CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Liberty Health Sciences Inc.

FOR THE THREE MONTHS AND NINE MONTHS ENDED NOVEMBER 30, 2020 AND 2019

(in Canadian Dollars)

(Unaudited)

NOTICE TO READER

Under National Instrument 51-102, Part 4, subsection 4.3 (3) (a), if an auditor has not performed a review of the interim financial statements, they must be accompanied by a notice indicating that the financial statements have not been reviewed by an auditor.

The accompanying condensed interim consolidated financial statements of the Company have been prepared by and are the responsibility of the Company's management.

The Company's independent auditor has not performed a review of these condensed interim consolidated financial statements in accordance with standards established by the Canadian Institute of Chartered Professional Accountants.

Condensed Interim Consolidated Financial Statements November 30, 2020

Condensed Interim Consolidated Statements of Financial Position 1
Condensed Interim Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) 2
Condensed Interim Consolidated Statements of Changes in Shareholders' Equity 3
Condensed Interim Consolidated Statements of Cash Flows 4
Notes to the Condensed Interim Consolidated Financial Statements5-35

Condensed Interim Consolidated Statements of Financial Position (unaudited) As at November 30, 2020 and February 29, 2020 (In Canadian dollars)

		(Unaudited)
	Note	November 30, 2020	February 29, 2020
Assets
Current assets
Cash and cash equivalents		$11,251,402	$24,957,245
Inventory	5	48,421,436	37,524,091
Biological assets	6	12,120,351	6,095,296
Other receivables		47,684	113,483
Prepaid assets		831,565	1,300,375
Total current assets		72,672,438	69,990,490
Non-current assets
Deposits		805,860	789,024
Investments	7	1,525,524	1,580,120
Property, plant and equipment	9	82,380,986	73,329,320
Intangible assets	10	45,109,572	46,823,488
Total Non-current assets		129,821,942	122,521,952

Total assets		$202,494,380	$192,512,442
Liabilities
Current liabilities
Accounts payable and accrued liabilities		$8,888,161	$6,593,940
Current tax liability	23	6,133,331	9,336,972
Convertible notes payable	11	5,483,564	5,788,319
Embedded derivative	11	346,676	66,545
Current portion of lease liability	12	4,993,778	3,682,031
Total current liabilities		25,845,510	25,467,807
Long Term Liabilities
Deferred tax liability	23	11,213,910	9,728,717
Lease liability	12	23,361,418	17,680,318
Total Long Term Liabilities		34,575,328	27,409,035

Total liabilities		$60,420,838	$52,876,842
Shareholders' equity
Share capital	13	$146,047,450	$146,047,450
Warrant reserve	14	9,355,242	9,355,242
Contributed surplus	15	10,643,913	9,867,787
Accumulated other comprehensive income (loss)		(3,961,222)	3,482,959
Deficit		(20,011,841)	(29,117,838)
Total shareholders' equity		$142,073,542	$139,635,600
Total liabilities and shareholders' equity		$202,494,380	$192,512,442

Approved on behalf of the Board:

"William Pfeiffer" "George Gremse" Signed: Chair of the Board and Director Signed: Interim CEO and Director

Condensed Interim Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) (unaudited)

For the three and nine month periods ended November 30, 2020 and November 30, 2019 (In Canadian dollars)

			For the three months ended		For the nine months ended
	Note
		November 30,2020	November 30,2019	November 30,2020	November 30,2019
Revenue, net of discounts	20	$13,048,315	$16,122,254	$49,660,046	$32,270,471
Cost of sales
Cost of goods sold, net	21	5,490,634	6,323,092	20,403,835	15,253,882
Gross profit before fair value adjustments		7,557,681	9,799,162	29,256,211	17,016,589

Realized fair value amounts included in the cost ofinventory sold		3,221,928	5,610,230	22,891,267	(996,345)
Change in unrealized gains resulting from fair value
changes on growth of biological assets	6	1,588,545	15,365,636	(914,185)	34,454,081
Gross profit		12,368,154	30,775,028	51,233,293	50,474,325

Operating expenses
Professional fees		752,113	1,240,673	2,432,085	3,329,495
Employee and staff costs		694,586	853,783	2,169,056	2,877,601
Office and general		1,063,306	1,007,242	3,050,721	2,916,161
Consulting fees		79,234	138,304	162,278	356,590
Travel and entertainment		25,665	55,105	103,012	188,815
Advertising and marketing		182,760	176,086	461,638	618,311
Insurance		415,032	331,608	1,277,165	940,267
Selling costs		2,356,939	1,752,964	7,008,935	4,612,301
Facilities expense and leases		108,464	399,902	673,057	849,694
Royalties		249,584	515,735	1,357,122	397,311
Depreciation	9	1,243,774	666,916	3,187,165	2,095,209
Amortization	10	33,591	50,351	100,054	333,460
Share-based compensation	15	168,878	260,307	776,126	867,476
Total operating expenses		7,373,926	7,448,976	22,758,414	20,382,691

Income from Operations		4,994,228	23,326,052	28,474,879	30,091,634
Non-operating income (expense)
Gain from sale of Chestnut Hill Tree Farm	4	-	165,185	-	14,266,807
Change in fair value of investments	7	-	(22,160)	-	(210,724)
Interest expense	11, 12	(1,138,490)	(1,282,171)	(3,331,897)	(3,154,758)
Loss on investment in joint ventures	8	-	-	-	(166,916)
Investor relations and filing fees		(19,840)	-	-	(230,669)
Interest accretion	11	(770,678)	(628,515)	(2,283,346)	(1,836,203)
Change in fair value of embedded derivative	11	(346,525)	(266,156)	(280,131)	2,178,482
Foreign currency translation gain (loss)		382,621	(220,260)	1,487,561	(235,707)
Other	22	(1,282,611)	128,426	(1,110,496)	179,379
Total other non-operating items		(3,175,523)	(2,125,651)	(5,518,309)	10,789,691

Net income before tax		1,818,705	21,200,401	22,956,570	40,881,325
Current income tax	23	2,861,786	14,308,688	12,365,379	14,308,688
Deferred income tax	23	1,066,879	-	1,485,194	-
Total income tax		3,928,665	14,308,688	13,850,573	14,308,688
Net income (loss)		(2,109,960) $$	6,891,713	$9,105,997	$26,572,637

Other comprehensive income
Foreign currency translation gain (loss)		(1,221,602)	85,242	(7,444,181)	1,150,227
Net comprehensive income (loss)		$(3,331,562) $	6,976,955	$1,661,816	$27,722,864
Weighted average number of shares – basic		346,090,635	345,290,635	346,090,635	345,290,635
Earnings per share – Basic	24	(0.01) $$	0.02	$0.03	$0.08
Earnings per share – Diluted	24	$(0.01) $	0.02	$0.03	$0.08

Condensed Interim Consolidated Statements of Changes in Shareholders' Equity (unaudited) For the nine month period ended November 30, 2020 and for the year ended February 29, 2020 (In Canadian dollars)

	Note	Number ofcommon shares	Share capital	Warrant reserve	Contributed surplus	Accumulated othercomprehensiveincome (loss)	Deficit	Totalshareholders'equity
Balance as at February 28, 2019		345,290,635 $	145,242,352 $	9,355,242 $	8,962,134 $	371,522 $	(50,661,123) $	113,270,127
Impact of change in accounting policy	3, 12	-	-		--		-(723,037)	(723,037)
		345,290,635	145,242,352	9,355,242	8,962,134	371,522	(51,384,160)	112,547,090
Share-based compensation	15	-	-		-1,212,883		--	1,212,883
Exercise of stock options	15	800,000	805,098		-(307,230)		--	497,868
Net comprehensive income for the year		-	-		-	-3,111,437	22,266,322	25,377,759
Balance as at February 29, 2020		346,090,635 $	146,047,450 $	9,355,242 $	9,867,787 $	3,482,959 $	(29,117,838) $	139,635,600
Share-based compensation	15	-	-		-776,126		--	776,126
Net comprehensive income for the year		-	-	-		-(7,444,181)	9,105,997	1,661,816
Balance as at November 30, 2020		346,090,635 $	146,047,450 $	9,355,242 $	10,643,913 $	(3,961,222) $	(20,011,841) $	142,073,542

Condensed Interim Consolidated Statements of Cash Flows (unaudited) For the nine month periods ended November 30, 2020 and November 30, 2019 (In Canadian dollars)

	Note	For the nine months endedNovember 30, 2020	November 30, 2019

Operating activitiesNet income		$9,105,997	$26,572,637
Adjustments for:
Depreciation	9	6,516,732	5,115,342
Amortization	10	100,054	333,460
Change in unrealized gains from fair value changes on growth of
biological assets	6	914,185	(33,457,736)
Share-based compensation	15	776,126	867,476
Accretion expense	11	2,283,346	1,836,203
Interest expense	11	3,331,897	3,154,758
Change in fair value of embedded derivative	11	280,131	(2,178,482)
Change in fair value of investments	7	-	210,724
Deferred tax	23	1,485,193	14,308,688
Gain from sale of Chestnut Hill Tree Farm		-	(14,266,807)
Loss on disposal of assets	9	11,084	287,656
Loss on joint venture	8	-$24,804,745	166,916$2,950,835

Changes in operating assets and liabilities
Inventory	5	(12,641,036)	(23,738,707)
Biological assets	6	(7,170,415)	28,086,864
Prepaid expenses and other current assets		534,609	225,802
Security Deposits		(16,836)	(197,610)
Accounts payable and accrued liabilities		3,404,168	(1,966,883)
Income tax payable		(3,203,641)$(19,093,151) $	-2,409,466

Cash provided (used) by operating activities		$5,711,594	$5,360,301
Investing activities
Purchase of property, plant & equipment and intangible assets	9, 10	(12,822,846)	(6,494,016)
Proceeds received from sale of Chestnut Hill Tree Farm	4	-	19,150,137
Purchase and sale of Investments, net		-	17,854
Proceeds received from dissolution of joint venture	8	-	132,360
Contributions to joint venture	8	-	(142,427)
Cash provided (used) by investing activities		$(12,822,846) $	12,663,908

Financing activities
Interest on convertible debt	11	(725,991)	(1,423,313)
Lease Payments	12	(2,605,906)	(1,731,445)
Proceeds from convertible debt	11	1,620,625	-
Convertible debt paydown	11	(3,792,263)	-
Cash provided (used) by financing activities		$(5,503,534) $	(3,154,758)

Effect of exchange rate changes		(1,091,057)	378,991
Net increase (decrease) in cash and cash equivalents		(13,705,843)	15,248,442
Cash and cash equivalents, beginning of period		24,957,245	13,291,426
Cash and cash equivalents, end of period		$11,251,402	$28,539,868

Notes to the Condensed Interim Consolidated Financial Statements (unaudited) For the three and nine months ended November 30, 2020 (In Canadian dollars, unless otherwise noted)

1. Nature of operations

Liberty Health Sciences Inc. (the "Company") was incorporated under the Business Corporations Act (British Columbia) on November 9, 2011 as SecureCom Mobile Inc. ("SecureCom"). The head and registered office of the Company is located at 18770 N CR 225 Gainesville, FL 32609. The Company's common shares are listed on the Canadian Securities Exchange under the trading symbol "LHS" and on the OTCQX under the trading symbol "LHSIF".

The Company's principal business activity is the production and distribution of medical cannabis through its wholly owned subsidiary DFMMJ Investments, LLC ("DFMMJ") (doing business as Liberty Health Sciences Florida).

These condensed interim consolidated financial statements were approved by the Company's Board of Directors on January 29, 2021.

2. Basis of presentation

(a) Statement of compliance

The Company's condensed interim consolidated financial statements, including comparatives, have been prepared in accordance with IAS 34, "Interim Financial Reporting". These condensed interim consolidated financial statements do not include all notes of the type normally included within the annual financial report, and should be read in conjunction with the audited financial statements of the Company for the fiscal year ended February 29, 2020, which have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board and Interpretations of the IFRS Interpretations Committee.

(b) Basis of measurement

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

These condensed interim consolidated financial statements are presented in Canadian dollars, which is the Company's presentation currency, unless otherwise indicated.

The Company's functional currency, as determined by management, is the Canadian dollar. Management has determined that the functional currency of its Canadian subsidiary is the Canadian dollar, and that the functional currency of its US subsidiaries is the US dollar.

(d) Use of estimates and judgements

The preparation of condensed interim consolidated financial statements requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, and revenue and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

Management has applied significant estimates and assumptions related to the following:

Biological assets and Inventory

Determination of the fair value of the biological assets requires the Company to make several estimates primarily related to the fair value at point of harvest, attrition rates, expected future yields from the cannabis plants and estimating the plants at various phases of the growth cycle.

The valuation of biological assets at the point of harvest is the cost basis for all cannabis-based inventory and thus any critical estimates and judgements related to the valuation of biological assets are also

Notes to the Condensed Interim Consolidated Financial Statements (unaudited) For the three and nine months ended November 30, 2020 (In Canadian dollars, unless otherwise noted)

applicable for inventory. The Company must also determine if the cost of any inventory exceeds its net realizable value, such as cases where prices have decreased, or inventory has spoiled or has otherwise been damaged.

Estimated useful lives, residual values, impairment considerations and amortization of property, plant and equipment and intangible assets

Depreciation of property, plant and equipment and amortization of intangible assets is dependent upon estimates of useful lives and residual values based on management's judgment.

Indefinite life intangible asset impairment testing requires management to make critical estimates in the impairment testing model. On an annual basis, the Company tests whether indefinite life intangible assets are impaired. Estimation is required with respect to determining the recoverable amount of indefinite life intangibles.

Impairment of definite long-lived assets is influenced by judgment in defining a cash generating unit (or "CGU") and determining the indicators of impairment, and estimates used to measure impairment losses.

Share-based compensation and warrants

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

Taxes

Provisions for taxes are made using the best estimate of the amount expected to be paid based on a qualitative assessment of all relevant factors. The Company reviews the adequacy of these provisions at the end of the reporting period. However, it is possible that at some future date an additional liability could result from audits by taxing authorities. Where the outcome of these tax‑related matters is different from the amounts that were initially recorded, such differences affect the tax provisions in the period in which such determination is made.

Expected credit losses

The Company measures expected credit losses in accordance with IFRS 9: Financial instruments. Under this approach, the Company estimates an allowance at an amount equal to twelve months of expected losses and the lifetime expected credit losses of financial instruments. In the case of an expected credit loss, the Company creates an impairment.

Derivative liabilities

The Company uses the fair value method of accounting for derivative liabilities and such liabilities are re-measured at each reporting date with changes in fair value recorded in the period incurred. The fair value is estimated using a Black-Scholes model.

Financial instruments

The Company evaluates the fair value of investments at the end of each reporting period. In addition to investment-specific information, the Company considers general market trends, conditions and transactions. Financial information for private companies in which the Company has investments may not be available and, even if available, that information may be limited and/or unreliable. Use of the valuation approach described below may involve uncertainties and determinations based on the Company's judgment and any value estimated from these techniques may not be realized or realizable.

The fair value of investments may be adjusted if:

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

Notes to the Condensed Interim Consolidated Financial Statements (unaudited) For the three and nine months ended November 30, 2020 (In Canadian dollars, unless otherwise noted)

1. There have been significant corporate, political or operating events affecting the investee company that, in management's opinion, have a material impact on the investee company's prospects and therefore its fair value.
1. The investee company is placed into receivership or bankruptcy.
1. Based on financial information received from the investee company, it is apparent to the Company that the investee company is unlikely to be able to continue as a going concern.
1. The investee company makes important positive/negative management changes that the Company's management believes will have a positive/negative impact on the investee company's ability to achieve its objectives and build value for shareholders.

CGU Determination

The Company determines its cash-generating units ("CGUs") in accordance with IAS 36 – Impairment of Assets, defined as the smallest group of assets that independently generate cash flow and whose cash flow is largely independent of the cash flows generated by other assets.

Discount Rate for Leases

IFRS 16: Leases requires lessees to discount lease payments using the rate implicit in the lease if that rate is readily available. If that rate cannot be readily determined, the lessee is required to use its incremental borrowing rate. The Company generally uses the incremental borrowing rate when initially recording real estate leases as the implicit rates are not readily available as information from the lessor regarding the fair value of the underlying assets, and the initial direct costs incurred by the lessor related to the leased asset are not available. The Company determines the incremental borrowing rate as the interest rate the Company would pay to borrow, over a similar term, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment.

(e) Comparative figures

Comparative amounts for changes in biological assets and inventory in the condensed interim consolidated statements of income (loss) and comprehensive income (loss) and cash flows have been restated. The impact on net income (loss) and comprehensive income (loss) and net cash flow from operating activities is nil. The comparative amounts for changes in biological assets and inventory were restated to comply with the presentation adopted for the current year.

3. Significant accounting policies

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

(a) Revenue recognition

The Company uses the following process for revenue recognition:

1. Identify the contract with a customer
1. Identify the performance obligation(s)
1. Determine the transaction price
1. Allocate the transaction price to the performance obligation(s)
1. Recognize revenue when/as performance obligation(s) are satisfied

The Company manufactures and sells cannabis and cannabis-derived products. Revenue from the sale of goods is recognized when the Company sells a product to a customer. Payment of the transaction is due immediately when the customer purchases the product and takes delivery either in store or at a predetermined delivery location dictated by the customer. Due to the nature of the products sold, it is the Company's policy to not accept returned items under most circumstances unless products are defective. As a result, it is highly improbable that a significant reversal in the cumulative revenue recognized will occur. The validity of this assumption is reassessed at each reporting date.

Notes to the Condensed Interim Consolidated Financial Statements (unaudited) For the three and nine months ended November 30, 2020

(In Canadian dollars, unless otherwise noted)

The Company has a loyalty rewards program that allows customers to earn reward credits to be used on future purchases. Loyalty reward credits issued as part of a sales transaction results in revenue being deferred until the loyalty reward is redeemed by the customer. The loyalty rewards are shown as reductions to revenue, net of discounts on the accompanying condensed interim consolidated statements of income (loss) and comprehensive income (loss).

The Company recognizes revenue from dispensary customers and delivery customers.

(b) Cash and cash equivalents

Cash and cash equivalents are comprised of cash and highly liquid investments that are readily convertible into known amounts of cash with original maturities of three months or less.

Inventories of harvested cannabis are transferred from biological assets into inventory at their fair value at harvest less costs to sell, which is deemed to be their cost. Any subsequent post-harvest costs are capitalized to inventory as incurred, including labour related costs, consumables, materials, utilities, packaging supplies, facilities costs, quality and testing costs, and production related depreciation. Inventory is valued at the lower of cost and net realizable value. Net realizable value is determined as the estimated selling price in the ordinary course of business less estimated costs to sell. Supplies and consumables are valued at lower of cost and net realizable value, which costs are determined on an average cost basis.

(d) Biological assets

The Company's biological assets consist of medical cannabis plants. The Company capitalizes all direct and indirect costs, as incurred, related to the transformation of the biological assets between the point of initial recognition and the point of harvest, including labour related costs, grow consumables, materials, utilities, and facilities costs including an allocation of overhead costs related to depreciation on the production facility and equipment. The Company then measures the biological assets at fair value less costs to sell up to the point of harvest, which becomes the basis for the cost of internally produced work in progress and finished goods inventories after harvest. Unrealized gains or losses arising from changes in fair value less costs to sell are included in the net income (loss) and comprehensive income (loss) of the related period. Costs to sell includes post harvest production costs and fulfilment costs.

(e) Property, plant and equipment

Property, plant and equipment are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any.

Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labor, any other costs directly attributable to bringing the asset to a working condition for the intended use and borrowing costs on qualifying assets. During their construction, items of property, plant and equipment are classified as assets under construction. When the asset is available for use, it is transferred from assets under construction to the appropriate category of property, plant and equipment and depreciation on the item at that point starts. The cost of repairs and maintenance is expensed as incurred. Subsequent costs are included in the asset carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably.

Depreciation is not recognized until the asset is determined to be ready for use. Depreciation is calculated using the following terms and methods:

Notes to the Condensed Interim Consolidated Financial Statements (unaudited) For the three and nine months ended November 30, 2020 (In Canadian dollars, unless otherwise noted)

Asset type	Depreciation method	Depreciation term
Land	Not depreciated	No term
Greenhouse infrastructure	Straight-line	15 years
Vehicles	Straight-line	5 years
Furniture & office equipment	Straight-line	5 years
Computers	Straight-line	3 years
Leasehold improvements	Straight-line	Over lease term
Right of use asset	Straight-line	Over lease term
Construction in progress	Not depreciated	No term

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

The assets' residual values, useful lives and methods of depreciation are reviewed at each financial year-end and adjusted prospectively if appropriate.

(f) Intangible assets

Intangible assets are comprised of software and purchased licenses and permits. All are recorded at cost less accumulated amortization and accumulated impairment losses, if any. Amortization of software is recorded on a straight-line basis over the estimated useful life of three (3) years. There is no amortization of the licenses and permits which have an indefinite life.

(g) Impairment of non-financial assets

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

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

(h) Income taxes

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

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

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

Notes to the Condensed Interim Consolidated Financial Statements (unaudited) For the three and nine months ended November 30, 2020

(In Canadian dollars, unless otherwise noted)

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

(i) Earnings (loss) per share, basic and diluted

The Company presents basic and diluted earnings per share. Basic earnings (loss) per share is calculated by dividing the net income or loss attributable to shareholder by the weighted average number of common shares outstanding during the period. Diluted earnings per share is determined by adjusting the net income or loss attributable to shareholders and the weighted average number of shares outstanding during the period for the effects of all potential dilutive shares, which comprise warrants, options and convertible debt. The calculation of diluted earnings per share assumes that the proceeds of such exercise would be used to repurchase common shares at the average market price during the period. However, the calculation of diluted earnings per share excludes the effects of various conversions and exercise of options and warrants that would be anti-dilutive.

(j) Share-based compensation

The Company has a stock option plan in place. The Company measures equity settled share-based payments based on their fair value at the grant date and recognizes compensation expense over the vesting period based on the Company's estimate of equity instruments that will eventually vest. Fair value is measured using the Black-Scholes option pricing model. Expected forfeitures are estimated at the date of grant and subsequently adjusted if further information indicates actual forfeitures may vary from the original estimate. Any revisions are recognized in the consolidated statements of income (loss) and comprehensive income (loss) such that the cumulative expense reflects the revised estimate.

(k) Investment in joint arrangements

The Company has certain investments in joint arrangements. On recognition, the Company assesses whether an investment is jointly controlled through an evaluation of the management structure and agreements. If jointly controlled, the Company then determines whether the joint arrangement is a joint venture recognized as an equity investment, or a joint operation recognized on a consolidated basis. Parties to joint ventures have rights to the net profits of the arrangement, whereas parties to joint operations have rights to the assets and obligations for the liabilities of the arrangement. The Company's investments in joint arrangements have been determined to be joint ventures.

The Company exercises judgement in determining whether it has joint control relating to its investments in joint ventures. The Company has considered relevant activities of the joint ventures that are established by contractual agreement and requiring unanimous consent for strategic financial and operating decisions.

Under the equity method of accounting for joint ventures, the investments are initially recognized at cost and adjusted thereafter for the Company's share of the profits or losses of the joint venture. This adjustment is recognized in net income (loss) and comprehensive income (loss).

(l) Investments and other financial assets

(i) Classification

Financial assets are classified into two categories based on measurement:

amortized cost; and
measurement at fair value either through other comprehensive income ("OCI") or through profit and loss.

This classification depends on the Company's business model for managing its financial assets and contractual terms of the cash flows.

Notes to the Condensed Interim Consolidated Financial Statements (unaudited) For the three and nine months ended November 30, 2020

(In Canadian dollars, unless otherwise noted)

For assets measured at fair value, gains and losses will either be recorded in profit or loss or OCI. For investments in equity instruments that are not held for trading, this will depend on whether the Company has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income ("FVOCI").

(ii) Recognition and derecognition

Regular way purchases and sales of financial assets are recognized on their trade date, the date on which the Company commits to purchase or sell the asset. Financial assets are derecognized when the rights to receive cash flows from the financial assets have expired or have been transferred and the Company has transferred substantially all the risks and rewards of ownership.

(iii) Measurement

At initial recognition, the Company measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss ("FVTPL"), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVTPL are expensed in profit or loss.

Debt instruments

Subsequent measurement of debt instruments depends on the Company's business model for managing the asset and the cash flow characteristics of the asset. There are three measurement categories into which the Company classifies its debt instruments.

Amortized cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortized cost. Interest income from these financial assets is included in finance income using the effective interest rate method. Any gain or loss arising on derecognition is recognized directly in income or loss. Impairment losses are presented as a separate line item in the condensed interim consolidated statements of income (loss) and comprehensive income (loss).

FVOCI: Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets' cash flows represent solely payments of principal and interest, are measured at FVOCI. Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest income and foreign exchange gains and losses which are recognized in income or loss. When the financial asset is derecognized, the cumulative gain or loss previously recognized in OCI is reclassified from equity to income or loss. Interest income from these financial assets is included in finance income using the effective interest rate method. Impairment expenses are presented as a separate line item in the condensed interim consolidated statements of income or loss.

FVTPL: Assets that do not meet the criteria for amortized cost or FVOCI are measured at FVTPL. A gain or loss on a debt investment that is subsequently measured at FVTPL is recognized in income or loss in the period in which it arises.

Equity instruments

The Company subsequently measures all equity investments at fair value. Where the Company has elected to present fair value gains and losses on equity investments in OCI, there is no subsequent reclassification of fair value gains and losses to profit or loss following the derecognition of the investment.

Changes in the fair value of financial assets at FVTPL are recognized in other income/(loss) in the consolidated statements of income (loss) and comprehensive income (loss). Impairment losses (and reversal of impairment losses) on equity investments measured at FVOCI are not reported separately from other changes in fair value.

Notes to the Condensed Interim Consolidated Financial Statements (unaudited) For the three and nine months ended November 30, 2020 (In Canadian dollars, unless otherwise noted)

(iv) Impairment

From March 1, 2018, the Company assesses on a forward-looking basis, the expected credit losses associated with its debt instruments carried at amortized cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk.

For financial assets carried at amortized cost, the Company recognizes loss allowances for expected credit losses ("ECLs"). ECLs are a probability-weighted estimate of credit losses. The Company applies a three-stage approach to measure ECLs. The Company measures loss allowance at an amount equal to twelve months of expected losses if the credit risk at the reporting date has not increased significantly since initial recognition (Stage 1) and at an amount equal to lifetime expected losses if there is a significant increase in credit risk since origination (Stage 2) and at an amount equal to lifetime expected losses which are credit impaired (Stage 3).

The Company considers a significant increase in credit risk to have occurred if contractual payments are more than 30 days past due and considers the financial assets carried at amortized cost to be in default if they are 90 days past due. A significant increase in credit risk or default may have also occurred if there are other qualitative factors (including forward looking information) to consider, such as borrower specific information (i.e. change in credit assessment). Such factors include consideration relating to whether the counterparty is experiencing significant financial difficulty, there is a breach of contract, concessions are granted to the counterparty that would not normally be granted, or it is probable the counterparty will enter bankruptcy or a financial reorganization.

Significant increases in credit risk are assessed based on changes in probability of default of a financial asset subsequent to initial recognition. The Company uses past due information to determine whether credit risk has increased significantly since initial recognition. Financial assets are considered to have experienced a significant increase in credit risk and are reclassified to Stage 2 if a contractual payment is more than 30 days past due as at the reporting date.

The Company defines default as the earlier of when a contractual payment is more than 90 days past due or when a loan becomes insolvent as a result of customer bankruptcy. Financial assets that have experienced a default event are credit impaired and are reclassified as Stage 3 loans.

The Company measures ECL by considering the risk of default over the contract period and incorporates forward-looking information into its measurement. ECLs are measured as the difference in the present value of the contractual cash flows that are due to the Company under the contract, and the cash flows that the Company expects to receive. The Company assesses all information available, including past due status and forward looking macro-economic factors in the measurement of the ECLs associated with its assets carried at amortized cost.

The maximum period considered when estimating ECLs is the maximum contractual period over which the Company is exposed to credit risk.

(m) Financial liabilities

Financial assets are classified into two categories based on measurement:

amortized cost; and
measurement at FVTPL.

Financial liabilities held for trading are measured at FVTPL and all other financial liabilities are measured at amortized cost unless the fair value option is applied.

Financial liability can be designated to be measured at FVTPL if doing so eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise from measuring assets or liabilities or recognizing the gains and losses on them on different bases, or the liability is part or a group of financial liabilities or financial assets and financial liabilities that is managed and its performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy, and information about the group is provided internally on that basis to the entity's key management personnel.

Notes to the Condensed Interim Consolidated Financial Statements (unaudited) For the three and nine months ended November 30, 2020

(In Canadian dollars, unless otherwise noted)

Financial liabilities are derecognized when the obligation specified in the contract is either discharged or cancelled or expires. Where there has been an exchange between an existing borrower and lender of debt instruments with substantially different terms, or there has been a substantial modification of the terms of an existing financial liability, this transaction is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. A gain or loss from extinguishment of the original financial liability is recognized in profit or loss.

(n) Embedded derivatives

The Company has convertible note payables whereby balances can be converted into equity. Embedded derivatives are separated from the host contract and accounted for separately if certain criteria are met. Derivatives are initially measured at fair value; any directly attributable transaction costs are recognized in profit or loss as incurred. Subsequent to initial recognition, derivatives are measured at fair value and changes therein are recognized in net income (loss) and comprehensive income (loss).

(o) Classification and measurement of financial instruments

All financial instruments are initially measured at fair value, plus or minus transaction costs in case of financial instruments classified as amortized cost or fair value through other comprehensive income, FVTOCI.

Where assets are measured at fair value, gains and losses are either recognized entirely in profit or loss (fair value through profit or loss, FVTPL), or recognized in other comprehensive income (fair value through other comprehensive income, FVTOCI).

Debt instruments are measured at amortized cost (net of any write down for impairment) unless is designated at FVTPL under the fair value option.

Balance Sheet Classification	Classification
Cash and cash equivalents	FVTPL
Investments	FVTPL
Other receivables	Amortized cost
Accounts payable and accrued liabilities	Amortized cost
Convertible notes payable	Amortized cost
Embedded derivative	FVTPL

(p) Borrowing costs

The Company capitalizes borrowing costs directly attributable to the acquisition, construction, and production of assets into the cost of the assets. Borrowing costs not directly attributable to an asset are included as expenses.

(q) Warrants

The warrants reserve records the grant date fair value of the warrants issued until such time that the warrants are exercised, at which time the corresponding amount will be transferred to share capital. If the warrants expire unexercised, the amount recorded is transferred to contributed surplus.

(r) Related party transactions

Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party, or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control. Related parties may be individuals or corporate entities. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties.

Notes to the Condensed Interim Consolidated Financial Statements (unaudited) For the three and nine months ended November 30, 2020 (In Canadian dollars, unless otherwise noted)

(s) Leases

The Company does not recognize and measure a lease as an asset and liability for short-term leases and for leases for which the underlying asset is of low value when new. Such lease payments are expensed on a straight-line basis over the term of the lease.

The determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement at the inception of the lease. The arrangement is, or contains, a lease, if fulfillment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement.

Assets held under leases are recognized as assets of the Company at the present value of the minimum lease payments and are amortized on a straight-line basis over the term of the lease. The corresponding liability is recognized as a lease obligation. Lease payments are apportioned between finance charges and a reduction of the lease obligation to achieve a constant rate of interest on the remaining liability.

(t) Basis of consolidation

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

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

Liberty Health Sciences Inc. owns 100% of the share capital of Liberty Health Sciences USA Ltd, which owns 100% of the share capital of DFMMJ and 242 Cannabis, LLC. There is no Non-Controlling Interest to be reported as a result.

Entity Name	Jurisdiction of Incorporation	Method ofConsolidation
Liberty Health Sciences USA Ltd.	British Columbia, Canada	Fully Consolidated
DFMMJ Investments, LLC (d/b/aLiberty Health Sciences Florida)	Florida, USA	Fully Consolidated
242 Cannabis, LLC	Florida, USA	Fully Consolidated

(u) Foreign currency translation

All figures presented in the consolidated financial statements are reflected in Canadian dollars unless otherwise noted.

Foreign currency transactions are translated into Canadian dollars at exchange rates in effect on the date of the transactions. Monetary assets and liabilities denominated in foreign currencies at the statement of financial position date are translated to Canadian dollars at the foreign exchange rate applicable as at that date. Realized and unrealized exchange gains and losses are recognized through profit or loss.

The assets and liabilities of foreign operations are translated into Canadian dollars at period-end exchange rates. Income and expenses, and cash flows of foreign operations are translated into Canadian dollars using average exchange rates. Exchange differences resulting from translating foreign operations are recognized in other comprehensive income (loss) and accumulated in shareholders' equity.

Notes to the Condensed Interim Consolidated Financial Statements (unaudited) For the three and nine months ended November 30, 2020 (In Canadian dollars, unless otherwise noted)

Foreign currency translation gains or losses arising from a monetary item receivable from or payable to a foreign operation, the settlement of which is neither planned nor likely to occur in the foreseeable future and which in substance is considered to form part of the net investment in the foreign operation, are recognized in other comprehensive income (loss) in the translation reserve.

4. Sale of Chestnut Hill Tree Farm

On August 13, 2019, the Company entered into a definitive asset purchase and sale agreement to sell its Chestnut Hill Tree Farm ("CHT") facility in Florida and certain joint venture interest and dispensary licenses in Ohio for cash consideration totaling USD$14,750,000 ($19,523,100) (the "Disposition"), of which USD$14,650,000 ($19,390,740) corresponded to the CHT Farm facility and USD$100,000 ($132,360) to the Investment in Ohio JV. Pursuant to the Disposition, the Company recognized a gain on sale of the CHT facility of $14,266,807.

The following summarizes the gain on the sale of CHT:

	Amount
Property, plant and equipment	$5,536,871
Accumulated depreciation	(653,541)
Total assets, net	4,883,330

Proceeds on disposition, gross	19,390,740
Transaction costs	(240,603)
Proceeds on disposition, net	19,150,137
Net gain on sale	$14,266,807

Similarly, pursuant to the Disposition, the Company recognized a loss on the redemption of the Ohio JV. See note 8 on the redemption of the Ohio JV.

5. Inventory

Finished goods inventory consists of concentrates and other products that are complete and available for sale, and includes both internally generated inventory and third-party products purchased in the wholesale market. Packaging and miscellaneous consists of consumables for use in the transformation of biological assets and other inventory used in production of finished goods. Work in process inventory consists of cannabis after harvest in the processing stage.

The Company's inventories are comprised of:

	November 30, 2020	February 29, 2020
Raw materials
Harvested cannabis	$33,213,239	$28,449,304
Packaging and miscellaneous	1,740,825	1,085,005
Total raw materials	$34,954,064	$29,534,310
Work-in-process	3,153,161	3,073,140
Finished goods	10,314,211	4,916,641
Total inventories	$48,421,436	$37,524,091

Biological assets included in inventory are subject to the assumptions listed in the Biological Assets note.

Notes to the Condensed Interim Consolidated Financial Statements (unaudited) For the three and nine months ended November 30, 2020 (In Canadian dollars, unless otherwise noted)

6. Biological assets

As at November 30, 2020, biological assets had a balance of $12,120,351, reconciled as follows:

	Amount
Balance as at February 28, 2019	$1,089,990
Costs incurred until harvest	5,044,532
Effect of changes in fair value of biological assets	43,281,125
Transferred to inventory upon harvest	(43,406,076)
Effect of foreign exchange	85,725
Balance as at February 29, 2020	$6,095,296
Costs incurred until harvest	4,458,279
Effect of changes in fair value of biological assets	35,721,203
Transferred to inventory upon harvest	(33,665,788)
Effect of foreign exchange	(488,639)
Balance as at November 30, 2020	$12,120,351

The Company values biological assets at the end of each reporting period at fair value less costs to sell. This is determined using a valuation model to estimate the expected harvest yield per plant applied to the estimated price per gram less costs to sell.

Determination of the fair values of the biological assets requires the Company to make various estimates and assumptions. The fair value of biological assets is considered a Level 3 categorization in the IFRS fair value hierarchy. The significant estimates and inputs used to assess the fair value of biological assets include the following assumptions as at November 30, 2020, as at February 29, 2020, and as at November 30, 2019:

(a) Selling prices – selling prices are based on the Company's average selling price per gram for cannabis flower.

Average selling prices for dried cannabis flower averaged $9.29 and $10.63 per gram for the three and nine months ended November 30, 2020, respectively.

Sequentially, average selling prices for cannabis flower of $9.29 for the three months ended November 30, 2020, compare to $9.95 for the three months ended August 31, 2020, and $12.26 for the three months ended May 31, 2020.

(b) The stage of plant growth – represents the weighted average number of days out of the 110-day growing cycle that biological assets have reached as at the measurement date.

The estimated stage of growth of cannabis plants as at November 30, 2020 averaged 55%, compared to an estimated stage of growth of cannabis plants of 48%, 48% and 48% as at August 31, May 31, and February 29, 2020, respectively.

The estimated stage of growth of cannabis plants averaged 52% as at November 30, 2019, compared to 49%, 49%, and 38% as at August 31, May 31, and February 28, 2019, respectively.

(c) Post-harvest costs – calculated as the cost per gram of harvested cannabis to complete the sale of cannabis plants after harvest, consisting of the cost of direct and indirect materials and labor related to labeling and packaging.

(d) Yield by plant – represents the expected number of grams of finished cannabis inventory which are expected to be obtained from each harvested cannabis plant.

The average dried weight yield is 46 dry grams per plant for the nine months ended November 30, 2020. This compares to an average 52 dry grams per plant for the year ended February 29, 2020.

The average dried weight yield used was 69 grams per plant for the nine months ended November 30, 2019. This compares to an average 46 dry grams per plant for the year ended February 28, 2019.

These estimates are subject to volatility in market prices and several uncontrollable factors, which could significantly affect the fair value of biological assets in future periods. The following table presents the

Notes to the Condensed Interim Consolidated Financial Statements (unaudited) For the three and nine months ended November 30, 2020

(In Canadian dollars, unless otherwise noted)

effect of a 10% change in the following inputs used in the fair value model on the valuation of biological assets as at November 30, 2020 and as at February 29, 2020.

Assumption	10% change as atNovember 30, 2020	10% change as atFebruary 29, 2020
Estimated Selling Price	$1,799,459	$1,235,911
Expected average stage of growth	$1,215,214	$610,272
Expected yields for cannabis plants	$1,212,500	$609,530
After harvest cost to complete and sell	$586,959	$626,381

The correlation between the inputs and fair value of the biological assets is as follows:

If the average estimated selling price were higher (lower), the estimated fair value would increase (decrease).
If the expected stage of growth was higher (lower), the estimated fair value would increase (decrease).
If the average yield for cannabis plants was higher (lower), the estimated fair value would increase (decrease).
If the after-harvest cost to complete and sell was lower (higher), the estimated fair value would increase (decrease).

7. Investments

In April 2018, the Company acquired 150,000 shares of Promedia Investments Inc. for US$150,000 ($196,390). The fair value for this investment as at February 29, 2020 was $nil ($197,535 as at February 28, 2019). Accordingly, the Company recognized a loss of $197,535 for the year ended February 29, 2020.

In April 2018, the Company acquired 1,369,863 units of Isodiol International Inc. ("Isodiol") for $1,000,000. Each unit was comprised of one common share of Isodiol and one warrant to purchase one common share purchase of Isodiol, exercisable at a price of $1.00 per warrant until April 17th, 2021. At July 23, 2018, Isodiol enacted a reverse stock split at a ratio of one post-consolidated common share to ten pre-consolidated common shares and modifying the strike price of the common share purchase warrants to $10.00.

On October 12, 2018, the Company sold 34,200 common shares of Isodiol for proceeds of $108,414, realizing a loss of $32,039.

On November 18, 2019, the Company sold its remaining investment in Isodiol for $17,854. Related to its investment in Isodiol, the Company recognized a loss of $210,724 for the year ended February 29, 2020.

In 2018, the Company acquired 49,213 preferred shares of Weekend Holdings Corp. ("Weekend"), the parent company of Green Tank Holdings, for US$250,000 ($325,003). Weekend undertook a 12:1 share split as part of their Series A capital raising which was closed in March 2019. During the year ended February 28, 2019, due to meeting certain commercial activity thresholds, the Company was entitled to receive an additional 281,640 shares at no cost. These shares were included as additional shares received amounting to $949,910. As such, the Company determined the fair value of its investment, based on the Series A financing (US$2.56 per share), at February 28, 2019 was US$2,232,767 ($2,940,408). The Company recognized a gain from the change in fair value of $2,611,106 resulting from the higher valuation in the Series A financing round and the additional shares granted, and a gain of $9,077 resulting from the effect of foreign exchange for the year ended February 28, 2019.

Notes to the Condensed Interim Consolidated Financial Statements (unaudited) For the three and nine months ended November 30, 2020

(In Canadian dollars, unless otherwise noted)

For the year ended February 29, 2020, the Company recognized an unrealized gain (loss) of ($1,401,371) from changes in the fair value of the investment in Weekend, as well as an unrealized gain of $41,083 in the fair value of the investment resulting from changes in foreign exchange. As such, the fair value of this investment at February 29, 2020 is $1,580,120 ($2,940,408 as at February 28, 2019).

For the nine months ended November 30, 2020, the Company recorded a gain (loss) in the net unrealized changes in the fair value of the investment of $nil, and a loss in the fair value of the investment of $54,596 from changes in foreign exchange.

The table below summarizes the changes in the value of the Company's investments as at February 29, 2020, and for the nine months ended November 30, 2020.

	Promedia	Isodiol	Weekend	Totals
Balance as at February 28, 2019	$197,535	$228,578	$2,940,408	$3,366,521
Disposal of investments	-	(17,854)	-	(17,854)
Net realized changes in fair value	(197,535)	(210,724)	-	(408,259)
Net unrealized changes in fair value	-	-	(1,401,371)	(1,401,371)
Effect of foreign exchange	-	-	41,083	41,083
Balance as at February 29, 2020	$-	$-	$1,580,120	$1,580,120
Acquisitions of investments	-	-	-	-
Disposal of investments	-	-	-	-
Net realized changes in fair value	-	-	-	-
Net unrealized changes in fair value	-	-	-	-
Effect of foreign exchange	-	-	(54,596)	(54,596)
Balance as at November 30, 2020	$-	$-	$1,525,524	$1,525,524

As a comparison, the Company reported investments of $3,167,237 as at November 30, 2019.

For the nine months ended November 30, 2019, the Company recorded a realized loss in the fair value of its investments of $210,724 related to its investment in Isodiol, partially offset by a gain from changes in foreign exchange of $28,654.

8. Investment in Joint Ventures

In August 2019, the Company entered into Membership Interest Redemption agreements with the Schottenstein Group and dissolved, 50.1% of Schottenstein Aphria I, 50% of Schottenstein Aphria II, and 50% of Schottenstein Aphria III. The Company received proceeds of $132,360 (see note 4) and was released of all outstanding balances to/from the Ohio JV.

The total loss on the investment in Ohio JV for the fiscal year ended February 29, 2020 was $166,916.

The following summarizes the (loss) on the redemption of Ohio JV:

	Amount
Balance as at February 28, 2019	$240,193
Contributions	142,427
Share of loss	(166,916)
Proceeds from redemption of JV	(132,360)
Release of outstanding to/from JV	(90,450)
Effect of foreign exchange	7,106
Balance as at February 29, 2020 and November 30, 2020	$-

Notes to the Condensed Interim Consolidated Financial Statements (unaudited) For the three and nine months ended November 30, 2020 (In Canadian dollars, unless otherwise noted)

9. Property, plant and equipment

		Greenhouse		Furniture and	Leasehold		Construction in
	Land	infrastructure	Vehicles	equipment	improvements	Right-of-use assets	progress	Total capital assets
Cost
As at February 28, 2019	$2,436,035	$22,045,647	$485,580	$5,896,667	$4,102,839	$-	$22,968,115	$57,934,883
Additions	-	170,138	-	1,938,259	20,749	21,613,281	5,138,080	28,880,507
Transfers	-	21,738,706	-	1,260,952	3,822,107	-	(26,821,765)	-
Disposals	(1,154,030)	(3,755,257)	(30,615)	(816,052)	-	-	(78,879)	(5,834,833)
Effect of foreign exchange	37,866	452,236	9,316	131,424	241,358	102,857	272,407	1,247,464
As at February 29, 2020	$1,319,871	$40,651,470	$464,281	$8,411,250	$8,187,053	$21,716,138	$1,477,958	$82,228,021
Additions	-	43,171	196,731	899,884	7,997	8,478,595	10,189,315	19,815,693
Payable reversal	-	(1,109,948)	-	-	-	-	-	(1,109,948)
Transfers	-	4,194,556	-	1,235,044	842,725	-	(6,272,325)	-
Disposals	-	-	(29,244)	-	(10,579)	-	14,013	(25,810)
Effect of foreign exchange	(45,605)	(1,466,109)	(20,705)	(358,665)	(308,086)	(1,095,369)	(394,617)	(3,689,156)
As at November 30, 2020	$1,274,266	$42,313,140	$611,063	$10,187,513	$8,719,110	$29,099,364	$5,014,344	$97,218,800

			Greenhouse		Furniture and	Leasehold		Construction in
	Land		infratstructure	Vehicles	equipment	improvements	Right-of-use assets	progress		Total capital assets
Accumulated depreciation
As at February 28, 2019	$	-	$243,231	$93,863	$979,973	$335,730	$-	$-	$	1,652,797
Additions		-	2,753,497	94,632	1,277,277	1,285,224	2,359,998	-		7,770,628
Disposals		-	(349,416)	(13,300)	(284,705)	-	-	-		(647,421)
Effect of foreign exchange		-	32,510	2,792	31,934	23,015	32,446	-		122,697
As at February 29, 2020	$	-	$2,679,822	$177,987	$2,004,479	$1,643,969	$2,392,444	$-	$	8,898,701
Additions		-	2,076,361	77,924	1,351,845	1,301,119	1,709,483	-		6,516,732
Disposals		-	-	(13,139)	-	(1,587)	-	-		(14,726)
Effect of foreign exchange		-	(179,008)	(8,179)	(123,706)	(109,996)	(142,004)	-		(562,893)
As at November 30, 2020	$	-	$4,577,175	$234,593	$3,232,618	$2,833,505	$3,959,923	$-	$	14,837,814

		Greenhouse		Furniture and	Leasehold		Construction in
	Land	infratstructure	Vehicles	equipment	improvements	Right-of-use assets	progress	Total capital assets
Net book value
As at February 29, 2020	$1,319,871	$37,971,648	$286,294	$6,406,771	$6,543,084	$19,323,694	$1,477,958	$73,329,320
As at November 30, 2020	$1,274,266	$37,735,965	$376,470	$6,954,895	$5,885,605	$25,139,441	$5,014,344	$82,380,986

Notes to the Condensed Interim Consolidated Financial Statements (unaudited) For the three and nine months ended November 30, 2020 (In Canadian dollars, unless otherwise noted)

For the nine months ended November 30, 2020 the Company recorded depreciation and amortization expense of $6,516,732, of which $3,329,567 is depreciation included in cost of goods sold and inventory, and $3,187,165 is depreciation and amortization included in operating expenses. As a comparison, for the nine months ended November 30, 2019 depreciation expense was $5,115,342 of which $3,020,133 is included in cost of goods sold and inventory and $2,095,209 is depreciation included in operating expenses.

For the three months ended November 30, 2020 the Company recorded depreciation and amortization expense of $2,428,857, of which $1,185,083 is depreciation included in cost of goods sold and inventory, and $1,243,774 is depreciation and amortization included in operating expenses. As a comparison, for the three months ended November 30, 2019 depreciation expense was $1,653,300, of which $986,384 is depreciation included in cost of goods sold and inventory, and $666,916 is depreciation and amortization included in operating expenses.

As previously reported in the subsequent events section of the Management Discussion and Analysis accompanying the Financial Statements for the period ended August 31, 2020, in September 2020, one of the Company's subsidiaries and one of its vendors executed a settlement agreement and mutual claims release in regard to various work performed for the Company's greenhouse infrastructure. Following the execution of the mutual release, the company reversed the recognition of the payable resulting in a reduction of the account payable balance by $1,100,089, and in the corresponding reduction in the balance of the asset account by the same amount.

10. Intangible assets

As at November 30, 2020, and as at February 29, 2020, intangible assets consisted of licenses and software as described in the table below:

	Licenses	Software	Total intangible assets
Cost
As at February 28, 2019	$45,696,121$	384,602	$46,080,723
Additions	-	11,309	11,309
Effect of foreign exchange	902,194	7,645	909,839
As at February 29, 2020	$46,598,315$	403,556	$47,001,871
Additions	-	-	-
Effect of foreign exchange	(1,610,069)	(13,943)	(1,624,012)
As at November 30, 2020	$44,988,246	$389,613	$45,377,859

	Licenses	Software	Total intangible assets
Amortization
As at February 28, 2019	$-	$49,060	$49,060
Additions	-	126,699	126,699
Effect of foreign exchange	-	2,624	2,624
As at February 29, 2020	$-	$178,383	$178,383
Additions	-	100,054	100,054
Effect of foreign exchange	-	(10,150)	(10,150)
As at November 30, 2020	$-	$268,287	$268,287

	Licenses	Software	Total intangible assets
Net book value
As at February 29, 2020	$46,598,315$	225,173$	46,823,488
As at November 30, 2020	$44,988,246$	121,326$	45,109,572

For the nine months ended November 30, 2020, the Company recorded amortization expense of $100,054. This compares to amortization expense of $333,460 for the nine months ended November

Notes to the Condensed Interim Consolidated Financial Statements (unaudited) For the three and nine months ended November 30, 2020 (In Canadian dollars, unless otherwise noted)

30, 2019. Similarly, for the three months ended November 30, 2020, the Company recorded amortization expense of $33,591. This compares to amortization expense of $50,351 for the three months ended November 30, 2019.

During the year ended February 29, 2020, the Company changed its accounting estimate for the useful life of software, and the amortization of software was recorded on a straight-line basis over the estimate useful life of three years. The effect of this change in accounting estimate was a $228,658 decrease in amortization expense in the nine months period ended November 30, 2019 from $333,346 to $104,802. The effect of this change in future periods would be impracticable to estimate.

11. Convertible notes payable

In November 2017, the Company issued convertible secured debentures of US$12,000,000 ($15,465,600) (the "Notes"). The Notes bear interest at 12% per annum, payable semi-annually, and mature in November 2020. The notes are convertible into common shares of the Company at $2.00 per share. The Company has the right to convert the Notes into common shares if the Company's common shares trade at a minimum of $3.00 per share for ten consecutive trading days, on a volume weighted average basis.

On November 22, 2017, the Company recognized $262,236 in transaction costs relating to the issuance of the Notes.

The Notes are secured by a perfected first priority lien in all existing and future tangible and intangible assets of the Company, including accounts receivable, inventory, equipment, permits, subject only to customary permitted liens and provided that no security interest shall attach to any property or asset (tangible and intangible) which violates or creates a default under any contract to which the Company or any subsidiary is a party. The first priority security interest includes a general security agreement covering and a mortgage over the land and greenhouse infrastructure with a net book value of $39,291,519 as at February 29, 2020.

The Notes are denominated in United States dollars, while the conversion feature is in Canadian dollars. The conversion feature being in a different currency requires a variable number of shares to settle the Notes, and therefore is treated as an embedded derivative under IFRS.

On December 30, 2019, the Company redeemed US$6,000,000 of convertible notes payable. The balance, with a face value of US$6,000,000 is due in November 2020.

The Company announced on October 26, 2020, that it was offering holders of the Notes a 12-month extension to the maturity date together with certain other amendments to the conversion price, interest rate, and redemption price. Under the new terms, the notes are convertible into common shares of the Company at $0.85 per share. The interest rate under the extension terms is 13% per annum. Investors holding an aggregate amount of US$3,075,000 accepted the extension offer and certain investors agreed to subscribe approximately US$1,250,000 of convertible notes payable under the extension option. Investors of US$2,925,000 aggregate principal amount were repaid at maturity plus accrued interest.

As at November 30, 2020, the value of the convertible notes payable was $5,483,564 ($5,788,319 as at February 29, 2020).

The convertibles notes with face value of US$1,250,000 are convertible into common shares of the Company at $0.85 per share.

As at November 30, 2020, the fair value of the embedded derivative was $346,676 compared to $66,545 fair value of the former embedded derivative as at February 29, 2020. For the three and nine months ended November 30, 2020, the fair value of the embedded derivative increased by $346,525 and $280,131, respectively. This compares to an increase (decrease) in the fair value of the embedded derivative of $241,996 and ($2,174,955), respectively, for the three and nine months ended November 30, 2019.

Notes to the Condensed Interim Consolidated Financial Statements (unaudited) For the three and nine months ended November 30, 2020

(In Canadian dollars, unless otherwise noted)

For the three and nine months ended November 30, 2020, the Company incurred interest expense related to its convertible note of $232,485, and $725,991. This compares to interest expense incurred by the Company related to its convertible note of $466,716, and $1,425,108 for the three and for the nine months ended November 30, 2019.

The Company recorded accretion interest of $770,678, and foreign exchange gain related to the Notes of $152,576 for the three months ended November 30, 2020. As a comparison, the Company recorded accretion interest of $628,515 and foreign exchange gain of $9,364 for the three months ended November 30, 2019.

For the nine months ended November 30, 2020, the Company recorded accretion interest of $2,283,346, and a foreign exchange loss related to the Notes of $416,464. As a comparison, the Company recorded accretion interest of $1,836,203 and foreign exchange gain of $114,350 for the nine months ended November 30, 2019.

	Amount
Balance as at February 28, 2019	$11,124,391
Interest accretion	2,477,875
Paydown	(7,876,251)
Effect of foreign exchange	62,304
Balance as at February 29, 2020	$5,788,319
Interest accretion	2,283,346
Net paydown	(2,171,638)
Effect of foreign exchange	(416,464)
Balance as at November 30, 2020	$5,483,564

As at November 30, 2020, the outstanding interest payable was $16,328. This compares to outstanding interest payable of $402,870 as at February 29, 2020.

For the three and nine months ended November 30, 2020, nil interest expense was incurred with related parties. This compares to $101,150 and $305,390 paid to related parties for the three and nine months ended November 30, 2019.

The fair value of the embedded derivative was determined using the Black Scholes valuation model using the following assumptions for November 30, 2020: stock price of $0.50; expected life of 0.98 years; $nil dividends; 68% volatility; risk-free interest rate of 0.60%; foreign exchange rate of 0.7713; and the exercise price of $0.85.

The fair value of the embedded derivative was also determined using the Black Scholes valuation model using the following assumptions for February 29, 2020: stock price of $0.54; expected life of 0.73 years; $nil dividends; 93% volatility; risk-free interest rate of 1.22%; foreign exchange rate of 0.7447; and the exercise price of $2.00.

12. Leases

The Company leases commercial properties across the State of Florida where it operates its dispensary and delivery operations. Lease terms are generally between 3 and 5 years. The majority of the Company's leases include an option to renew the lease for an additional period usually matching the original term of the lease. At inception, the Company assesses whether it is reasonably certain to exercise the extension options, which is reassessed if there is a significant event or change in circumstances. Some of the Company's leases also include requirements to make payments in respect of common area maintenance, property taxes, insurance and non-refundable sales taxes, most of which is determined annually.

In addition to leases related to real estate for its retail operations, the Company also leases vehicles and equipment.

Notes to the Condensed Interim Consolidated Financial Statements (unaudited) For the three and nine months ended November 30, 2020 (In Canadian dollars, unless otherwise noted)

As at November 30, 2020, the Company has incurred in gross lease commitments of $58,440,213. The undiscounted gross lease commitments, including options to renew the leases, are broken down by year as follows:

For the period ended November 30, 2020	Amount
2021 (remaining 3 months)	$1,291,838
2022	5,279,221
2023	5,405,994
2024	5,221,033
2025	5,256,276
Thereafter	35,985,851
Total minimum lease payments	$58,440,213

Lease commitments have been discounted using an average incremental borrowing rate of 15% to 15.4%, which resulted in the recognition of a lease liability of $28,355,196 as at November 30, 2020.

This compares to gross lease commitments of $48,031,916 as at February 29, 2020, which, when discounted using an average incremental borrowing rate of 15% to 15.4%, resulted in the recognition of a lease liability of $21,362,349 in the Consolidated Statements of Financial Position as at February 29, 2020.

The table below summarizes the lease liability amount recognized by the Company on its statement of financial position as at November 30, 2020.

	Amount
Balance as at February 29, 2020	$21,362,349
New leases	8,395,298
Lease Payments	(3,198,362)
Lease Interest	2,611,336
Foreign currency translation adjustment	(815,425)
Balance as at November 30, 2020	$28,355,196

Current Lease Liability	4,993,778
Long Term Liability	23,361,418
Total Lease Liability as at November 30, 2020	$28,355,196

13. Share capital

	Number of shares	Amount
Balance as at February 28, 2019	345,290,635 $	145,242,352
Share issuance – Options exercised	800,000	805,098
Balance as at February 29, 2020	346,090,635 $	146,047,450
Share issuance – stock options exercised	-	-
Balance as at November 30, 2020	346,090,635 $	146,047,450

Notes to the Condensed Interim Consolidated Financial Statements (unaudited) For the three and nine months ended November 30, 2020 (In Canadian dollars, unless otherwise noted)

The Company is authorized to issue an unlimited number of common shares. As at November 30, 2020 the Company has issued 346,090,635 shares.

14. Warrant reserve

The warrant details of the Company are as follows:

	Number ofwarrants	Weightedaverage exerciseprice
Balance as at February 28, 2019	31,674,899	$1.72
Expired during the period	(192,307)	0.62
Balance as at February 29, 2020	31,482,592	$1.39
Expired during the period	(22,074,931)	1.10
Balance as at November 30, 2020	9,407,661	$2.07

	Number of	Weighted
	Bought deal broker	average exercise
	warrants	price
Balance as at February 28, 2019	1,533,352	$0.90
Balance as at February 29, 2020	1,533,352	$0.90
Expired during the period	(1,533,352)	0.90
Balance as at November 30, 2020	-	$-

As at November 30, 2020, the remaining life of the 9,407,661 outstanding warrants, which are fully vested and exercisable, is 77 days, as they expire on February 15, 2021.

15. Contributed surplus

The Company has adopted a stock option plan under which it is authorized to grant options to officers, directors, employees and consultants enabling them to acquire common shares of the Company. The maximum number of common shares reserved for issuance of stock options that may be granted under the plan is 10% of the issued and outstanding common shares of the Company from time to time. The options granted have a maximum term of five years and vest as determined by the Board of Directors.

The Company recognized share-based compensation expense of $168,878 and $776,126 for the three months and for the nine months ended November 30, 2020, respectively. This compares to sharebased compensation expense of $260,307 and $867,476 for the three and nine months ended November 30, 2019, respectively. The Company had previously recorded share-based compensation expense (recovery) of ($685,503) related to forfeited options for the three months ended August 31, 2019. This recovery was reversed in the third quarter of fiscal year 2020 in accordance with IFRS 2.

	Number ofoptions	Weightedaverage exerciseprice
Balance as at February 28, 2019	11,525,000	$1.36
Issued during the year	2,750,000	0.76
Forfeited during the year	(583,348)	0.92
Expired during the year	(8,397,490)	1.47
Exercised during the year	(800,000)	0.62
Balance as at February 29, 2020	4,494,162	$0.97
Issued during the first nine months of the fiscal year	2,630,000	0.43
Forfeited during the first nine months of the fiscal year	(6,668)	0.96
Expired during the first nine months of the fiscal year	(1,726,662)	1.28
Balance as at November 30, 2020	5,390,832	$0.60

Notes to the Condensed Interim Consolidated Financial Statements (unaudited) For the three and nine months ended November 30, 2020 (In Canadian dollars, unless otherwise noted)

During the three months ended November 30, 2020, options on 23,332 common shares expired unexercised, bringing the total number of options that expired unexercised during the nine months ended November 30, 2020 to 1,726,662.

During the three months ended May 31, 2020, options on 6,668 common shares were forfeited. During the three months ended May 31, 2020, the Company issued options on 2,630,000 compensation options to employees, consultants, and directors exercisable at $0.43 per share.

In February 2020, 450,000 common shares were issued following the exercise of stock options with an average exercise price of $0.624.

In January 2020, 350,000 common shares were issued following the exercise of stock options with an average exercise price of $0.624.

In October 2019, the Company issued 900,000 compensation options at the exercise price of $0.39 to a director of the Company. Of these, 600,000 are already vested, and the other 300,000 will vest after two years from the date they were granted or in October 2021. Once vested, these options can be exercised until October 2024.

In May 2019, the Company issued 950,000 compensation options at the exercise price of $0.79 to employees and officers of the Company, of which 210,000 have either been forfeited or have expired as at November 30, 2020. Of the remaining 740,000 options, 493,332 have vested and 246,668 will vest in May 2021. Once vested, these options can be exercised until May 2024.

In March 2019, the Company issued 900,000 compensation options at the exercise price of $1.09 to an officer of the Company. Of these, 600,000 are already vested, and the other 300,000 will vest in March 2021. Once vested, all of these options can be exercised until March 2024.

In January 2019, the Company issued 2,380,000 compensation options at the exercise price of $0.96 to employees and officers of the Company, of which 2,166,668 have either been forfeited or have expired as at November 30, 2020. Of the remaining, 213,332, 13,332 already vested and can be exercised until April 2021, 133,333 have already vested and can be exercised until March 2022, and the remaining 66,666 will vest upon the realization of certain performance objectives and can be exercised until March 2022.

A total of 13,332 options granted in October 2017 with an exercise price of $1.07 expired in September 2020.

A total of 7,500 options granted in October 2017 at the exercise price of $1.07 remain vested and outstanding as at November 30, 2020. If unexercised, these 7,500 options will expire in October 2022.

In July 2018, the Company issued 450,000 compensation options at the exercise price of $0.92 to employees and officers of the Company, all of which have either been forfeited or have expired as at November 30, 2020.

Expiry date	Exerciseprice	Number ofoptions	Vested andexercisable
April 17, 2021	$0.96	13,332	13,332
October 17, 2022	$1.07	7,500	7,500
March 31, 2022	$0.96	200,000	133,332
March 31, 2022	$0.43	450,000	150,000
March 1, 2024	$1.09	900,000	600,000
May 3, 2024	$0.79	190,000	126,667
March 31, 2022	$0.79	250,000	166,667
May 12, 2024	$0.79	300,000	200,000
October 11, 2024	$0.39	900,000	600,000
April 9, 2025	$0.43	2,180,000	726,667
Balance as at November 30, 2020		5,390,832	2,724,164

The option details of the Company are as follows:

Notes to the Condensed Interim Consolidated Financial Statements (unaudited) For the three and nine months ended November 30, 2020 (In Canadian dollars, unless otherwise noted)

16. Related parties

Key management personnel are those persons that have the authority and responsibility for planning, directing and controlling the activities of the Company directly and indirectly. Key management personnel include the Company's directors and certain members of the senior management group.

The related parties include entities related to a Board Advisor and a significant shareholder and members of their immediate families.

For the three months ended November 30, 2020, the Company paid $1,335,031 to key management personnel and related parties. This compares to $445,682 paid to related parties in the three months ended November 30, 2019. The amounts paid to related parties in the three months ended November 30, 2020, and November 30, 2019 are broken down as follows:

	Three monthsendedNovember 30, 2020	Three monthsendedNovember 30, 2019
Employee and staff costs	$146,240	$128,682
Share-based compensation	141,357	138,841
Consulting fees	42,879	28,109
Interest on convertible note	-	101,150
Purchases of hardware supplies	796,782	32,000
Royalties	207,772	16,900
Total	$1,335,031	$445,682

For the nine months ended November 30, 2020, and November 30, 2019, the Company paid $3,956,061 and $1,725,091 to key management personnel and related parties, respectively.

	Nine monthsended	Nine monthsended
	November 30, 2020	November 30, 2019
Employee and staff costs	$481,155	$452,643
Share-based compensation	630,959	797,431
Consulting fees	130,638	114,271
Interest on convertible note	-	305,390
Purchases of Hardware supplies	2,080,337	32,000
Royalties	632,971	23,357
Total	$3,956,061	$1,725,091

Employee and staff costs, share-based compensation and consulting fees include payments made in respect of employment agreements of directors and officers of the Company.

Share-based compensation expense includes the impact of the accelerated vesting of stock options for certain directors and officers.

Consulting fees include $40,117 (1.34 CAD/USD exchange rate) incurred with a shareholder who exercises significant influence over the Company during the nine months ended November 30, 2020. As a comparison, the company incurred consulting expenses with the same shareholder of $39,844 (1.33 CAD/USD exchange rate) during the nine months ended November 30, 2019.

Interest on convertible debt include interest payments related to the outstanding convertible debt made to directors and officers of the Company, or their family members, as noteholders.

During the nine months ended November 30, 2020, the Company purchased certain brand specific hardware supplies totaling $2,080,337 from related parties.

Royalties relate to products sold by the Company under brands which trademarks are held by companies directly or indirectly majority owned by significant shareholders of the Company and their family members. During the nine months ended November 30, 2020, the Company incurred royalty

Notes to the Condensed Interim Consolidated Financial Statements (unaudited) For the three and nine months ended November 30, 2020 (In Canadian dollars, unless otherwise noted)

expense of $632,971 for the uses of the associated intellectual property, formulas, and SOPs from related parties.

The independent members of the Board of Directors reviewed the applicable contracts and concluded that these contracts are reasonable and contain market and industry standard terms and no minimum requirements. On that basis, a waiver was granted by the Board for these contracts under the Company's Code of Business Conduct and Ethics. The Board is monitoring the development of the Company's house brands and the use of third-party brands and the Company's financial exposure to these related counterparties on an ongoing basis.

17. Financial risk management and financial instruments

Financial instruments

The Company's financial instruments consist of cash and cash equivalents, deposits, investments, other receivables, accounts payable and accrued liabilities, lease liabilities, convertible notes payable and embedded derivative.

The carrying values of accounts payable and accrued liabilities approximate their fair values due to their short periods of maturity.

Fair value hierarchy

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

Level 1 quoted prices (unadjusted) in active markets for identical assets and liabilities

Level 2 inputs that are observable for the asset or liability, either directly (prices) or indirectly (derived from prices) from observable market data

Level 3 inputs for assets and liabilities not based upon observable market data

The following table shows the balances of financial instruments that are measured at fair value as at November 30, 2020 and as at February 29, 2020, broken down according to the fair value hierarchy. Excluded from the table below are assets and liabilities that are measured at amortized cost (note 3).

Notes to the Condensed Interim Consolidated Financial Statements (unaudited) For the three and nine months ended November 30, 2020 (In Canadian dollars, unless otherwise noted)

	Level 1		Level 2		Level 3		30-Nov-20
Financial assets
Cash and cash equivalents	$11,251,402 $			- $		- $	11,251,402
Security deposits	805,860		-		-		805,860
Investments	-		-		1,525,524		1,525,524
As at November 30, 2020	$12,057,262 $			- $	1,525,524 $		13,582,786
Financial liabilities
Embedded derivative	-		346,676		-		346,676
As at November 30, 2020	$	- $	346,676 $			- $	346,676

	Level 1		Level 2		Level 3		29-Feb-20
Financial assets
Cash and cash equivalents	$24,957,245 $			- $		- $	24,957,245
Security deposits	789,024		-		-		789,024
Investments	-		-		1,580,120		1,580,120
As at February 29, 2020	$25,746,269 $			- $	1,580,120 $		27,326,389

Financial liabilitiesEmbedded derivative	-		66,545		-		66,545
As at February 29, 2020	$	- $	66,545 $			- $	66,545

The following table presents the changes in level 3 items for the nine months ended November 30, 2020 and for the year ended February 29, 2020.

	Unlisted equitysecurities
Balance as at February 29, 2019	$3,137,943
Net realized change in fair value	(197,535)
Net unrealized gain on fair value	(1,401,371)
Effect of foreign exchange	41,083
Balance as at February 29, 2020	$1,580,120
Net unrealized gain (loss) on fair value	(54,596)
Balance as at November 30, 2020	$1,525,524

The Company's investments in unlisted equity securities are classified as Level 3 in the fair value hierarchy. Changes to the fair value of these securities are based on financings and other transactional data of the underlying companies.

A 10% increase/decrease in the price per share of the Company's investments classified as Level 3 would increase/decrease the Company's change in fair value of investments by $152,552.

A 10% increase in the Company share price would increase the fair value of the embedded derivative classified as Level 2 by $117,023. A 10% decrease in the Company share price would decrease the fair value of the embedded derivative by $99,314.

Notes to the Condensed Interim Consolidated Financial Statements (unaudited) For the three and nine months ended November 30, 2020 (In Canadian dollars, unless otherwise noted)

Financial risk management

The Company has exposure to the following risks:

(a) Business risk

The Company operates in the medical cannabis industry in the United States, which is largely regulated at the state level. Cannabis is categorized under the US federal Controlled Substances Act as a controlled substance and as such, violates federal law in the United States.

(b) Foreign exchange risk

The Company maintains a portion of its cash and cash equivalents, a portion of its other receivables, its investments, and convertible notes payable in United States dollars. As at November 30, 2020, the Company's balances in cash and cash equivalents, other receivables, investments, and convertible notes payable denominated in United States dollars totaled US$8,187,817, US$20,229, US$1,176,648, and US$4,325,000, respectively (February 29, 2020: US$17,903,920, US$84,506, US$1,176,648, and US$6,000,000 respectively). As a result, the Company's operations are subject to variations from fluctuation in the foreign exchange rate. A 1% change in the foreign exchange rate may result in a gain/loss of approximately $65,599. The Company does not maintain any contract to hedge against any fluctuation on foreign exchange rate.

Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The Company has historically had two types of financial assets that are subject to the ECL model which are its cash and cash equivalents, and its other receivable and the promissory note receivable.

The maximum credit exposure at November 30, 2020 is the carrying amount of these items. The Company does not have significant credit risk with respect to customers. All cash is placed with locally established financial institutions. The Company does have risk associated with the promissory note receivable. In accordance with this risk, the Company recognized an impairment as of February 28, 2019 as shown in the financial statements.

(d) Liquidity risk

As at November 30, 2020, the Company's financial liabilities consist of accounts payable and accrued liabilities, which have contractual maturity dates within one year, the Company's convertible notes payable, which matures in November 2021, and lease liabilities.

As of November 30, 2020, the Company's convertible notes payable had a balance of $5,483,564 (US$4,229,513). The face value of the remaining convertible note is US$4,325,000, and the convertible note will mature in November 2021.

As of November 30, 2020, the Company had undiscounted lease liability payments due under the Company's non-cancelable leases as shown in the table below:

	Amount
2021 (remaining three months)	$1,291,838
2022	5,279,221
2023	5,405,994
2024	5,221,033
2025	5,256,276
Thereafter	35,985,851
Total minimum lease payments	$58,440,213

The Company manages its liquidity risk by reviewing its capital requirements on an ongoing basis.

(e) Interest rate risk

Notes to the Condensed Interim Consolidated Financial Statements (unaudited) For the three and nine months ended November 30, 2020 (In Canadian dollars, unless otherwise noted)

Interest risk is the risk that the fair value or future cash flows of a financial investment will fluctuate because of changes in market interest rates.

(f) Price risk

Price risk is the risk of variability in the fair value due to changes in the quoted price of assets and securities. See Note regarding the fair value assumption in the calculation of biological assets and inventory.

18. Capital management

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

19. Contingent liabilities and other contingencies

In the ordinary course and conduct of its business, the Company is occasionally the subject of litigation in employment and property matters.

As at November 30, 2020 and February 29, 2020, the Company's statements of financial position reflects a provision of $337,090 and $176,000, respectively, related to these contingencies, which is Management's estimate of the remaining cost to the Company of these actions.

These legal matters do not present material exposure to the Company. The Company is pursuing its defenses diligently.

Beginning in March 2020 Canadian and US federal, provincial and state governments instituted emergency measures as a result of the COVID-19 virus. The COVID-19 crisis persisted following the end of the third quarter ended November 30, 2020. These financial statements do not reflect any such impacts after November 30, 2020, and as of the date of the publication of these condensed interim consolidated financial statements, it is not possible to accurately quantify or estimate any impacts from COVID after November 30, 2020.

20. Revenue, net of discounts

The Company recognizes revenue from dispensary customers and delivery customers. The following table represents the Company's net revenue disaggregated by source for the three and nine months ended November 30, 2020 and November 30, 2019:

Three monthsended		Three monthsended		Nine monthsended	Nine monthsended
		November 30, 2020	November 30, 2019		November 30, 2020		November 30, 2019
Dispensary	$	12,416,807	$15,875,270	$	47,316,525	$	30,674,013
Delivery		631,508	246,984		2,343,521		1,596,458
Total revenue	$	13,048,315	$16,122,254	$	49,660,046	$	32,270,471

Loyalty rewards of ($151,643) and $126,337 are included as adjustments to revenue, net of discounts for the three month and nine month periods ended November 30, 2020, respectively. The reduction in

Notes to the Condensed Interim Consolidated Financial Statements (unaudited) For the three and nine months ended November 30, 2020 (In Canadian dollars, unless otherwise noted)

the balance of loyalty rewards as at November 30, 2020 compared to the balance as at August 31, 2020 is driven by loyalty reward expirations per the loyalty plan rules.

Included in accounts payable and accrued liabilities is a provision related to outstanding loyalty rewards of $996,425 as at November 30, 2020, compared to $924,446 as at February 29, 2020.

21. Cost of Sales

The following table sets forth the Company's cost of sales for the three and nine months periods ended November 30, 2020, and the comparative amounts for the three and nine months ended November 30, 2019:

	Three monthsendedNovember 30,2020		Three monthsendedNovember 30,2019		Nine monthsendedNovember 30,2020
Costs of sales
Cost of goods sold, net	$	5,490,634 $	6,323,092	$	20,403,835 $	15,253,882
Realized fair value amounts included incost of goods sold		(3,221,928)	(5,610,230)		(22,891,267)	996,345
Unrealized fair value gain on growth ofbiological assets		(1,588,545)	(15,365,636)		914,185	(34,454,081)
Total Cost of Sales	$	680,161 $	(14,652,774) $		(1,573,247) $	(18,203,854)

The Company capitalizes certain production costs to inventory and costs of goods sold. The Company's approach to the capitalization of production costs was refined during the fiscal year ended February 29, 2020, and cost of goods sold figures in the above table may not be comparable for the year over year comparisons.

The Company recorded cost of sales for the three months ended November 30, 2020 of $680,161, compared to costs of sales recorded for the three months ended November 30, 2019 of ($14,652,774).

For the nine months ended November 30, 2020, the Company recorded costs of sales of ($1,573,247), compared to costs of sales recorded for the nine months ended November 30, 2019 of ($18,203,854).

22. Other Non-Operating Income (Expense)

For the three months ended November 30, 2020, the Company recorded other non-operating income (expense) of ($1,282,611), compared to other non-operating income (expense) of $128,426 for the three months ended November 30, 2019.

For the nine months ended November 30, 2020, the Company recorded other non-operating income (expense) of ($1,110,496), compared to other non-operating income (expense) of $179,379 for the nine months ended November 30, 2019.

The Company reported on November 19, 2020, that it had signed a memorandum of understanding regarding the settlement of the securities class action that was commenced against it in the United States. Related to this class action lawsuit, the Company recorded a provision for settlement costs in the amount of $1,034,776 during the three month period ending November 30, 2020. This provision represents management's best estimate of the remaining costs that the Company will be responsible

Notes to the Condensed Interim Consolidated Financial Statements (unaudited) For the three and nine months ended November 30, 2020 (In Canadian dollars, unless otherwise noted)

for. As of the date of publication of these Financial Statements, the Company is waiting to receive Court approval of this settlement.

In addition to the settlement costs mentioned above, during the three and nine months ended November 30, 2020, other non-operating income (expense) also included settlement costs related to dispensary and employment matters, offset by ATM income as well as the sale of timber.

23. Income Taxes

Income taxes recognized in the consolidated statements of income (loss) and comprehensive income (loss) are comprised of both current and deferred tax expense.

For the nine months ended November 30, 2020, the Company recorded Income tax expense of $13,850,573, compared to a tax provision of $14,308,688 for the nine months ended November 30, 2019.

For the three months ended November 30, 2020, the Company recorded Income tax expense of $3,928,665, compared to a tax provision of $14,308,688 for the three months ended November 30, 2019.

The Company's income tax expense is allocated as follows:

	Three monthsended		Three monthsended			Nine monthsended	Nine monthsended
		November 30, 2020		November 30, 2019		November 30, 2020		November 30, 2019
Current income tax	$	2,861,786	$	14,308,688	$	12,365,379	$	14,308,688
Deferred income tax		1,066,879		-		1,485,194		-
Income tax expense	$	3,928,665	$	14,308,688	$	13,850,573	$	14,308,688

(a) Current tax

Current tax expense is the expected tax payable on the taxable income for the year and any tax payable or receivable with respect to the previous years. The amount of current tax payable or receivable is the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income taxes, if any. It is measured using tax rates enacted or substantively enacted at year-end. Current tax assets and liabilities are offset only if certain criteria are met.

As the Company operates in the cannabis industry, it is subject to the limits of the Internal Revenue Code (IRC) Section 280(e) under which the Company is only allowed to deduct expenses directly related to sales of product. This results in permanent differences between ordinary and necessary business expenses deemed non-allowable under IRC Section 280(e).

The reconciliation of the combined Canadian federal and provincial statutory income tax rate of 27% (2019 – 26.5%) to the effective tax rate is as follows:

Notes to the Condensed Interim Consolidated Financial Statements (unaudited) For the three and nine months ended November 30, 2020 (In Canadian dollars, unless otherwise noted)

	Three monthsendedNovember 30, 2020			Nine monthsendedNovember 30, 2020
Net income (loss) before income taxes	$	1,818,705	$	22,956,570
Expected income tax expenses		491,050		6,198,274
Tax rate changes and other adjustments		438,928		319,399
Non deductible expenses		45,597		209,554
IRC 280(e) deductions		2,705,731		6,367,326
Change in tax benefits not recognized and other		247,359		756,020
Income tax expense	$	3,928,665	$	13,850,573
Effective Income Tax (%)		30.1%		27.9%

(b) Deferred tax

Deferred tax assets and liabilities are measured using the enacted or substantively enacted tax rates expected to apply when the asset is realized or the liability settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that substantive enactment occurs.

A deferred tax asset is recognized to the extent that it is probable that future taxable income will be available against which the asset can be utilized. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.

The following table summarizes the components of deferred tax:

	November 30, 2020	February 29, 2020
Deferred tax assets
Deferred income loyalty program	$55,429	$80,658
Deferred tax liabilities
Capital assets, net of lease liability	(3,457,482)	(2,256,145)
Intangible assets	(969,467)	(476,923)
Inventory	(5,761,678)	(5,859,655)
Biological assets	(1,080,712)	(1,216,652)
Deferred tax liability, net	$(11,213,910) $	(9,728,717)

Movement in deferred tax liability is as follows:

Notes to the Condensed Interim Consolidated Financial Statements (unaudited) For the three and nine months ended November 30, 2020 (In Canadian dollars, unless otherwise noted)

	Nine monthsended		Yearended
		November 30, 2020	February 29, 2020
Balance at the beginning of the period	$	(9,728,717)$	(1,424,716)
Recognized in profit/loss		(1,485,194)	(8,304,001)
Deferred tax liability at end of period	$	(11,213,910)$	(9,728,717)

Unrecognized deferred tax assets

Deferred tax assets have not been recognized in respect of the following deductible temporary differences:

	November 30, 2020	February 29, 2020
Intangible assets	$6,310,801	$6,391,048
Share issuance costs - 201(1)(e)	2,285,864	2,815,598
Promissory note	-	145,136
Non-capital loss carried forward - Canadian	38,064,916	31,520,267
Total	$46,661,581	$40,872,049

As at November 30, 2020, and as at February 29, 2020, the Company had the following loss carryforwards:

		Amount		Amount
		as at		as at
	Year	November 30, 2020		February 29, 2020
Canadian non-capital loss carryforward	2017	$13,357,177	$	13,357,177
Canadian non-capital loss carryforward	2018	$1,472,206	$	1,472,206
Canadian non-capital loss carryforward	2019	$10,594,904	$	10,594,904
Canadian non-capital loss carryforward	2020	$6,095,980	$	6,095,980
Canadian non-capital loss carryforward	2021	$6,544,649	$	-

Notes to the Condensed Interim Consolidated Financial Statements (unaudited) For the three and nine months ended November 30, 2020 (In Canadian dollars, unless otherwise noted)

24. Earnings per share

Basic and diluted earnings (loss) per share attributable to Liberty Health Sciences, Inc. was calculated as follows:

	ThreemonthsendedNovember 30,2020	ThreemonthsendedNovember 30,2019	NinemonthsendedNovember 30,2020	NinemonthsendedNovember 30,2019
Numerator:
Net income attributable to shareholders	$(2,109,960) $	6,891,713 $	9,105,997 $	26,572,637
Denominator:
Weighted avg. common shares outstanding - Basic	346,090,635	345,290,635	346,090,635	345,290,635
Weighted avg. common shares outstanding - Diluted	346,090,635	345,290,635	346,875,079	345,290,635
Earnings per share – Basic	$(0.01) $	0.02 $	0.03 $	0.08
Earnings per share – Diluted	$(0.01) $	0.02 $	0.03 $	0.08

As the Company was in a loss position for the three months ended November 30, 2020, the inclusion of shares from the exercise of options and warrants, and from conversion of convertible note in the calculation of diluted earnings per share would have been anti-dilutive, and accordingly, these shares were excluded in the diluted loss per share calculation for the three months ended November 30, 2020.

25. Subsequent events

Subsequent to the end of the quarter, on December 22, 2020, the Company announced that it had entered into a definitive arrangement agreement with Ayr Strategies Inc. ("Ayr") pursuant to which Ayr is to acquire all of the issued and outstanding shares of the Company in an all-share transaction.

Between December 1, 2020 and the date of publication of these financial statements, the Board of the Company granted a total of 6,164,000 options at the exercise prices and with the expiration dates noted in the table below:

Expiry date		Number ofoptions	Vested andexercisable
January 3, 2026	1.07	1.064.000	354.667
November 30, 2025	0.51	5.100.000	100,000
Balance as at January 31, 2021		6,164,000	454,667

Other than as disclosed above, the Company has evaluated subsequent events through the date on which the condensed interim consolidated financial statements were available to be issued and has concluded that no other events or transactions took place that would require disclosure herein.

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DIRTT Environmental Solutions Ltd. — Interim / Quarterly Report 2021

47167_rns_2021-01-29_ca4c0dbd-5815-451f-9570-51bdebd97cb3.pdf

Liberty Health Sciences Inc.

NOTICE TO READER

Table of contents

1. Nature of operations

2. Basis of presentation

(a) Statement of compliance

(b) Basis of measurement

Biological assets and Inventory

Share-based compensation and warrants

Taxes

Expected credit losses

Derivative liabilities

Financial instruments

CGU Determination

Discount Rate for Leases

3. Significant accounting policies

(i) Classification

(ii) Recognition and derecognition

(iii) Measurement

Debt instruments

Equity instruments

(iv) Impairment

(s) Leases

(u) Foreign currency translation

4. Sale of Chestnut Hill Tree Farm

5. Inventory

6. Biological assets

7. Investments

8. Investment in Joint Ventures

9. Property, plant and equipment

10. Intangible assets

11. Convertible notes payable

12. Leases

13. Share capital

14. Warrant reserve

15. Contributed surplus

16. Related parties

17. Financial risk management and financial instruments

Financial instruments

Fair value hierarchy

Financial risk management

18. Capital management

19. Contingent liabilities and other contingencies

20. Revenue, net of discounts

21. Cost of Sales

22. Other Non-Operating Income (Expense)

23. Income Taxes

(a) Current tax

(b) Deferred tax

Unrecognized deferred tax assets

24. Earnings per share

25. Subsequent events

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DIRTT Environmental Solutions Ltd. Interim / Quarterly Report 2021