to recover products from patients. Sales allowances are included in profit and loss as a reduction in revenue.

  
 12 

 MEDRELEAF CORP. 

Notes to Consolidated Financial Statements (continued) 
 (In
thousands of Canadian dollars, except share and per share amounts, unless otherwise noted) 
 Years ended March 31, 2018 and 2017 

 
  
  

	(g)	 Research and development 

Research costs are expensed as incurred. Development costs are capitalized only if development costs can be measured reliably, the product or process is
technically and commercially feasible, future economic benefits are probable, and the Company intends to and has sufficient resources to complete development to use or sell the asset. Other development expenditures are recognized in the consolidated
statements of comprehensive income as incurred. To date, no development costs have been capitalized. 
 The Company claims investment tax credits as a
result of incurring scientific research and experimental development expenditures. Investment tax credits are recognized and offset against the related expenditures when they are incurred, and there is reasonable assurance of their realization.
Management has made a number of estimates and assumptions in determining the expenditures eligible for the investment tax credit claim. It is possible that the allowed amount of the investment tax credit could be materially different from the
recorded amount upon assessment by the Canada Revenue Agency. 
  

	(h)	 Income taxes 

Income tax expense comprises current and deferred taxes. Current tax and deferred tax are recognized in the consolidated statements of comprehensive income
except to the extent that it relates to a business combination, or items recognized directly in equity or in other comprehensive income. Current tax is the expected tax payable or receivable on the taxable income or loss for the years, using tax
rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. 
 Deferred tax is recognized
in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. 

Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted
or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on
the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously. 

A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future
taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized. 

  
 13 

 MEDRELEAF CORP. 

Notes to Consolidated Financial Statements (continued) 
 (In
thousands of Canadian dollars, except share and per share amounts, unless otherwise noted) 
 Years ended March 31, 2018 and 2017 

 
  
  

	(i)	 Share-based payment transactions 

Certain members of the Company’s personnel participate in share-based compensation plans. The share-based compensation costs are expensed by the Company
and included in G&A expense in profit or loss. The grant date fair value of share-based payment awards granted to the Company’s employees is recognized as compensation cost, with a corresponding increase in contributed surplus within
shareholders’ equity, over the years that the employees unconditionally become entitled to the awards. The amount recognized as compensation cost is adjusted to reflect the number of awards for which the related service vesting conditions are
expected to be met, such that the amount ultimately recognized as compensation cost is based on the number of awards that vest. 
  

	(j)	 Deferred share units (“DSU”) 

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

	(k)	 Provisions 

A provision is recognized if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is
probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market
assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognized as finance cost. 

  
 14 

 MEDRELEAF CORP. 

Notes to Consolidated Financial Statements (continued) 
 (In
thousands of Canadian dollars, except share and per share amounts, unless otherwise noted) 
 Years ended March 31, 2018 and 2017 

 
  
  

	(l)	 Asset retirement obligation 

The Company recognizes its best estimate of an asset retirement obligation as a liability in the year in which it incurs a legal or constructive obligation
associated with the retirement of long-lived assets that result from the acquisition, construction, development and/or normal use of the assets. The Company concurrently recognizes a corresponding increase in the carrying amount of the related
long-lived asset that is amortized on a straight-line basis over the life of the asset. The best estimate of the asset retirement obligation is estimated using the expected cash flow approach that reflects a range of possible outcomes discounted at
a current market-based pre-tax discount rate. Subsequent to the initial measurement, the asset retirement obligation is adjusted at the end of each year for changes in the timing or amount of cash flows,
changes in the discount rate and the unwinding of the discount. Changes in the obligation due to the passage of time are recognized in finance costs. Changes in the obligation due to the changes in estimated cash flows are recognized as an
adjustment of the carrying amount of the related long-lived asset that is amortized over the remaining life of the asset. Actual costs incurred upon the settlement of the asset retirement obligation are charged against the liability. 

 

	(m)	 Foreign currency 

The consolidated financial statements are presented in Canadian dollars, the Company’s functional currency. 

Monetary assets and liabilities denominated in foreign currencies at the reporting dates are translated into the functional currency at the exchange rate at
that date. Other consolidated statements of financial position items reported in foreign currencies are translated into Canadian dollars at the exchange rates prevailing at the respective transaction dates. Revenue and expenses denominated in
foreign currencies are translated into Canadian dollars at average rates of exchange prevailing during the years. The resulting gains or losses on translation are included in the determination of net income. 

For international subsidiaries whose functional currencies are their local currencies, their assets and liabilities are translated from the respective local
currency to Canadian dollars using exchange rates at the balance sheet date. The Company’s consolidated statements of income of all international subsidiaries are translated from the respective local currencies to Canadian dollars using average
exchange rates for the period covered by the income statements. The resulting foreign exchange gain or loss is recognized in other comprehensive income. 
  

	(n)	 Financial assets 

All financial assets are initially recorded at fair value and designated upon initial recognition into one of the following four categories: held-to-maturity, available-for-sale, loans and receivables, or at fair value through profit or
loss (“FVTPL”). 
 Financial assets classified as held-to-maturity
are subsequently measured at amortized cost using the effective interest method less any allowance for impairment. The effective interest method is a method of calculating the amortized cost of a financial asset and of allocating interest income
over its life. As at March 31, 2018 and 2017, the Company did not have any assets classified as held-to-maturity. 

  
 15 

 MEDRELEAF CORP. 

Notes to Consolidated Financial Statements (continued) 
 (In
thousands of Canadian dollars, except share and per share amounts, unless otherwise noted) 
 Years ended March 31, 2018 and 2017 

 
  
  

 Financial assets classified as
available-for-sale are subsequently measured at fair value with unrealized gains and losses recognized in other comprehensive income (loss), except for losses in value
that are considered other than temporary or a significant or prolonged decline. As at March 31, 2018 and 2017, the Company did not have any financial assets classified as
available-for-sale. 
 Financial assets classified as loans and receivables
are subsequently measured at amortized cost. Financial assets classified as loans and receivables consist of accounts receivable. The Company records an allowance for doubtful accounts against accounts receivable that management believes are
impaired. The Company records specific allowances against patient receivables based on their past experiences with the patients and knowledge of the patients’ financial conditions. The Company also considers cash flow cycles of patients. 

Financial assets classified as FVTPL are subsequently measured at fair value through the consolidated statements of comprehensive income. Financial assets
classified as FVTPL consist of cash and cash equivalents. 
 Financial assets are derecognized when the rights to receive cash flows from the asset have
expired or the Company has transferred its rights to receive cash flows from an asset. 
  

	(o)	 Impairment of financial assets 

Financial assets that are measured at amortized cost are assessed for impairment at the end of each reporting year. A financial asset or group of financial
assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset and the event has a negative impact on the estimated cash flows
of the financial asset and the loss can be reliably estimated. 
 The amount of the impairment loss recognized is the difference between the carrying amount
of the financial asset and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate. 

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of accounts receivable,
where the carrying amount is reduced through the use of an allowance account. When an account receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are
credited against the allowance account. Changes in the carrying amount of the allowance account are recognized in the consolidated statements of comprehensive income. 

  
 16 

 MEDRELEAF CORP. 

Notes to Consolidated Financial Statements (continued) 
 (In
thousands of Canadian dollars, except share and per share amounts, unless otherwise noted) 
 Years ended March 31, 2018 and 2017 

 
  
  

 If, in a subsequent year, the amount of the impairment loss of a financial asset other than the accounts
receivable decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed through the consolidated statements of comprehensive income to the
extent that the carrying amount of the financial asset at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized. 

 

	(p)	 Financial liabilities 

All financial liabilities are initially recorded at fair value and designated upon initial recognition as FVTPL or other financial liabilities. 

Financial liabilities classified as FVTPL include financial liabilities
held-for-trading and financial liabilities designated upon initial recognition as FVTPL. Derivatives are also classified as FVTPL unless they are designated as effective
hedging instruments. Transaction costs on financial liabilities classified as FVTPL are expensed as incurred. Fair value changes on financial liabilities classified as FVTPL are recognized through the consolidated statements of comprehensive income.
There were no financial liabilities designated at FVTPL upon initial recognition. 
 Financial liabilities classified as other financial liabilities are
initially recognized at fair value less directly attributable transaction costs. After initial recognition, other financial liabilities are subsequently measured at amortized cost using the effective interest method. 

The Company derecognizes a financial liability when its contractual obligations are discharged or cancelled or expire. 

 

	(q)	 New standards and interpretations not yet adopted 

 

	 	i.	 IFRS 9 

In July 2014, the IASB issued the final publication of the IFRS 9 Financial Instruments (“IFRS 9”) standard. The new standard is
effective for annual periods beginning on or after January 1, 2018. IFRS 9 includes revised guidance on the classification and measurement of financial instruments, new guidance for measuring impairment on financial assets, and new hedge
accounting guidance. 
 While there is no material impact on the classification and measurement of the Company’s financial assets and
financial liabilities under IFRS 9, the introduction of the “expected credit loss” model for impairment will impact the Company’s impairment of accounts receivable. Under IFRS 9, the model will be based on the Company’s grouping
of the allowance, determined by the nature of the receivable. The new model incorporates current and forecasted factors that are specific to the borrowers and general economic conditions at the reporting date. A provision matrix, based on the
Company’s historical observed default rates over the expected life of the accounts receivable, will also be applied. Bad debt allowance will be calculated by multiplying the provision rates against the aged accounts receivable for each
grouping. 

  
 17 

 MEDRELEAF CORP. 

Notes to Consolidated Financial Statements (continued) 
 (In
thousands of Canadian dollars, except share and per share amounts, unless otherwise noted) 
 Years ended March 31, 2018 and 2017 

 
  
  

 The Company assessed the impact of adopting IFRS 9 retrospectively and determined that the
impact was not material. Commencing April 1, 2018, the Company will adopt IFRS 9 on a cumulative effective basis, with no restatement of the comparative period. 
  

	 	ii.	 IFRS 15 

In May 2014, the IASB issued IFRS 15 Revenue from Contracts with Customers (“IFRS 15”). The new standard is effective for annual
periods beginning on or after January 1, 2018. IFRS 15 introduces a single model for recognizing revenue from contracts with customers. The standard requires revenue to be recognized in a manner that depicts the transfer of promised goods or
services to a customer and at an amount that reflects the consideration expected to be received in exchange for transferring those goods or services. 

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

	 	iii.	 IFRS 16 

In 2016, the IASB issued IFRS 16, Leases (“IFRS 16”), replacing International Accounting Standards (“IAS 17”), Leases, and
related interpretations. The standard introduces a single on-balance sheet recognition and measurement model for lessees, eliminating the distinction between operating and finance leases. Lessors continue to
classify leases as finance and operating leases. IFRS 16 becomes effective for annual periods beginning on or after January 1, 2019, and is to be applied retrospectively. Early adoption is permitted if IFRS 15 has been adopted. The Company is
currently assessing the impact of the new standard on its consolidated financial statements. 
  

	4.	 ACCOUNTS RECEIVABLE 

Accounts receivable represents amounts due from patients, insurance providers, and third-party e-commerce payment
processing facilitators. As at March 31, 2018, the Company had accounts receivable of $10,750 (2017—$9,953), net of an allowance of $1,349 (2017—$530) and inclusive of $3,036 sales tax refunds receivable (2017—$872). During the
year ended March 31, 2018, $759 of bad debt expense was included in general and administrative expenses (2017—$546) and $94 of sales returns and allowances were offset against revenue (2017 – nil). 

  
 18 

 MEDRELEAF CORP. 

Notes to Consolidated Financial Statements (continued) 
 (In
thousands of Canadian dollars, except share and per share amounts, unless otherwise noted) 
 Years ended March 31, 2018 and 2017 

 
  
  

 The table below summarizes the aged accounts receivable as at March 31, 2018 and March 31, 2017:

  

													
	 	  	Notes	 	  	2018	 	  	2017	 
	 Current
	  				  	$	3,577	 	  	$	3,452	 
	 30 days
	  				  	 	3,164	 	  	 	2,741	 
	 60 days
	  				  	 	407	 	  	 	1,832	 
	 90+ days
	  				  	 	1,915	 	  	 	1,586	 
		  				  	  
	  
	 	  	  
	  
	 
	 Trade accounts receivable
	  				  	 	9,063	 	  	 	9,611	 
	 Sales tax refunds receivable
	  	 	24	 	  	 	3,036	 	  	 	872	 
	 Allowance for sales returns liability
	  				  	 	(79	) 	  	 	—  	 
	 Allowance for impairment of accounts receivable
	  				  	 	(1,270	) 	  	 	(530	) 
		  				  	  
	  
	 	  	  
	  
	 
	 Accounts receivable
	  				  	$	10,750	 	  	$	9,953	 
		  				  	  
	  
	 	  	  
	  
	 

 The movement in the allowance for doubtful accounts in respect of trade accounts receivable during the years ended
March 31, 2018 and 2017 were as follows: 
  

									
	 	  	2018	 	  	2017	 
	 Balance, beginning of period
	  	$	530	 	  	$	31	 
	 Additions
	  	 	853	 	  	 	499	 
	 Writeoffs
	  	 	(34	) 	  	 	—  	 
		  	  
	  
	 	  	  
	  
	 
	 Balance, end of period
	  	$	1,349	 	  	$	530	 
		  	  
	  
	 	  	  
	  
	 

  

	5.	 LETTER OF CREDIT: 

On February 7, 2018, the Company issued an irrevocable standby letter of credit (“LOC”) in favour of a local utilities distributor (the
“Beneficiary”) for $845. The LOC can be drawn upon from time to time upon written demand for payment to be honoured by the Company’s main banking partner. The LOC expires on January 30, 2019 and can be used by the Beneficiary as
security or reimbursement for utility infrastructure upgrade costs. 

  
 19 

 MEDRELEAF CORP. 

Notes to Consolidated Financial Statements (continued) 
 (In
thousands of Canadian dollars, except share and per share amounts, unless otherwise noted) 
 Years ended March 31, 2018 and 2017 

 
  
  

	6.	 LOAN RECEIVABLE AND CONVERTIBLE NOTE RECEIVABLE: 

The Company entered into a loan agreement on March 25, 2015 with MMMG, LLC (the “Borrower”), a Nevada limited liability company for $250 bearing
interest at 15% per annum and maturing in March 2017. On May 26, 2017, the Borrower repaid the full outstanding principal and accrued interest of $312. 

On November 14, 2016, the Company entered into a strategic alliance agreement (the “Alliance”) with Ehave, Inc. (“Ehave”) to develop
software and a branded application. On February 22, 2017, the Company purchased an unsecured convertible promissory note from Ehave with a principal amount denominated in $100 United States dollars. Interest accrues on the note at the rate of
10% per annum and will be due with principal at the earlier of February 22, 2018 or upon the closing of a registered direct offering of Equity Securities of Ehave that meet minimum gross proceed requirements as defined in the Alliance agreement
(“Qualifying Offer”). At the option of the Company, upon closing of a Qualifying Offer, the outstanding note receivable plus unpaid accrued interest can be converted to Equity Securities of Ehave. 

As at February 22, 2018 the note was not settled or converted and the Company recorded an impairment related to the note. The note impairment of $143
(2017 – nil) was included in general and administrative costs for the year ended March 31, 2018. As at March 31, 2018 the balance of the convertible note receivable was nil (2017 – $132). 

 

	7.	 OTHER CURRENT ASSETS 

Other current assets consist of interest income receivable on cash and cash equivalents invested in interest bearing accounts held with Canadian financial
institutions. As at March 31, 2018, $300 (2017 – nil) of interest income was receivable on outstanding cash balances. 
  

	8.	 INCOME TAXES RECEIVABLE 

Income taxes receivable consists of income tax installments paid in excess of estimated income taxes payable and HST sales tax refunds receivable transferred
and applied to the Company’s tax account. During the year ended March 31, 2018, $2,397 of HST sales tax refunds due to the Company were transferred to the Company’s tax account and applied to the Company’s tax years ended
March 31, 2017 and 2016. The Company intends to appeal the additional assessed tax which it believes arose through the misapplication of prior year tax loss carry forwards and pending amendments required to be filed. As at March 31, 2018
the Company had $8,074 in income taxes receivable. The table below summarizes income taxes receivables as at March 31, 2018 and 2017: 

  
 20 

 MEDRELEAF CORP. 

Notes to Consolidated Financial Statements (continued) 
 (In
thousands of Canadian dollars, except share and per share amounts, unless otherwise noted) 
 Years ended March 31, 2018 and 2017 

 
  
  

									
	 	  	2018	 	  	2017	 
	 Installments paid for year ended March 31, 2018
	  	$	4,147	 	  	$	—  	 
	 Estimated income tax refund for year ended March 31, 2018
	  	 	1,530	 	  	 	—  	 
	 Sales tax refunds applied to tax account for year ended March 31, 2017
	  	 	2,397	 	  	 	—  	 
		  	  
	  
	 	  	  
	  
	 
	 Income taxes receivable
	  	$	8,074	 	  	$	—  	 
		  	  
	  
	 	  	  
	  
	 

  

	9.	 INVENTORIES: 

 

													
	 	  	 	 	  	Biological asset	 	  	 	 
	 	  	Capitalized	 	  	fair value	 	  	Carrying	 
	 	  	cost	 	  	adjustment	 	  	Amount	 
	 Accessories, supplies and consumables
	  	$	320	 	  	$	—  	 	  	$	320	 
	 Work-in-process,
dried cannabis and extracts
	  	 	822	 	  	 	3,006	 	  	 	3,828	 
	 Finished goods, dried cannabis and extracts
	  	 	1,191	 	  	 	4,172	 	  	 	5,363	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Carrying amount, March 31, 2017
	  	$	2,333	 	  	$	7,178	 	  	$	9,511	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Accessories, supplies and consumables
	  	$	892	 	  	$	—  	 	  	$	892	 
	 Work-in-process,
dried cannabis and extracts
	  	 	3,739	 	  	 	10,043	 	  	 	13,782	 
	 Finished goods, dried cannabis and extracts
	  	 	5,047	 	  	 	13,135	 	  	 	18,182	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Carrying amount, March 31, 2018
	  	$	9,678	 	  	$	23,178	 	  	$	32,856	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 

 Inventories consist of, accessories available for resale; supplies and consumables for use in the production of inventories
and the transformation of biological assets; capitalized inventory costs; and deemed costs of inventories arising from fair value gains on the transformation of biological assets. The capitalized cost component of inventories represents the amount
of cost before any fair value adjustments transferred to inventory through fair value gains recognized on the transformation of biological assets. The biological asset fair value adjustment is exclusive of any cash outlay of cost and represents the non-cash fair value incremental adjustment arising from the transformation of biological assets transferred to inventory as deemed cost. Together the capitalized cost and the incremental biological asset fair value
adjustments comprise the total carrying amount of inventory. 
 During the year ended March 31, 2018 the Company recorded a $1,309 fair value loss
arising from the write-down of inventory related to the fair value biological asset adjustment component of its inventory. The write-down was required to adjust inventory to its net realizable value less remaining costs to sell. 

Inventories recognized as an expense during the year ended March 31, 2018 was $41,074 (2017—$33,652), summarized as follows: 

  
 21 

 MEDRELEAF CORP. 

Notes to Consolidated Financial Statements (continued) 
 (In
thousands of Canadian dollars, except share and per share amounts, unless otherwise noted) 
 Years ended March 31, 2018 and 2017 

 
  
  

									
	 	  	2018	 	  	2017	 
	 Production costs
	  	$	13,212	 	  	$	9,436	 
	 Fair value adjustment on inventory sold
	  	 	26,553	 	  	 	24,216	 
	 Fair value adjustment on carrying amount of inventory
	  	 	1,309	 	  	 	—  	 
		  	  
	  
	 	  	  
	  
	 
	 Inventory expense
	  	$	41,074	 	  	$	33,652	 
		  	  
	  
	 	  	  
	  
	 

  

	10.	 BIOLOGICAL ASSETS: 

Biological assets consist of cannabis on plants. The changes in the carrying value of biological assets are as follows: 

 

													
	 	  	 	 	  	Biological asset	 	  	 	 
	 	  	Capitalized	 	  	fair value	 	  	Cannabis on	 
	 	  	cost	 	  	adjustment	 	  	on plants	 
	 Carrying amount, March 31, 2016
	  	$	363	 	  	$	1,453	 	  	$	1,816	 
	 Changes in fair value less costs to sell due to biological transformation
	  	 	—  	 	  	 	31,252	 	  	 	31,252	 
	 Production costs capitalized
	  	 	5,024	 	  	 	—  	 	  	 	5,024	 
	 Transferred to inventories upon harvest
	  	 	(5,012	) 	  	 	(30,271	) 	  	 	(35,283	) 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Carrying amount, March 31, 2017
	  	$	375	 	  	$	2,434	 	  	$	2,809	 
	 Changes in fair value less costs to sell due to biological transformation
	  	 	—  	 	  	 	44,098	 	  	 	44,098	 
	 Production costs capitalized
	  	 	8,550	 	  	 	—  	 	  	 	8,550	 
	 Transferred to inventories upon harvest
	  	 	(8,400	) 	  	 	(43,855	) 	  	 	(52,255	) 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Carrying amount, March 31, 2018
	  	$	525	 	  	$	2,677	 	  	$	3,202	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 

 Biological assets consist of cannabis plants measured at fair value less cost to sell up to the point of harvest. The
Company’s estimates, by their nature, are subject to changes that could result from volatility of market prices, unanticipated regulatory changes, harvest yields, loss of crops, changes in estimates and other uncontrollable factors that could
significantly affect the future fair value of biological assets. 
 These estimates include the following assumptions and are based on historical
information: 
  

	 	i.	 Selling prices were determined by estimating the Company’s average selling price and mix of product
strains applicable to each three-month ending reporting period. The Company’s average selling price for the year ended March 31, 2018 was $8.91 (2017—$11.00) per gram and equivalent gram of cannabis sold. A change in the
Company’s average selling price of $1 per gram would result in a 21% change in the carrying amount of biological assets. 

  
 22 

 MEDRELEAF CORP. 

Notes to Consolidated Financial Statements (continued) 
 (In
thousands of Canadian dollars, except share and per share amounts, unless otherwise noted) 
 Years ended March 31, 2018 and 2017 

 
  
  

	 	ii.	 Equivalent grams on extracts were determined by estimating the expected yields of extracted plants and are
dependant on the efficiency and output of the Company’s extraction processes. On January 1, 2018, the Company changed its estimated conversion rate for extracts from 10 grams per 1,250 mg of THC/CBD to 10 grams per 960 mg of THC/CBD.

  

	 	iii.	 Costs incurred and remaining costs to complete were estimated by calculating the average production costs up to
the point of harvest over the total production period; 

  

	 	iv.	 The percentage of costs incurred for each stage of plant growth; 

 

	 	v.	 The stage of plant growth at which point of harvest is determined; 

 

	 	vi.	 Costs to sell and other fulfillment costs were determined by estimating the Company’s average cost per
gram; and 

  

	 	vii.	 Expected yields of harvested plants are estimated and risk adjusted at each stage of growth.

  

	11.	 PROPERTY, PLANT AND EQUIPMENT 

On July 22, 2016, the Company completed the purchase of a 210,596 square foot production facility on approximately 11 acres of land, located in an
industrialized zone in Bradford, Ontario. The purchase price of the property was $8,750, excluding legal and transfer tax costs, and was primarily funded through a collateralized credit facility. The facility will be used for the production and sale
of medical cannabis. 
 As at March 31, 2017, total construction costs of $17,550 related to the Bradford Facility were classified as construction in
process. During the year ended March 31, 2018 additional construction costs of $29,752 were incurred and $27,352 of construction costs related to the first sub-phase of phase two were classified from
construction in process as production rooms ($10,524) and building improvements ($16,572) and depreciation commenced. 
 As of March 31, 2018, $19,950
in construction costs related to the latter part of the second phase of the Bradford Facility project were classified as construction in process and were not depreciated. 

Included in production costs for the year ended March 31, 2018 is depreciation in the amount of $2,924 (2017—$1,197). 

  
 23 

 MEDRELEAF CORP. 

Notes to Consolidated Financial Statements (continued) 
 (In
thousands of Canadian dollars, except share and per share amounts, unless otherwise noted) 
 Years ended March 31, 2018 and 2017 

 
  
  

																																									
	 	 	Computer	 	 	Furniture	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	hardware/	 	 	and	 	 	Motor	 	 	Leasehold	 	 	Production	 	 	Construction	 	 	 	 	 	Building	 	 	 	 	 	 	 
	 	 	software	 	 	equipment	 	 	Vehicles	 	 	improvements	 	 	rooms	 	 	in process	 	 	Building	 	 	improvements	 	 	Land	 	 	Total	 
	 Cost
	 				 				 				 				 				 				 				 				 				 			
	 Balance, March 31, 2016
	 	 	298	 	 	 	2,145	 	 	 	—  	 	 	 	2,260	 	 	 	4,588	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	9,291	 
	 Additions
	 	 	591	 	 	 	3,226	 	 	 	—  	 	 	 	797	 	 	 	441	 	 	 	17,550	 	 	 	4,296	 	 	 	—  	 	 	 	4,604	 	 	 	31,505	 
		 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Balance, March 31, 2017
	 	 	889	 	 	 	5,371	 	 	 	—  	 	 	 	3,057	 	 	 	5,029	 	 	 	17,550	 	 	 	4,296	 	 	 	—  	 	 	 	4,604	 	 	 	40,796	 
	 Additions
	 	 	2,080	 	 	 	4,528	 	 	 	10	 	 	 	601	 	 	 	1,660	 	 	 	29,752	 	 	 	—  	 	 	 	2,266	 	 	 	—  	 	 	 	40,897	 
	 Asset reclassification
	 	 	63	 	 	 	193	 	 	 	—  	 	 	 	—  	 	 	 	10,524	 	 	 	(27,352	) 	 	 	—  	 	 	 	16,572	 	 	 	—  	 	 	 	—  	 
		 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Balance, March 31, 2018
	 	 	3,032	 	 	 	10,092	 	 	 	10	 	 	 	3,658	 	 	 	17,213	 	 	 	19,950	 	 	 	4,296	 	 	 	18,838	 	 	 	4,604	 	 	 	81,693	 
		 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Accumulated amortization
	 				 				 				 				 				 				 				 				 				 			
	 Balance, March 31, 2016
	 	 	126	 	 	 	481	 	 	 	—  	 	 	 	355	 	 	 	362	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	1,324	 
	 Amortization
	 	 	168	 	 	 	750	 	 	 	—  	 	 	 	290	 	 	 	463	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	1,671	 
	 Asset retirement
	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	21	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	21	 
		 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Balance, March 31, 2017
	 	 	294	 	 	 	1,231	 	 	 	—  	 	 	 	666	 	 	 	825	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	3,016	 
	 Amortization
	 	 	587	 	 	 	1,544	 	 	 	—  	 	 	 	395	 	 	 	1,365	 	 	 	—  	 	 	 	215	 	 	 	779	 	 	 	—  	 	 	 	4,885	 
	 Asset retirement
	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	22	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	22	 
		 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Balance, March 31, 2018
	 	 	881	 	 	 	2,775	 	 	 	—  	 	 	 	1,083	 	 	 	2,190	 	 	 	—  	 	 	 	215	 	 	 	779	 	 	 	—  	 	 	 	7,923	 
		 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Carrying amounts
	 				 				 				 				 				 				 				 				 				 			
	 March 31, 2017
	 	 	595	 	 	 	4,140	 	 	 	—  	 	 	 	2,391	 	 	 	4,204	 	 	 	17,550	 	 	 	4,296	 	 	 	—  	 	 	 	4,604	 	 	 	37,780	 
	 March 31, 2018
	 	 	2,151	 	 	 	7,317	 	 	 	10	 	 	 	2,575	 	 	 	15,023	 	 	 	19,950	 	 	 	4,081	 	 	 	18,059	 	 	 	4,604	 	 	 	73,770	 

  
 24 

 MEDRELEAF CORP. 

Notes to Consolidated Financial Statements (continued) 
 (In
thousands of Canadian dollars, except share and per share amounts, unless otherwise noted) 
 Years ended March 31, 2018 and 2017 

 
  
  

	12.	 INTANGIBLE ASSETS 

During the year ended March 31, 2018, the Company completed the purchase of intangible assets for a purchase price of $9,762, of which $1,900 was paid for
in cash and the remainder ($7,862) paid through the issuance of Common Shares (note 13). 
 The Company has an obligation to purchase additional intangible
assets by way of issuance of Common Shares contingent on the seller meeting specified targets. The agreed upon purchase price of each intangible asset is $3,750, $3,250, and $3,000, respectively. 

Intangible assets consist of trademarks, patents, and other intangible assets. 
  

																	
	 	  	Trademarks	 	  	Patents	 	  	Other	 	  	Total	 
	 Cost
	  				  				  				  			
	 Balance, March 31, 2016
	  	$	—  	 	  	$	—  	 	  	$	—  	 	  	$	—  	 
	 Additions
	  	 	13	 	  	 	—  	 	  	 	—  	 	  	 	13	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Balance, March 31, 2017
	  	 	13	 	  	 	—  	 	  	 	—  	 	  	 	13	 
	 Additions
	  	 	124	 	  	 	111	 	  	 	9,527	 	  	 	9,762	 
	 Balance, March 31, 2018
	  	$	137	 	  	$	111	 	  	$	9,527	 	  	$	9,775	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Accumulated amortization
	  				  				  				  			
	 Balance, March 31, 2016
	  	$	—  	 	  	$	—  	 	  	$	—  	 	  	$	—  	 
	 Amortization
	  	 	—  	 	  	 	—  	 	  	 	—  	 	  	 	—  	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Balance, March 31, 2017
	  	 	—  	 	  	 	—  	 	  	 	—  	 	  	 	—  	 
	 Amortization
	  	 	—  	 	  	 	—  	 	  	 	632	 	  	 	632	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Balance, March 31, 2018
	  	$	—  	 	  	$	—  	 	  	$	632	 	  	$	632	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Carrying amounts
	  				  				  				  			
	 March 31, 2017
	  	$	13	 	  	$	—  	 	  	$	—  	 	  	$	13	 
	 March 31, 2018
	  	 	137	 	  	 	111	 	  	 	8,895	 	  	 	9,143	 

  
 25 

 MEDRELEAF CORP. 

Notes to Consolidated Financial Statements (continued) 
 (In
thousands of Canadian dollars, except share and per share amounts, unless otherwise noted) 
 Years ended March 31, 2018 and 2017 

 
  
  

	13.	 SHARE CAPITAL 

Authorized: 
  

	 	•	 	 Unlimited common shares Initial public offering: 

On May 30, 2017, the Company filed its final prospectus with the securities regulatory authorities in each of the provinces and territories of Canada in
connection with the initial public offering and secondary offering (together, the “Offering”) of an aggregate of 10,600,000 common shares (the “Offered Shares”) of the Company at a price of $9.50 per Offered Share (the
“Offering Price”) for aggregate gross proceeds of $100,700, with certain selling shareholders receiving $20,000 of the gross proceeds as part of a secondary offering. 

The Offering closed on June 7, 2017, and the Offered Shares commenced trading on the TSX under the symbol “LEAF”. 

Issued: 
  

																																	
	 	 	 	 	 	 	 	 	Class A	 	 	Class B	 	 	Class C	 
	 	 	Common shares	 	 	Common shares	 	 	Common shares	 	 	Common shares	 
	 	 	Number of	 	 	Share	 	 	Number of	 	 	Share	 	 	Number of	 	 	Share	 	 	Number of	 	 	Share	 
	 	 	shares	 	 	capital	 	 	shares	 	 	capital	 	 	shares	 	 	capital	 	 	shares	 	 	capital	 
	 Balance, March 31, 2016
	 	 	—  	 	 	$	—  	 	 	 	363,544	 	 	$	11,595	 	 	 	226,416	 	 	$	—  	 	 	 	8,175	 	 	$	—  	 
	 Issuance of Class A common shares
	 	 	—  	 	 	 	—  	 	 	 	71,964	 	 	 	24,694	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 
	 Conversion of Class C shares to Class A common shares
	 	 	—  	 	 	 	—  	 	 	 	4,177	 	 	 	74	 	 	 	—  	 	 	 	—  	 	 	 	(4,177	) 	 	 	—  	 
	 Exercise of stock options
	 	 	—  	 	 	 	—  	 	 	 	39,214	 	 	 	2,337	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 
		 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Balance, March 31, 2017
	 	 	—  	 	 	$	—  	 	 	 	478,899	 	 	$	38,700	 	 	 	226,416	 	 	$	—  	 	 	 	3,998	 	 	$	—  	 
	 Conversion of Class A shares to common shares at 116.0909:1
	 	 	55,595,369	 	 	 	38,700	 	 	 	(478,899	) 	 	 	(38,700	) 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 
	 Conversion of Class B shares to common shares
	 	 	464,054	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	(3,998	) 	 	 	—  	 	 	 	—  	 	 	 	—  	 
	 Conversion of Class B shares to common shares at 116.0909:1
	 	 	26,284,837	 	 	 	2,400	 	 	 	—  	 	 	 	—  	 	 	 	(226,416	) 	 	 	—  	 	 	 	—  	 	 	 	—  	 
	 Conversion of Class C shares to Class B shares at 116.0909:1
	 	 	—  	 	 	 	218	 	 	 	—  	 	 	 	—  	 	 	 	3,998	 	 	 	—  	 	 	 	(3,998	) 	 	 	—  	 
	 Initial public offering
	 	 	8,494,742	 	 	 	80,700	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 
	 Bought deal financing
	 	 	3,625,470	 	 	 	60,002	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 
	 Second bought deal financing
	 	 	5,000,000	 	 	 	120,000	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 
	 Share issuance costs
	 	 	—  	 	 	 	(16,753	) 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 
	 Shares issued for intangible assets
	 	 	488,313	 	 	 	7,862	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 
	 Shares issued for Woodstock licence
	 	 	18,416	 	 	 	350	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 
	 Exercise of stock options
	 	 	808,590	 	 	 	1,405	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 
	 Tax effect of share issuance costs
	 	 	—  	 	 	 	4,194	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 
		 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Balance, March 31, 2018
	 	 	100,779,791	 	 	$	299,078	 	 	 	—  	 	 	$	—  	 	 	 	—  	 	 	$	—  	 	 	 	—  	 	 	$	—  	 
		 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 

 Class A common shares 

Class A common shares were voting and participating and were entitled to dividends as and when declared by the Board, subject to the prior rights of other
share classes. The Class A common shareholders were entitled to receive the remaining property of the Company upon liquidation, dissolution or winding up. Prior to the Offering, Class A shares were subdivided at a ratio of 116.0909:1 and re-designated as “common shares”. 

  
 26 

 MEDRELEAF CORP. 

Notes to Consolidated Financial Statements (continued) 
 (In
thousands of Canadian dollars, except share and per share amounts, unless otherwise noted) 
 Years ended March 31, 2018 and 2017 

 
  
  

 Common shares 

Common shares are voting and participating and are entitled to dividends as and when declared by the Board. The holders of common shares will be entitled to
receive, on a pro rata basis, the remaining property and assets available for distribution upon the Company’s liquidation, dissolution or winding-up, whether voluntary or involuntary, subject to the
rights of the Class B shares. 
 Class B shares 

Prior to the Offering on June 7, 2017, Class B shares were voting, non-participating, convertible shares,
redeemable by the Company. Each Class B share was issued at $0.001 and carried an entitlement of one vote. Immediately prior to the Offering, on June 7, 2017, the Class B shares were converted on a 1:1 basis into Class A common
shares and were subdivided at a ratio of 116.0909:1 and re-designated as “common shares”. 
 Subsequent to
the Offering, Class B shares, are restricted and can only be held by Igor Gimelshtein, Chief Financial Officer of the Company, pursuant to the terms of his employment agreement with the Company. The holder of Class B shares is not entitled
to notice of, to attend at, nor to vote at any meeting of the shareholders of the Company, and is not entitled to any dividends. In the event of the liquidation, dissolution or winding-up of the Company,
whether voluntary or involuntary, the holder of the Class B shares shall be entitled to receive, in respect of each such share, before any distribution of any part of the assets of the Company among the holders of the common shares and any
other class of shares of the Company ranking junior to the Class B shares, an amount equal to the Redemption Price (defined below) per Class B share held. 

All of the Class B shares outstanding on the date (the “Redemption Date”) on which the holder of the Class B shares delivers a notice of
resignation or the date on which employment is terminated for just cause, shall be automatically redeemed by the Company on the Redemption Date at a price per Class B Share equal to $0.001 (the “Redemption Price”). 

Subject to the foregoing, on March 23, 2018 the 3,998 Class B shares were converted into 464,054 common shares. 

As at March 31, 2018 there were no Class B shares issued or outstanding. 

  
 27 

 MEDRELEAF CORP. 

Notes to Consolidated Financial Statements (continued) 
 (In
thousands of Canadian dollars, except share and per share amounts, unless otherwise noted) 
 Years ended March 31, 2018 and 2017 

 
  
  

 Class C Shares 

Class C shares were non-voting, convertible, redeemable by the Company and issued pursuant to the terms of an
employment agreement dated March 2, 2015. Each Class C share is issued at $0.001 per share. On each of the first, second and third anniversary of March 23, 2015, 4,177 Class C shares would automatically convert on a 1:1 basis
into Class A common shares. In the event of a change of control, all outstanding unconverted shares would have been converted on a 1:1 basis into Class A common shares. Immediately prior to the Offering, on June 7, 2017, the
Class C shares were converted on a 1:1 basis into Class B shares (as described above). 
 Period transactions 

During year ended March 31, 2017, the following series of transactions occurred: 
  

	 	(a)	 On August 31, 2016, the Board of directors and the requisite number of shareholders of record, approved a
private placement offering of Class A common shares. The offering authorized the Company to raise up to $25,000 of capital through the issuance of up to 72,791 Class A common shares (the “Offering”). During the year ended
March 31, 2017, the Company issued 71,964 Class A common shares for a stated share capital value of $24,694 related to the Offering. 

  

	 	(b)	 The holders of Class A common stock options exercised 39,214 options for a stated share capital value of
$2,336, plus proceeds of $1. 

  

	 	(c)	 The holder of the Class C shares converted 4,177 shares to Class A common shares in accordance with
the terms of an employment agreement. 

  

	 	(d)	 During the year ended March 31, 2017, 22,490 stock options were forfeited with a stated value of $12.

 During the year ended March 31, 2018, the following series of transactions occurred: 

 

	 	(a)	 Immediately prior to the Offering, 478,899 Class A common shares converted on a basis of 1:1 into common
shares and were subdivided into 55,595,369 shares at a ratio of 116.0909:1 (subject to rounding provisions). 

  

	 	(b)	 Immediately prior to the Offering, the Class B shares were converted on a 1:1 basis into Class A
common shares and were subdivided at a ratio of 116.0909:1 and re-designated as 26,284,837 “common shares”. The non-interest bearing shareholder loans (held by
Class B shareholders) with a face value of $2,400 were eliminated and contributed as common share capital (note 13). 

  
 28 

 MEDRELEAF CORP. 

Notes to Consolidated Financial Statements (continued) 
 (In
thousands of Canadian dollars, except share and per share amounts, unless otherwise noted) 
 Years ended March 31, 2018 and 2017 

 
  
  

  

	 	(c)	 Immediately prior to the Offering, on June 7, 2017, the Class C shares were converted on a 1:1 basis
into Class B shares (as described above). Contributed surplus of $218 attributable to the Class C shares was reallocated to Class B share capital. 

 

	 	(d)	 On June 7, 2017, the Company completed its initial public offering and issued 8,494,742 common shares
(excluding shares issued through the secondary offering) at price of $9.50 per Offered Share. 

  

	 	(e)	 The Company incurred various legal, consulting, professional, regulatory and underwriter fees in connection
with its Offering. Underwriter fees and other legal professional and consulting fees associated with the Company’s Offering of $5,361 were dispersed from gross proceeds and offset against common share capital, net of estimated incomes taxes of
$1,437. In addition, the Company expensed and included in initial public company related costs for the year ended March 31, 2018, $2,611 in other fees incurred in connection with the Listing of the Company’s existing shares on the TSX.

  

	 	(f)	 On December 4, 2017, the Company closed a short form prospectus offering on a “bought deal
basis”, pursuant to which the Company issued an aggregate of 3,625,470 Common Shares at a price of $16.55 per Common Share (the “Bought Deal”), for aggregate gross proceeds to the Company of $60,002. Issuance costs in relation to the
equity offering amounted to $4,063 and are reflected in shareholders’ equity, net of estimated incomes taxes of $1,038. 

  

	 	(g)	 On December 8, 2017, the Company issued 488,313 Common Shares at a price of $16.10 as consideration for
the purchase of intangible assets (note 12). 

  

	 	(h)	 On January 31, 2018 the Company closed a short form prospectus offering on a “bought deal
basis”, pursuant to which the Company issued an aggregate of 5,000,000 Common Shares each with a one-half of one common share purchase warrant (each full common share warrant, a “warrant”) at a
price of $26.50 per Common Share (the “Second Bought Deal”), for aggregate gross proceeds to the Company of $132,500. Issuance costs in relation to the equity offering amounted to $8,092 and are reflected in shareholders’ equity, net
of estimated incomes taxes of $1,904. 

  

	 	(i)	 On February 1, 2018 in connection with the Second Bought Deal, 375,000 overallotment warrants were issued
for aggregate gross proceeds of $338. 

  

	 	(j)	 On March 1, 2018, the Company executed a license trademark agreement in exchange for $150 cash proceeds
and 18,416 common shares valued at $350. 

  
 29 

 MEDRELEAF CORP. 

Notes to Consolidated Financial Statements (continued) 
 (In
thousands of Canadian dollars, except share and per share amounts, unless otherwise noted) 
 Years ended March 31, 2018 and 2017 

 
  
  

  

	 	(k)	 On March 23, 2018 3,998 Class B shares converted to 464,054 common shares. 

 

	 	(l)	 The holders of common stock options exercised 808,590 options for a stated share capital value of $1,405
inclusive of total proceeds to the Company of $849. 

  

	 	(m)	 The holders of 196,844 common stock options were terminated resulting in forfeiture of unvested options at the
time of termination. 

  

	 	(n)	 Earnings per share (“EPS”) has been calculated using the weighted average number of shares
outstanding during the period on a total outstanding and fully dilutive basis. The potential conversion of options into common shares as determined using the treasury stock method, has a dilutive effect on EPS. 

EPS amounts for the years ended March 31, 2018 and 2017 are presented in the table below: 

 

									
	 Years ended March 31,
	  	2018	 	  	2017	 
	 Numerator:
	  				  			
	 Total comprehensive (loss) income
	  	$	 (7,531	) 	  	$	10,958	 
		  	  
	  
	 	  	  
	  
	 
	 Denominator—basic earnings per share:
	  				  			
	 Weighted average number of shares – basic 1

	  	 	91,119,745	 	  	 	77,789,726	 
		  	  
	  
	 	  	  
	  
	 
	 Denominator—diluted earnings per share:
	  				  			
	 Total dilutive effect of outstanding stock options
2 
	  	 	2,557,251	 	  	 	3,912,031	 
		  	  
	  
	 	  	  
	  
	 
	 Weighted average number of shares—diluted
	  	 	93,676,996	 	  	 	81,701,757	 
		  	  
	  
	 	  	  
	  
	 
	 Earnings per share—basic
	  	$	 (0.08	) 	  	$	0.14	 
	 Earnings per share—diluted
	  	 	(0.08	) 	  	 	0.13	 

  

	1 	 Weighted average number of shares, basic and diluted, for the year ended March 31, 2017 are presented on a
converted basis of 116.0909:1 to reflect the capital reorganization (note 13). 

	2 	 Calculated using the treasury stock method which reduces the dilutive effect of outstanding stock options by
the number of shares assumed to be repurchased with proceeds. Warrants were not included in the calculation of diluted earnings per share as they were anti-dilutive 

Warrants 
 On January 31, 2018 and
February 1, 2018 the Company issued 2,500,000 and 375,000 warrants, respectively, convertible to common shares of the Company at an exercise price of $34.50. The changes in issued and outstanding warrants during the year ended March 31,
2018, are presented in the table below. No warrants were issued during the year ended March 31, 2017. 

  
 30 

 MEDRELEAF CORP. 

Notes to Consolidated Financial Statements (continued) 
 (In
thousands of Canadian dollars, except share and per share amounts, unless otherwise noted) 
 Years ended March 31, 2018 and 2017 

 
  
  

																					
	 	  	 	 	  	Number of	 	  	Exercise	 	  	Initial fair	 	  	Amount	 
	 	  	Expiry date	 	  	warrants	 	  	price	 	  	value price	 	  	March 31, 2018	 
	 Second bought deal
	  	 	January 31, 2020	 	  	 	2,500,000	 	  	$	34.50	 	  	$	5.00	 	  	$	12,500	 
	 Second bought deal overallotment
	  	 	February 1, 2020	 	  	 	375,000	 	  	$	34.50	 	  	$	0.90	 	  	 	338	 
	 Issuance fees net of tax
	  				  				  				  				  	 	(598	) 
		  				  	  
	  
	 	  				  				  	  
	  
	 
	 Balance as at March 31, 2018
	  				  	 	2,875,000	 	  				  				  	$	12,240	 
		  				  	  
	  
	 	  				  				  	  
	  
	 

 The Company used an algorithm based on the Black-Scholes option pricing model to determine the fair value of the warrants
granted using the following assumptions: 
  

	 	•	 	 risk-free rate of 1.68% on the date of grant; 

 

	 	•	 	 expected life of 2 years; 

 

	 	•	 	 volatility of 70%; 

  

	 	•	 	 Spot price on valuation date; 

 

	 	•	 	 Strike price range lower limit of $34.50 and upper limit of $51.75; 

 

	 	•	 	 dividend yield of nil; and 

 

	 	•	 	 the exercise price of the respective warrant. 

 

	14.	 SHAREHOLDER LOANS PAYABLE 

As at March 31, 2018, there were no shareholder loans comprising of non-interest bearing promissory notes
(2017—$2,189). These shareholder loans were unsecured and had no fixed terms of repayment. The non-interest bearing notes were recorded at fair value, representing an imputed interest of 4.7%, and had a
face value of $2,400 as at March 31, 2017. Included in finance costs for the year ended March 31, 2018 are amortized interest charges of $19 (2017—$98) relating to these shareholder loans. 

In connection with the Offering (note 13), the $2,400 non-interest bearing promissory notes, which were held by the
holders of all of the issued Class B shares, were eliminated and contributed as common share capital upon conversion of the Class B shares. As a result, the Company recorded a fair value loss of $192, which was included in net and
comprehensive loss for the year ended March 31, 2018. 
  

	15.	 ASSET RETIREMENT OBLIGATION 

The Company has recorded an asset retirement obligation for the estimated costs to remediate the Company’s building upon termination of the lease. The
liability is $214 as at March 31, 2018 (2017—$204). The following is a reconciliation of the changes in the decommissioning liability: 

  
 31 

 MEDRELEAF CORP. 

Notes to Consolidated Financial Statements (continued) 
 (In
thousands of Canadian dollars, except share and per share amounts, unless otherwise noted) 
 Years ended March 31, 2018 and 2017 

 
  
  

					
	 	  	Asset retirement obligation	 
	 Balance, March 31, 2016
	  	$	195	 
	 Accretion
	  	 	9	 
		  	  
	  
	 
	 Balance, March 31, 2017
	  	 	204	 
	 Balance
	  	 	10	 
		  	  
	  
	 
	 Balance, March 31, 2018
	  	$	214	 
		  	  
	  
	 

 The provision for the asset retirement obligation is based on the following key assumptions: 

 

	 	•	 	 the total undiscounted cash flows as at March 31, 2018 and March 31, 2017 is $275;

  

	 	•	 	 the expected settlement is in fiscal 2024; 

 

	 	•	 	 the current market-based pre-tax discount rate is 3.45%; and

  

	 	•	 	 an inflation rate of 1.25%. 

 

	16.	 COLLATERALIZED CREDIT FACILITY AND TERM CREDIT FACILITY 

On July 22, 2016, the Company secured a real property loan, in the amount of $7,500 (the “Former Credit Facility”). The Former Credit Facility
was collateralized and provided the lender with first ranked security against the new production facility as well as all personal property of the Company. The lender was ranked second behind registered landlord(s) for all improvements to leased
properties. The Former Credit Facility was an open variable rate loan with a five-year term, ending August 1, 2021. 
 On April 17, 2017, the
Company entered into a new $20,000 credit agreement with a major Canadian bank (the “Credit Agreement”). The Credit Agreement provides the Company with a $10,000 term credit facility (the “Term Facility”) and a $10,000 revolving
credit facility (the “Revolving Facility” and together with the Term Facility, the “New Credit Facility”), subject to covenant requirements. The Former Credit Facility lender continues to hold 50% of the Company’s
outstanding debt under the New Credit Facility, which is administered by and payable to the New Credit Facility lender (the “debt reorganization”). The Company utilized the proceeds of the Term Facility to repay all principal and interest
outstanding of $7,500 on the Former Credit Facility, the balance was used to fund the build-out of the Bradford Facility. 

  
 32 

 MEDRELEAF CORP. 

Notes to Consolidated Financial Statements (continued) 
 (In
thousands of Canadian dollars, except share and per share amounts, unless otherwise noted) 
 Years ended March 31, 2018 and 2017 

 
  
  

 The balances that comprise the term credit facility are presented below: 

 

									
	 As at March 31,
	  	2018	 	  	2017	 
	 Term facility – short term portion
	  	$	1,000	 	  	$	—  	 
	 Term facility
	  	 	8,750	 	  	 	—  	 
	 Deferred financing fees
	  	 	(364	) 	  	 	—  	 
	 Amortization of deferred financing fees
	  	 	35	 	  	 	—  	 
		  	  
	  
	 	  	  
	  
	 
	 Term credit facility
	  	$	9,421	 	  	$	—  	 
		  	  
	  
	 	  	  
	  
	 

 The New Credit Facility can be issued as Bankers’ Acceptance (“BA”) rate based borrowing or Canadian Prime
(“Prime”) rate based borrowing. Any portion of the New Credit Facility issued as a BA rate based borrowing incurs interest, payable monthly, at an annual variable interest rate of 3.25% plus a discount equal to the lessor of the annual
Canadian Dollar Offered Rate plus 0.10% or the lenders offered discount rate. Any portion of the New Credit Facility issued as a Prime rate based borrowing incurs monthly interest at an annual variable interest rate equal to the Canadian Prime rate
applicable on the issue date plus 2.25%. 
 As at March 31, 2018, the Term Facility was rolled into a 30-day BA
rate based borrowing, maturing on April 2, 2018 at a rate of 3.25% per annum plus a discount rate of 1.58% per annum, payable monthly. The Term Facility requires quarterly principal repayments of $250 and monthly payments of accrued interest
and fees. The Term Facility rolls into a 30-day BA rate for the purposes of determining the interest obligation. 

The Credit Agreement restricts the use of proceeds of the New Credit Facility provided thereunder. Advances under the Term Facility may be used solely for the
purpose of repaying the Former Credit Facility or other indebtedness of the Company and funding the build-out of the Bradford Facility. Advances under the Revolving Facility may fund working capital and other
general corporate purposes of the Company. As at March 31, 2018 the Company advanced $845 from the Revolving Facility. 
 The Credit Agreement contains
events of default customary for agreements of this nature as well as certain restrictive covenants including, subject to certain exceptions, restrictions on the Company’s ability to incur indebtedness, grant liens, make corporate changes,
dispose of assets, make investments including acquisitions and pay dividends. The Company must maintain its Health Canada Licences and observe certain financial covenants including with respect to: (i) maintaining an interest coverage ratio of
not less than 3.00 to 1.00; (ii) maintaining a total leverage ratio of not more than 2.50 to 1.00; (iii) maintaining a capitalization ratio of not more than 1.00 to 2.00; and (iv) not permitting any earnings before interest, taxes, depreciation
and amortization decrease (as defined therein as “EBITDA”) to exceed 30.0% (the “EBITDA Decrease Covenant”), in each case as particularly provided in the Credit Agreement. 

  
 33 

 MEDRELEAF CORP. 

Notes to Consolidated Financial Statements (continued) 
 (In
thousands of Canadian dollars, except share and per share amounts, unless otherwise noted) 
 Years ended March 31, 2018 and 2017 

 
  
  

 On November 10, 2017, the Company amended the Credit Agreement (the “ November 2017 Amended Credit
Agreement”). Under the November 2017 Amended Credit Agreement, the EBITDA Decrease Covenant was removed commencing March 31, 2017 until the remaining term of the Credit Agreement. The November 2017 Amended Credit Agreement also removed the
election to defer principal payments, and as such, the quarterly principal repayments of $250 are required for each three-month period ended December 31, March 31, June 30, and September 30. The first payment was made on
January 2, 2018. 
 On March 29, 2018, the Company further amended the Credit Agreement (the “March 2018 Amended Credit Agreement”).
Under the March 2018 Amended Credit Agreement, the interest coverage ratio, the total leverage ratio and the capitalization ratio under the Credit Agreement were removed and replaced with the following financial covenants for periods July 1,
2019 an onwards: (i) maintaining a total leverage ratio of not more than 3.00 to 1.00; (ii) maintaining shareholders equity of not less than a shareholders’ equity floor as defined in the March 2018 Amended Credit Agreement; and
(iii) maintaining a fixed charge coverage ratio of not less than 1.25 to 1.00. For periods prior to July 1, 2019, the Company must maintain a cash and cash equivalent balance of at least 150% of the aggregate outstanding principle balance
of all borrowed under the Credit Agreement. 
 Effective for reporting periods on or after March 31, 2017, the EBITDA Decrease Covenant was removed
under the Amended Credit Agreement and as at March 31, 2018, the Company was in compliance with all covenants contained in the March 2018 Amended Credit Agreement and no material breach of such agreement has occurred or been waived. 

In securing the New Credit Facility, the Company incurred $364 of finance related costs during the year ended March 31, 2018. The unamortized finance
fees of $87 related to the Former Credit Facility were expensed to finance costs during the year ended March 31, 2018. As at March 31, 2018, $329 of unamortized deferred finance fees were netted against the New Credit Facility. During the
year ended March 31, 2018, $122 of deferred finance fees were amortized and included in finance costs for the period (2017 – $14). 
  

	17.	 STOCK-BASED COMPENSATION 

The Company has stock option plans to encourage ownership of the Company’s common shares by its officers, directors, employees and certain non-employees. Stock options for employees have a maximum term of six years. The options vesting period ranges between one and five years. Stock options for certain executives and
non-employees, vest based on performance milestones and have an indefinite term. 

  
 34 

 MEDRELEAF CORP. 

Notes to Consolidated Financial Statements (continued) 
 (In
thousands of Canadian dollars, except share and per share amounts, unless otherwise noted) 
 Years ended March 31, 2018 and 2017 

 
  
  

 During the period and prior to the closing of the Offering, the Board established an employee incentive stock
option plan (“ESOP”), under which options were granted to executive officers, employees and consultants of the Company and its subsidiaries. After giving effect to the Capital Reorganization (refer to note 13) and the Closing Option Grant,
an aggregate of 4,354,543 common shares were reserved for issuance under options granted under the Stock Option Plan and an aggregate of 2,655,226 common shares were reserved for issuance under Legacy Option Agreements. Under the option plan the
total amount of outstanding options is to not exceed 10% of the issued and outstanding shares of the Company. As at March 31, 2018 the Company had 6,645,835 outstanding stock options. 

During the year ended March 31, 2018, the Company granted 359,000 performance-based options to certain third-party consultants as remuneration,
contingent on the achievement of specified performance targets. As at March 31, 2018, the specified performance targets have not been met, and thus no outstanding performance-based options during the period became exercisable. As at
March 31, 2017, there were no performance-based options outstanding. 
 A summary of the Company’s plans and changes during the respective periods
is presented below: 
  

																					
	 	  	 	 	  	 	 	  	 	 	  	 	 	  	Weighted average	 
	 	  	Number of options	 	  	Exercise price ($)	 	  	exercise ($)	 
	 Outstanding options, March 31, 2016
	  	 	79,429	 	  	$	0.01	 	  	 	-	 	  	$	98.05	 	  	$	8.01	 
	 Granted
	  	 	13,322	 	  	$	0.01	 	  	 	-	 	  	$	343.45	 	  	$	131.28	 
	 Cancelled
	  	 	(22,490	) 	  				  				  	$	0.01	 	  	$	0.01	 
	 Exercised
	  	 	(43,391	) 	  	$	0.00	 	  	 	-	 	  	$	0.01	 	  	$	0.01	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Outstanding options, March 31, 2017
	  	 	26,870	 	  	$	0.00	 	  	 	-	 	  	$	343.45	 	  	$	88.75	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Opening options converted at 116.0909:1
	  	 	2,655,226	 	  	$	0.00	 	  	 	-	 	  	$	2.96	 	  	$	0.90	 
	 Granted—ESOP
	  	 	4,637,043	 	  	$	9.50	 	  	 	-	 	  	$	19.46	 	  	$	10.02	 
	 Granted—Performance based options
	  	 	359,000	 	  	$	17.09	 	  	 	-	 	  	$	19.46	 	  	$	18.79	 
	 Forfeited unvested
	  	 	(196,844	) 	  	$	9.50	 	  	 	-	 	  	$	19.46	 	  	$	11.77	 
	 Exercised
	  	 	(808,590	) 	  	$	0.00	 	  	 	-	 	  	$	9.50	 	  	$	1.05	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Outstanding options, March 31, 2018
	  	 	6,645,835	 	  	$	0.00	 	  	 	-	 	  	$	19.46	 	  	$	7.89	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Options exercisable, March 31, 20171

	  	 	574,766	 	  	$	0.00	 	  	 	-	 	  	$	2.96	 	  	$	1.24	 
	 Options exercisable, March 31, 2018
	  	 	1,736,529	 	  	$	0.00	 	  	 	-	 	  	$	9.50	 	  	$	6.90	 

  

	1 	 Options outstanding and exercisable as at March 31, 2017 are presented on a converted basis of 116.0909:1.

  
 35 

 MEDRELEAF CORP. 

Notes to Consolidated Financial Statements (continued) 
 (In
thousands of Canadian dollars, except share and per share amounts, unless otherwise noted) 
 Years ended March 31, 2018 and 2017 

 
  
  

 The following table summarizes the range of exercise prices and the weighted average of exercise prices as at
March 31, 2018 and 2017: 
  

																	
	 	  	 	 	  	Weighted average	 	  	 	 	  	 	 
	 	  	Outstanding	 	  	remaining term	 	  	Options	 	  	Weighted average	 
	 Exercise Price
	  	options	 	  	(years)	 	  	exercisable	 	  	exercise ($)	 
	 $0.00 - $0.01 converted at 116.0909 to $0.00
	  	 	1,311,361	 	  	 	2.62	 	  	 	118,761	 	  	$	0.00	 
	 $98.05 converted at 116.0909 to $0.84
	  	 	752,732	 	  	 	3.56	 	  	 	301,140	 	  	$	0.84	 
	 $343.45 converted at 116.0909 to $2.96
	  	 	591,133	 	  	 	4.95	 	  	 	154,633	 	  	$	2.96	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Outstanding options, March 31, 2017
	  	 	2,655,226	 	  	 	3.40	 	  	 	574,534	 	  	$	1.24	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 $0.00
	  	 	1,030,654	 	  	 	1.87	 	  	 	1,008,597	 	  	$	0.00	 
	 $0.84
	  	 	300,674	 	  	 	2.56	 	  	 	—  	 	  	$	0.84	 
	 $2.96
	  	 	552,432	 	  	 	4.05	 	  	 	296,337	 	  	$	2.96	 
	 $9.50
	  	 	4,171,334	 	  	 	4.20	 	  	 	431,595	 	  	$	9.50	 
	 $17.09
	  	 	241,741	 	  	 	4.63	 	  	 	—  	 	  	$	17.09	 
	 $19.46
	  	 	349,000	 	  	 	4.88	 	  	 	—  	 	  	$	19.46	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Outstanding options, March 31, 2018
	  	 	6,645,835	 	  	 	3.80	 	  	 	1,736,529	 	  	$	7.89	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 

 The estimated fair value of options granted was determined on the date of grant using the Black-Scholes option pricing model
with the following assumptions: 
  

									
	 	  	March 31, 2018	 	  	March 31, 2017	 
	 Fair value of options 1 
	  	$	0.00 - $13.64	 	  	$	0.00 - $2.96	 
	 Exercise price 1 
	  	$	0.00 - $19.46	 	  	$	0.00 - $2.96	 
	 Forfeiture rate
	  	 	2% - 3%	 	  	 	0%	 
	 Risk-free interest rate
	  	 	1% - 2%	 	  	 	0% - 1%	 
	 Volatility factor of the future expected market price of shares
	  	 	55% - 75%	 	  	 	75%	 
	 Weighted average expected life of the options
	  	 	2 - 5 years	 	  	 	2 - 5 years	 

  

	1 	 Fair value of options and exercise prices as at March 31, 2017 are presented on a converted basis of
116.0909:1 to reflect the capital reorganization (note 13). 

 During the year ended March 31, 2018, share-based compensation expense
relating to stock options of $11,418 (2017—$3,053) was included as part of general and administrative expenses in the consolidated statements of comprehensive (loss) income. 

 

	18.	 DEFERRED SHARE UNITS 

The Company has a deferred share unit plan for non-executive directors to enhance the Company’s ability to attract
and retain talented and experienced individuals to serve as members of its Board and to promote greater alignment of interest between such persons and the shareholders of the Company. 

  
 36 

 MEDRELEAF CORP. 

Notes to Consolidated Financial Statements (continued) 
 (In
thousands of Canadian dollars, except share and per share amounts, unless otherwise noted) 
 Years ended March 31, 2018 and 2017 

 
  
  

 Under the DSU plan, eligible directors may elect to receive up to 100% of their director compensation in the
form of DSUs, subject to any requirements that may be imposed by the Board. The number of DSU grants is determined by dividing the cash amount of the director compensation to be converted to DSUs by the market value of the share as of the last
business day of the three-month period ended for which the director compensation is paid (the “Valuation Date”). Each DSU awarded under the plan will vest immediately unless otherwise stated. DSUs granted to directors of the Company as
part of their annual cash retainer shall vest as to 25% of the total number of DSUs granted per director, on each of June 30, 2017; September 30, 2017; March 31, 2017 and March 31, 2018. 

During the year ended March 31, 2018, the Company initially recognized and included in G&A expense, $512 (2017 – nil) of board fees attributable
to DSUs. 
 During the year ended March 31, 2018, due to an increase in share price, the fair value increase on the remeasurement of the DSU liability
was $428 and was included in net loss (2017 – nil). Refer to note 3 for the account policy relating to DSUs. 
 If, and when dividends are paid on
shares, unless the Board decides otherwise, additional DSUs shall be credited to each eligible director who holds DSUs on the record date for such dividend, equal to the number (rounded down to the nearest whole DSU) determined by dividing:
(i) product of the amount of the dividend by the number of DSUs held by the Eligible Director on such record date by (ii) the market value of a share on the date on which the dividends were paid on the Shares. As at March 31, 2018 the
Company did not pay any dividends on outstanding shares. 
 A summary of the Company’s DSU liability and changes during the respective periods is
presented below: 
  

																					
	 	  	Number of DSU	 	  	Initial	 	  	Fair Value	 
	 	  	Units	 	  	Price	 	  	Amount	 	  	Price	 	  	Amount	 
	 As at March 31, 2017
	  	 	—  	 	  	$	—  	 	  	$	—  	 	  	$	—  	 	  	$	—  	 
	 Granted and vested
	  	 	53,893	 	  	$	9.50	 	  	$	512	 	  	$	17.45	 	  	$	940	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 As at March 31, 2018
	  	 	53,893	 	  	$	9.50	 	  	$	512	 	  	$	17.45	 	  	$	940	 
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 

  

	19.	 FINANCIAL INSTRUMENTS AND RISK MANAGEMENT 

The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, advances to shareholders, loan receivable, convertible note
receivable, accounts payable and accrued liabilities, term and revolving credit facilities, and shareholder loans payable. As at March 31, 2018 and 2017, the carrying values of these instruments approximate their fair values based on the nature
of these financial instruments. 

  
 37 

 MEDRELEAF CORP. 

Notes to Consolidated Financial Statements (continued) 
 (In
thousands of Canadian dollars, except share and per share amounts, unless otherwise noted) 
 Years ended March 31, 2018 and 2017 

 
  
  

	(a)	 Fair value measurements of assets and liabilities recognized at fair value in the consolidated statements of
financial position 

 Financial assets and liabilities are categorized using a fair value hierarchy as follows: 

 

	 	•	 	 Level 1 - quoted prices in active markets for identical assets or liabilities; 

 

	 	•	 	 Level 2 - inputs other than quoted prices included in Level 1 that are observable for the asset or
liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and 

  

	 	•	 	 Level 3 - inputs for the asset or liability that are not based on observable market data. 

The levels in the fair value hierarchy into which the Company’s assets and liabilities are measured and recognized in the consolidated statements of
financial position at fair value are categorized as follows: 
  

					
	Cash and cash equivalents	  	Level 1	  	
	Biological assets (note 10)	  	Level 3	  	

 There were no transfers between levels during the periods ended March 31, 2018 or 2017. See note 10 for Level 3
measurements relating to non-financial assets. 
  

	(b)	 Liquidity risk 

Liquidity risk is the risk that the Company will be unable to fulfill its obligations on a timely basis or at a reasonable cost. The Company manages its
liquidity risk by monitoring its operating requirements and capital structure. The Company prepares budget and cash forecasts to ensure it has sufficient funds to fulfill its obligations. See note 23 for the Company’s commitments as of
March 31, 2018. 
  

	(c)	 Credit risk 

The Company is exposed to credit risk related to cash and cash equivalents invested in short-term securities, outstanding accounts receivable, and shareholder
advances. 
 The Company manages credit risk from cash and cash equivalents by selecting high quality issuers and low risk investments which minimizes the
potential to default by the issuer of the certificates. All cash and cash equivalents are held with major Canadian financial institutions. 
 Credit risk
from accounts receivable is mitigated by regular monitoring of aged receivables and managing the underlying business relationships with insurance providers. A significant concentration of receivable, are held with insurance providers. Receivables
due from non-insurance providers, require advance payment through third-party credit card processing agents, which minimizes credit risk. 

  
 38 

 MEDRELEAF CORP. 

Notes to Consolidated Financial Statements (continued) 
 (In
thousands of Canadian dollars, except share and per share amounts, unless otherwise noted) 
 Years ended March 31, 2018 and 2017 

 
  
  

 Credit risk from shareholder advances arises from the possibility that principal and/or interest due may
become uncollectible. The Company mitigates this risk by managing and monitoring the underlying business relationships and transactions. 
  

	(d)	 Interest rate risk 

The Company is exposed to the risk of interest rate fluctuations on its term credit facility subject to variable Canadian Prime borrowing and Bankers’
Acceptance borrowing rates. If the variable interest rate were to increase 1%, the Company would incur additional finance costs of $100 per year which would reduce future cash flows and net income. Interest rate risk exposure on short-term
investments is mitigated by selecting low risk, cashable, guaranteed income investments. As at March 31, 2018, the full outstanding Term Facility was in the form of a Bankers’ Acceptance rate based borrowing subject to a rate of 3.25% per
year, with a 30-day rollover period. 
  

	(e)	 Market risk 

The Company operates in an industry regulated by ACMPR. Changes in legislation could have a significant impact on the Company’s operations. 

 

	(f)	 Capital management 

The Company’s managed capital as at March 31, 2018 was comprised of share capital in the amount of $299,078 (2017—$38,700), a term credit
facility of $9,750 (2017—nil), a revolving credit facility of $10,000 (2017 – nil), and a former credit facility of nil (2017—$7,500). As of March 31, 2018, $845 (2017 – nil) was drawn against the revolving facility for the
purpose of securing a letter of credit issued in connection with the upgrading of utilities infrastructure at the Company’s operational facilities. 

The Company’s objectives in managing capital include: maintaining a capital structure that provides financing opportunities and options while maintaining
compliance with debt facility covenants; maintaining its ability to meet capital and operating expenditure requirements; maintaining and, where necessary, raising sufficient capital to support future development of the business; maintaining the
ability to meet short and long-term debt servicing and financing obligations; and providing the ability to continue as a going concern. The Company’s capital management strategy is designed to maintain a flexible capital structure consistent
with its capital management objectives that optimizes the cost of capital within management’s assessed level of acceptable risk and positions the Company to respond to changes in economic conditions. 

The Company reviews its approach to capital management and associated risks on an on-going basis. 

  
 39 

 MEDRELEAF CORP. 

Notes to Consolidated Financial Statements (continued) 
 (In
thousands of Canadian dollars, except share and per share amounts, unless otherwise noted) 
 Years ended March 31, 2018 and 2017 

 
  
  

	20.	 INCOME TAXES 

The Company is subject to income taxes at a combined federal and provincial statutory income tax rate of 25% (2017 - 25%). 

The reconciliation of the annual income tax expense is set out below: 
  

									
	 	  	March 31,	 	  	March 31,	 
	 	  	2018	 	  	2017	 
	 Income before income taxes
	  	$	 (5,647	) 	  	$	15,462	 
		  	  
	  
	 	  	  
	  
	 
	 Expected income tax expense at
	  				  			
	 Canadian statutory income tax rates
	  	 	(1,412	) 	  	 	3,911	 
	 International tax rate differentials
	  	 	(53	) 	  	 	—  	 
	 Increase (decrease) in:
	  				  			
	 Non-deductible expenses
	  	 	2,888	 	  	 	807	 
	 Non-recognition of deferred tax assets
	  	 	317	 	  	 	—  	 
	 Other
	  	 	144	 	  	 	(34	) 
		  	  
	  
	 	  	  
	  
	 
	 Income tax expense
	  	$	 1,884	 	  	$	4,684	 
		  	  
	  
	 	  	  
	  
	 

 The components of the deferred tax liability are as follows: 

 

									
	 	  	March 31,	 	  	March 31,	 
	 	  	2018	 	  	2017	 
	 Deferred tax assets:
	  				  			
	 Non-capital losses and SR&ED pools
	  	 	315	 	  	 	174	 
	 Plant and equipment
	  	 	88	 	  	 	88	 
	 Undeducted finance fees and other
	  	 	4,214	 	  	 	—  	 
		  	  
	  
	 	  	  
	  
	 
		  	 	4,617	 	  	 	262	 
	 Deferred tax liabilities:
	  				  			
	 Effects of cash-basis taxation
	  	 	(7,094	) 	  	 	(3,935	) 
	 Shareholder loans
	  	 	—  	 	  	 	(53	) 
		  	  
	  
	 	  	  
	  
	 
		  	 	(7,094	) 	  	 	(3,988	) 
		  	  
	  
	 	  	  
	  
	 
	 Deferred tax liabilities
	  	$	 (2,477	) 	  	$	(3,726	) 
		  	  
	  
	 	  	  
	  
	 

 The Company has deductible SR&ED pools of $1,261 that do not expire. 

  
 40 

 MEDRELEAF CORP. 

Notes to Consolidated Financial Statements (continued) 
 (In
thousands of Canadian dollars, except share and per share amounts, unless otherwise noted) 
 Years ended March 31, 2018 and 2017 

 
  
  

	21.	 RELATED PARTY TRANSACTIONS 

No consulting fees were paid for the year ended March 31, 2018 to Two Plus Management Corp., a consulting company whose principal is Neil Closner, an
executive officer and shareholder of the Company (2017—$122). 
 Included in G&A expenses for the year ended March 31, 2018 was $30
(2017—$57) in consulting fees paid to Vive Technologies Inc., whose principal is Jeremy Friedberg, a consultant and shareholder of the Company. 
 On
July 17, 2013, the Company entered into a licence and distribution agreement (“Licence Agreement”) for a term of 12 years (renewable for a further five-year period) with Tikun Olam Ltd., a corporation incorporated under the laws of
Israel and a shareholder of the Company. The Licence Agreement grants the Company exclusive licence to use Tikun Olam Ltd.‘s intellectual property, as defined in the Licence Agreement, for the cultivation, processing, marketing, sale and other
commercialization of medical cannabis in Canada and New York State. 
 Under the Licence Agreement, the Company is subject to royalties on certain net
revenue in connection with Tikun Olam Ltd.‘s intellectual property commencing in the third year of the term of the Licence Agreement (July 18, 2015). Total royalties included in selling and marketing expenses for the year ended March 31,
2018 was $272 (2017—$535). In accordance with the share purchase promissory note, these royalties, less applicable withholding taxes, have been offset against the share purchase loan outstanding. In consideration for certain licensing
concessions, Tikun Olam Ltd. agreed to reduce future royalties owed by the Company under the terms of the original licence agreement by an amount equal to $250 (the “Royalty Rebate”), which is to be offset against future royalties owed by
the Company commencing July 17, 2017. During the year ended March 31, 2018, $250 of royalty fees were applied against the $250 Royalty Rebate, reducing the Royalty Rebate to nil. As at March 31, 2018, the Company included in accrued
liabilities $673 (2017—$249) of royalty fees and applicable withholding taxes payable to or on behalf of Tikun Olam Ltd.. 
  

	22.	 REMUNERATION OF DIRECTORS AND KEY MANAGEMENT OF THE COMPANY 

 

									
	 	  	2018	 	  	2017	 
	 Wages and short-term benefits
	  	$	 2,380	 	  	$	1,617	 
	 Consulting fees
	  	 	—  	 	  	 	122	 
	 Board and committee fees
	  	 	1,371	 	  	 	—  	 
	 Share based payments
	  	 	7,160	 	  	 	2,939	 
		  	  
	  
	 	  	  
	  
	 
		  	$	 10,911	 	  	$	4,678	 
		  	  
	  
	 	  	  
	  
	 

  
 41 

 MEDRELEAF CORP. 

Notes to Consolidated Financial Statements (continued) 
 (In
thousands of Canadian dollars, except share and per share amounts, unless otherwise noted) 
 Years ended March 31, 2018 and 2017 

 
  
  

	23.	 COMMITMENTS 

A summary of the approximate future minimum payments payable over the next five years are as follows: 

 

																									
	 	  	Notes	 	  	Less than 1 year	 	  	1-3 years	 	  	4-5 years	 	  	After 5 years	 	  	Total	 
	 Operating lease1 
	  				  	 	289	 	  	 	620	 	  	 	675	 	  	 	358	 	  	 	1,942	 
	 Term credit facility
	  	 	16	 	  	 	1,000	 	  	 	2,000	 	  	 	2,000	 	  	 	4,750	 	  	 	9,750	 
	 Revolving credit facility
	  	 	16	 	  	 	845	 	  	 	—  	 	  	 	—  	 	  	 	—  	 	  	 	845	 
	 Capital 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. 

 The Company is committed to payments under an operating lease
for its Markham Facility. Under the terms of the lease agreement, the Company is required to pay a proportion of common area costs, such as, realty taxes, maintenance, and insurance, in addition to the minimum lease payments. 

On March 1, 2018, the Company signed a waiver committing the Company to purchase a green house and land in Exeter, Ontario for the purchase price of
$26.0 million. The Company is required to settle and close the transaction on April 11, 2018 (note 24). 
 The Company has an obligation to
purchase additional intangible assets on each December 8, 2018, 2019, and 2020 by way of issuance of Common Shares contingent on the seller meeting specified targets. The agreed upon purchase price of each intangible asset is $3,750, $3,250,
and $3,000, respectively. 
  

	24.	 SUBSEQUENT EVENTS 

 

	(a)	 Acquisition of Exeter greenhouse and land 

On April 11, 2018, the Company acquired a 69-acre greenhouse in Exeter, Ontario (“Exeter Facility”) and
95 acres of adjacent land (“Exeter Land”) for a total purchase price of $26.0 million plus applicable taxes and closing costs (the “Exeter Transaction”) through cash proceeds of $21.5 million and the issuance of 225,083
common shares with a fair value of $4.5 million determined using the five-day volume weighted average price as at February 23, 2018 of $19.99 per common share. 

The Exeter Facility is equipped with 1 million square feet of existing greenhouse infrastructure, providing estimated production capacity of up to
105,000 kilograms annually. 

  
 42 

 MEDRELEAF CORP. 

Notes to Consolidated Financial Statements (continued) 
 (In
thousands of Canadian dollars, except share and per share amounts, unless otherwise noted) 
 Years ended March 31, 2018 and 2017 

 
  
  

	(b)	 Industrial building purchase in Bradford, Ontario 

On June 1, 2018, the Company completed the purchase of a 37,714 square feet industrial building in Bradford, Ontario located adjacent to the
Company’s existing Bradford facility. The Company will use this new facility to expand its processing operations at its Bradford location. The purchase price is expected to be settled with current working capital in the amount of $11,000 plus
applicable taxes and closing costs. 
  

	(c)	 Acquisition of MedReleaf by Aurora Cannabis Inc. 

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”). 

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

Registered Shareholders as of June 14, 2018 (the “record date”), are entitled to vote on the Arrangement Agreement at a special meeting on
July 18, 2018, at the offices of Stikeman Elliott LLP, 199 Bay Street, Commerce Court West, Suite 5300, Toronto, Ontario, Canada. 
  

	(d)	 Sales tax refund received 

During April 2018, the Company received an HST refund of $2,820 in settlement of sales tax refunds receivable included in Accounts Receivable as at
March 31, 2018. 

  
 43

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