Cannabis U.S. Companies

[JohnCM]

LIBERTY HEALTH SCIENCES INC.

(FORMERLY SECURECOM MOBILE INC.)

MANAGEMENT’S DISCUSSION & ANALYSIS

This MD&A is prepared as of July 25, 2018.

COMPANY OVERVIEW

Liberty Health Sciences Inc. is a producer and retailer of cannabis products aimed at improving the
quality of peoples’ lives. Liberty’s focus is solely on the United States market where it produces high quality
products at a low-cost. Through its wholly-owned subsidiary, DFMMJ Investments, LLC (d/b/a
Liberty Health Sciences Florida Ltd.) (“Liberty Florida”).

Liberty is licensed to produce and sell medical
cannabis products in the State of Florida. The Company is also focused on acquiring other cannabis
businesses and expanding its operations throughout the United States, including a proposed investment
in a Massachusetts-based business holding a medical cannabis license.

Liberty was also awarded a
dispensary license in Ohio in June 2018 and is developing operational plans with its joint venture partner.

Liberty’s common shares (the “Common Shares”) are listed under the symbol “LHS” on the Canadian
Securities Exchange (“CSE”) and the OTC Markets OTCQX Best Market (“OTCQX”) in the United States
under the symbol “LHSIF”.

Liberty was incorporated under the Business Corporations Act (British Columbia) (the “BCBCA”) on
November 9, 2011 as SecureCom Mobile Inc. (“SecureCom”). On July 20, 2017, 1006397 B.C. Ltd.
(“Subco”), a British Columbia company and wholly-owned subsidiary of SecureCom, completed a
business combination (the “Business Combination”) with DFMMJ Investments, Ltd. (“Holdco”) whereby
SecureCom acquired all of the issued and outstanding shares of Holdco by way of a three-cornered
amalgamation. Holdco amalgamated with Subco under the BCBCA to form a wholly-owned subsidiary of
SecureCom named “Liberty Health Sciences USA Ltd.”. Concurrently with the Business Combination,
SecureCom changed its name to “Liberty Health Sciences Inc.”.

STRATEGY AND OUTLOOK

Liberty’s business strategy is to acquire and operate vertically-integrated cannabis operations in states
that are heavily populated with limited licenses in the United States. Liberty has the know-how and
expertise to transform targeted investments into low-cost operations that produce high quality cannabis
products while delivering value to its shareholders.

Liberty has established strong relationships with
producers of trans-dermal products and edibles in Florida and will transfer these arrangements to other
states where possible.

In its inaugural fiscal year ended February 28, 2018, Liberty, through its wholly-owned subsidiary, Liberty
Florida, purchased land, offices, processing facilities and approximately 12,000 square feet of
greenhouses from Chestnut Hill Tree Farm LLC (“Chestnut”).

An expansion was completed in January
2018 which doubled the greenhouse capacity to approximately 1,600 kgs of product per year. Given the
rapidly growing demand for product in Florida, in February 2018, Liberty acquired a 387-acre site in
Gainesville which was previously owned by Alico Citrus Nursery, LLC (“Alico”). Liberty is in the process of
retrofitting the Alico property and in the meantime, continues to operate out of the expanded Chestnut
facility (the “Chestnut Facility”). The Alico location has been re-branded as the Liberty 360 Innovation
Campus (“Liberty 360 Campus”) and is expected to reach commercial production by early 2019.

The combined production capacity of the Chestnut Facility and the Liberty 360 Campus will be approximately
14,600 kgs annually.

Liberty is also executing on its dispensary expansion plans, opening up four dispensaries throughout the
State of Florida between January and May 2018. The Company has lease agreements in place for
another six locations and plans to open up to twelve dispensaries across the state by the end of February
2019.

To better serve Florida’s expanding patient base, Liberty has also invested in expanding its delivery
abilities, providing customers with door-to-door services and creating three major delivery hubs in Ft.
Lauderdale, St. Petersburg and Tallahassee.

Liberty plans on opening two additional delivery hubs by the
end of the fiscal year in underserved markets in Florida.

The Company has also signed an agreement to acquire an interest in a provisional medical cannabis
license in the Commonwealth of Massachusetts and is in the process of completing its required due
diligence.

Liberty was awarded a dispensary license in the State of Ohio and is currently developing
operational plans with their joint venture partner. Liberty also has a pending application for a processing
license in the State of Ohio and is awaiting final results to be announced.

QUARTERLY HIGHLIGHTS

Massachusetts Investment

In March 2018, the Company announced the proposed acquisition of a 75% ownership interest in the
Massachusetts-based William Noyes Webster Foundation (“WNWF”) for US$16.0 million. WNWF owns
an integrated medical cannabis license in the Commonwealth of Massachusetts. The purchase of WNWF
is subject to the receipt of all required governmental approvals from the Commonwealth of
Massachusetts, Medical Use of Marijuana Program or the Massachusetts Cannabis Control Commission.

As part of the proposed acquisition, Liberty issued a promissory note for approximately US$2.3M to
WNWF with an interest rate of 5% per annum, which is payable either on the closing of the transaction
and can be offset against the purchase price, or on March 27, 2019 if earlier than closing.

The promissory note is secured by the integrated medical license held by WNWF. The Company is in the process of
completing its required due diligence.

Bought Deal Financing – May 2018

In April 2018, the Company announced a bought deal financing to issue 22,222,500 units at a price of
$0.90 per unit, with an over-allotment option to purchase an additional 3,333,375 units at the same price.
Each unit consists of one Common Share of the Company and one common share purchase warrant.

Each common share purchase warrant entitles the holder thereof to acquire, subject to adjustment in certain circumstances, one Common Share of the Company at an exercise price of $1.10 for a period of
24 months after closing.

On May 10, 2018, the Company closed the financing, issuing 25,555,875 units for gross proceeds of $23,000,288. The funds will be used partially to fund the acquisition of WNWF as
well as for working capital and general corporate purposes.

Ohio Dispensary Licence Application

On June 4, 2018, the State of Ohio Board of Pharmacy awarded a dispensary license for the southwest
portion of the state to Schottenstein Aphria III LLC (“Joint Venture”), of which Liberty holds a 50.1%
ownership interest. Over 375 applications were submitted for 56 licenses in Ohio. The Joint Venture entity
is developing plans to open a dispensary over the next several months, targeting operation by the end of
calendar 2018.

Liberty, through a second joint venture entity, Schottenstein Aphria II LLC, in which Liberty
holds a 50.1% ownership interest, also has a pending application for a processing license in the State of
Ohio and is awaiting final results to be announced.

Rollout of Cannabis Education Centers

Liberty Florida is licensed to operate as a Medical Marijuana Treatment Center (“MMTC”) under
applicable Florida law and to possess, cultivate, process, dispense and sell medical marijuana in the
State of Florida pursuant to the terms of the license (the “Florida License”) issued by the Florida
Department of Health, Office of Medical Marijuana Use (the “Florida Department”) under the provisions of
the Senate Bill 8A, Fla. Stat. 381.986 et seq (the “Florida Legislation”).

Under the Florida License, the
Company is entitled to open up to 25 dispensaries (increasing by 5 for every 100,000 registered patients
in the State of Florida) across the State of Florida, which the Company is currently rolling out under its
branding of Cannabis Education Centers to better serve its patient base.

The Company opened its
inaugural dispensary in January 2018 in the Villages community in north central Florida and has opened
dispensaries in South Tampa, St. Petersburg and Port St. Lucie.

To date, the Company has also signed
leases for dispensary locations in Miami, Ft. Lauderdale, Jacksonville, Palm Harbor, Boca Raton and
Sarasota. The Company plans to open twelve dispensaries by the end of fiscal 2019 and have between
sixteen to eighteen open by the end of fiscal 2020, all subject to local municipal permitting.

Investment in Isodiol International Inc.

In May 2018, the Company entered into a subscription agreement with Isodiol International Inc. (“Isodiol”)
for the purchase of 1,369,863 Units for a total cost of $1,000,000. Each Unit is comprised of one common
share and one common share purchase warrant of Isodiol.

Isodiol is a producer of pharmaceutical grade
phytochemical products and an industry leader in the manufacturing of cannabidiol (“CBD”) products, and
this investment allows the Company to share in the growth of one of its major licensors.

The Company entered into a five year licensing agreement with Isodiol, subject to extensions, wherein
Isodiol will exclusively license its Isodiol-branded CBD-based consumer products, as well as its
intellectual property and know-how regarding the same, to Liberty in all states where Liberty has
operations.

Patient Growth

The medical cannabis marketplace in Florida is in its infancy, which is evidenced by the fact that
approximately 135,000 patients have been added to the Medical Marijuana Use Registry as of July 2018
statewide. With over 20 million residents, Florida’s potential patient base is vast. The patient registration
volume has grown significantly in recent months as more supply has become available and as access to
the growing number of physicians who are qualified to recommend medical cannabis has expanded,
which has resulted in more than a 100% increase in registered patients since the beginning of 2018.

There are now over 1,500 qualified physicians in the State of Florida who can access medical cannabis
for their patients. Patient volume is expected to continue increasing at a rapid pace in light of the
expanded medical uses as well as the broad availability of high THC products. With expanded production
capabilities, a primary goal of the business moving forward is the acquisition of qualified patients.

Product Offerings

Liberty announced a number of licensing and distributing agreements through fiscal 2018 and 2019,
including the following:
In October 2017, the Company announced an exclusive licensing agreement for the state of Florida with
MM Technology Holdings, LLC, which owns the award-winning Mary’s Medicinal brand. Mary’s products
include cannabis infused transdermal patches, ointments and creams.

Subsequent to year end, the
Company expanded this agreement to include exclusive licensing for the Commonwealth of
Massachusetts.

In January 2018, the Company also announced an exclusive licensing arrangement with MC Brands LLC
whereby the Company would produce on an exclusive basis, edible products under the Incredibles brand
in the State of Florida.

The Company announced in May 2018 that an amended licensing agreement was signed with Aphria to
add Solei Sungrown Cannabis to the Company’s growing list of brands in both the states of Florida and
Massachusetts.

Certain of these offerings may be subject to approval by state authorities. The Company continues to
round out its product line, offering THC and CBD products in a number of consumable formats.

Recent Business and Other Agreements

July 2018 Share Issuance.

On July 4, 2018, the Company issued 10,092,583 Common Shares at a price of $0.782 per share to
settle US$6,000,000 of outstanding payables to Thermo Energy Systems Inc.

Outstanding invoices to
Thermo Energy Systems Inc. were in respect of ongoing retrofitting and construction services performed
at the Company’s Liberty 360 Campus.

Relationship with Benefit of Aphria

Concurrently with the completion of the Business Combination, Liberty and Aphria entered into the
following commercial agreements:

Know-How License Agreement

On April 25, 2017, Holdco entered into a know-how license agreement (the “Know-How License”) with
Aphria pursuant to which Holdco obtained a license to use any know-how (including knowledge,
methodologies and techniques) made available by Aphria to Holdco related to the production of medical
cannabis (the “Know-How”) for the purposes of cultivating, distributing and selling medical cannabis in the
State of Florida. To the extent Holdco makes any improvement or enhancement to the Know-How (an
“Improvement”), such Improvement will be wholly owned by Aphria.

Following the completion of the
Business Combination, Holdco has made available such Know-How directly to Liberty Florida, which has
in turn been relayed to assist with the control and operation of the day-to-day cannabis business of
Chestnut.

In exchange for such license, Holdco issued to Aphria 192,400,000 Holdco Shares and has agreed to pay
Aphria an annual license fee of $10,000 plus applicable taxes. Following the Business Combination and
related consolidation, such Holdco Shares were consolidated and converted into 64,133,333 Common
Shares in the capital of Liberty.

The Know-How License has no defined term but will immediately terminate in the event Holdco
experiences a change of control, except to the extent Aphria provides its prior written consent thereto
(which consent was provided by Aphria in respect of the Business Combination).

Investor Rights Agreement

Concurrently with the completion of the Business Combination, Liberty entered into an investor rights
agreement (the “Investor Rights Agreement”) pursuant to which, among other things, Aphria is be entitled
to certain director nomination and pre-emptive rights. In particular, Aphria has the right to designate two
director nominees for election to the Board for so long as Aphria beneficially owns, directly or indirectly, in
the aggregate, 10% or more of the issued and outstanding Common Shares (on a non-diluted basis).
Such nomination rights will terminate in the event that Aphria’s ownership interest in the Company falls
below 10%.

The Investor Rights Agreement also includes customary pre-emptive rights in favour of Aphria pursuant to
which in the event of a proposed distribution or issuance of Common Shares or other securities
convertible or exchangeable into Common Shares (other than stock options or other securities issued
under security based compensation arrangements), the Company will grant Aphria the right to subscribe
for that number of Common Shares, or, as the case may be, for securities convertible or exchangeable
into Common Shares, on the same terms and conditions, including the same subscription or exercise
price, as applicable, in order that Aphria may continue to maintain its pro rata equity ownership interest in
the Company.

Trademark License Agreement

Concurrently with the completion of the Business Combination, Liberty entered into a trademark license
agreement (the “Trademark License”) with Aphria pursuant to which Liberty and its subsidiaries (including
Liberty Florida) obtained a license to use Aphria’s trademarks identified therein (the “Trademarks”) for the
purposes of marketing, distributing and selling medical cannabis in the State of Florida. The Trademark
License was subsequently amended and restated to allow Liberty and its subsidiaries to use the
Trademarks in Massachusetts and to provide a right of first refusal in other states.

The Trademark
License superseded the terms of an interim trademark license agreement which was in effect between
Aphria and Holdco, which was implemented on a temporary basis following the acquisition of Chestnut
Hill Tree Farm LLC.

In exchange for such license, Liberty will pay Aphria a royalty of 3% on sales of each product that is sold
or otherwise supplied by Liberty or any of its subsidiaries to another person under Aphria’s name
(excluding, for greater clarity, any costs of packing, insurance, transport, delivery and consumption
taxes).

Subject to each party’s termination rights therein, the Trademark License will remain in effect for an initial
term of ten (10) years, automatically renewing for successive sixty (60) month periods unless a party
provides the other party with notice of non-renewal. The Trademark License will automatically terminate
120 days after Liberty experiences a change of control, except to the extent Aphria provides its prior
written consent thereto. In addition, Aphria has the right to immediately terminate the Trademark License
in the event: (a) Liberty commits a material breach of the Trademark License (subject to a thirty (30) day
cure period); (b) Liberty or any of its subsidiaries goes bankrupt becomes insolvent or suspends or
ceases, or threatens to suspend or cease, to carry on all or a substantial part of its business; (c) Aphria
owns more than 10% of Liberty’s issued and outstanding shares and its representatives constitute less
than 40% of the board of directors of Liberty, (d) Liberty’s business competes with Aphria outside of the
approved territories (subject to a thirty (30) day cure period), or (e) the Know-How License is terminated.
Liberty may also terminate the agreement with thirty (30) days prior written notice.

Registration Rights Agreement

Concurrently with the completion of the Business Combination, Liberty entered into a registration rights
agreement (the “Registration Rights Agreement”) pursuant to which, among other things, Aphria will be
provided with customary demand and “piggy back” registration rights, as further described below.
Under the terms of the Registration Rights Agreement, Aphria may at any time and from time to time (but
in no event more than 3 times per calendar year), require the Company to file a prospectus under applicable securities laws and take such other steps as may be necessary to facilitate a secondary
offering in Canada of all or any portion of the Common Shares held by Aphria, by giving written notice of
such request to the Company. Subject to certain conditions set out in the Registration Rights Agreement,
the Company shall use commercially reasonable efforts to as expeditiously as possible, but in any event
no more than 60 days after the Company’s receipt of such notice, prepare and file a preliminary
Prospectus under applicable securities laws and promptly thereafter take such other steps as may be
necessary in order to effect the distribution in Canada of all or any portion of the Common Shares held by
Aphria as may be requested.

Additionally, if at any time and from time to time from and after the Effective Date, the Company proposes
to make a distribution for its own account, the Company will, at that time, promptly provide Aphria with
notice of such proposed distribution. Upon the written request of Aphria to the Company that Aphria
wishes to include a specified number of its Common Shares in the distribution, the Company will cause
such Common Shares held by Aphria to be included in the distribution.
Sale of Aphria’s Position
On February 5, 2018, it was announced that a group of buyers led by members of the Serruya family (the
“Group”) had entered into a purchase and sale agreement with Aphria to purchase all of the Common
Shares in the Company owned by Aphria that are not subject to CSE escrow requirements over the
course of the next two and a half years. Following the initial purchase, Aphria retained an ownership
position of 26.4% of the issued and outstanding Common Shares. The transaction also includes a call /
put option agreement for the remainder of the Common Shares in the Company owned by Aphria, which
are currently subject to the CSE mandatory escrow requirements. The Company will continue to utilize
the Aphria brand name and the Aphria know-how in perpetuity pursuant to the Trademark License and
Know-How License between the Company and Aphria. On July 23, 2018 it was announced that Aphria
had entered into a lock-up agreement with the Group, preventing them from selling the next tranche of
Liberty shares owned by Aphria that will become freely trading on July 26, 2018 for a period of 18
months.

SELECTED OPERATIONAL AND FINANCIAL RESULTS

Three months
ended May 31,
2018
Three months
ended
February 28,
2018
From May 1,
2017 to May
31, 2017
From May 1,
2017 to
February 28,
2018
Operating performance
Grams harvested 201,753 165,093 45 314,637
Equivalent grams sold 71,327 21,618 80 26,357
Average realized price per gram 15.99 19.99 25.74 22.96
Active registered patients 4,566 1,999 - 1,999
Financial Performance
Revenue 1,141,118 432,249 4,793 605,273
Adjusted gross profit (defined
below) 600,485 253,552 (1,479) 341,427
Adjusted gross margin (defined
below) 52.6% 58.7% (30.9%) 56.4%
Net loss (3,174,432) (4,035,254) (1,019,454) (28,845,506)
Net loss per share (0.01) (0.01) (0.01) (0.11)
Adjusted EBITDA (defined
below) (2,052,970) (3,475,288) (134,153) (6,843,765)
Cash and term deposits 38,844,035 26,145,379 4,764,591 26,145,379
Capital assets 34,357,072 25,285,804 2,394,101 25,285,804
Shareholders’ equity 109,714,822 89,963,195 52,940,432 89,963,195

RESULTS OF OPERATIONS

Revenue

Revenue for the three months ended May 31, 2018 was $1,141,118 compared with revenue for the three
months ended February 28, 2018 of $432,249 and revenue for the period from May 1, 2017 to May 31,
2017 of $4,793. The significant quarter over quarter increase in revenue was driven by the Company’s
progress in developing its brand and the opening of the Company’s first four dispensaries across the
State of Florida, allowing an increase in the amount of product sold to the growing registered patient base
on the Medical Marijuana Use Registry in Florida.
Gross profit and gross margin
Gross profit for the three months ended May 31, 2018 was $606,178 compared with $606,059 for the
three months ended February 28, 2018 and gross profit of negative $5,117 for the period from May 1,
2017 to May 31, 2017. Included in gross profit for the three months ended May 31, 2018 and February
28, 2018 were unrealized changes in fair value of biological assets of a loss of $145,765 and a gain of
$601,503, respectively, which are non-cash fair value adjustments required by IFRS.
The gross profit for the Company is outlined below for the following periods:
Three months
ended May 31,
2018
Three months
ended
February 28,
2018
From May 1,
2017 to May
31, 2017
From May 1,
2017 to
February 28,
2018

Revenue
Sales 1,141,118 432,249 4,793 605,273
Total revenue 1,141,118 432,249 4,793 605,273
Costs of sales
Cost of goods sold 826,298 351,136 6,272 707,396
Depreciation 176,772 76,557 4,810 226,480
Change in fair value of biological
assets (468,130) (601,503) (1,172) (1,311,671)
Total costs of sales 534,940 (173,810) 9,910 (377,795)
Gross profit 606,178 606,059 (5,117) 983,068
Cost of sales currently consist of three main categories: (i) cost of goods sold; (ii) depreciation and, (iii)
change in fair value of biological assets.
(i) Cost of goods sold include the direct cost of materials and labour related to the medical
cannabis sold. This includes the costs of any purchased medical cannabis, growing, cultivation and
harvesting costs, quality assurance and quality control, cannabis oil processing costs, packaging,
labelling, and maintenance and repairs of production equipment and greenhouse infrastructure
utilized in the production of medical cannabis.
(ii) Depreciation relates to production equipment and greenhouse infrastructure utilized in the
production of medical cannabis.
(iii) Fair value adjustment of biological assets is part of the Company’s cost of sales using IFRS
reporting standards relating to agriculture and biological assets (i.e. living plants or animals). This
line item represents the effect of the non-cash fair value adjustment of biological assets (medical
cannabis) produced in the period.

Management believes that the use of non-cash IFRS adjustments in calculating gross profit and gross
margin does not represent the true underlying economics of the business due to the large value of noncash
fair value adjustments required. Accordingly, management believes the use of an adjusted gross
profit and adjusted gross margin provides better representation of performance by excluding non-cash
adjustments required by IFRS, and certain cost of goods sold adjustments.
Adjusted gross profit and adjusted gross margin are non-GAAP financial measures that do not have any
standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by
other companies.
The below is the Company’s adjusted gross profit and adjusted gross margin for the following periods:
Three months
ended May 31,
2018
Three months
ended
February 28,
2018
From May 1,
2017 to May
31, 2017
From May 1,
2017 to
February 28,
2018
Gross Profit 606,178 606,059 (5,117) 983,068
Add back:
Adjustments to cost of goods
sold (285,665) (172,439) - (443,550)
Depreciation (176,772) (76,557) (4,810) (226,480)
Change in fair value of biological
assets 468,130 601,503 1,172 1,311,671
Subtotal 5,693 352,507 (3,638) 641,641
Adjusted gross profit 600,485 253,552 (1,479) 341,427
Adjusted gross margin 52.6% 58.7% (30.9%) 56.4%
The positive adjusted gross profit for the three months ended May 31, 2018 compared to the three
months ended February 28, 2018 reflects the increase in revenue from higher sales slightly offset by
higher production costs realized in the quarter.

Operating expenses
Three months
ended May 31,
2018
Three months
ended
February 28,
2018
From May 1,
2017 to May
31, 2017
From May 1,
2017 to
February 28,
2018

Operating expenses
Professional fees 512,692 652,229 299 1,756,648
Employee and staff costs 664,882 633,923 11,717 1,325,296
Office and general 238,315 216,033 10,897 455,609
Consulting fees 45,940 317,965 51,758 656,803
Travel and entertainment 166,490 123,034 19,170 364,773
Interest expense 463,553 456,666 - 530,863
Advertising and marketing 210,595 110,132 43,241 290,555
Insurance 261,582 201,410 - 339,182
Selling costs 347,806 179,431 - 230,443
Facilities expenses and leases 414,075 47,090 - 61,158
Royalty 34,234 18,126 - 18,126
Depreciation 458,611 476,268 36,530 1,349,745
Share-based compensation 1,137,933 1,759,253 - 2,440,895
Total non-operating items 4,956,708 5,191,560 173,612 9,820,096
The decrease in the operating expenses for the three months ended May 31, 2018 compared with the
three months ended February 28, 2018 was primarily driven by a decrease in share-based compensation,

consulting fees and professional fees, partially offset by increases in facility expenses and leases,
primarily from the opening of four dispensaries, as well as dispensary selling costs and advertising and
marketing expenses. Professional fees represent legal, audit, lobbying and other advisory fees that are
expected to decrease going forward as Liberty stabilizes its business. The year-over-year increase in
Liberty’s operating expenses reflect the growth of Liberty’s business, including the opening of several
dispensaries across Florida, the increase and improvement of Liberty’s delivery service to patients, the
hiring of sufficient employees to support Liberty’s activities and the related overhead.

Non-operating items
Three months
ended May 31,
2018
Three months
ended
February 28,
2018
From May 1,
2017 to May
31, 2017
From May 1,
2017 to
February 28,
2018

Non-operating items
Other income (512,054) (47,738) (4,408) (82,535)
Investor relations and filing fees 268,898 354,931 - 846,860
Application costs - 544,443 - 544,443
Transaction costs 247,268 143,107 435,555 20,817,958
Legal settlement - - - 595,900
Interest accretion 463,751 422,866 - 461,181
Change in fair value of
embedded derivative (1,577,173) (2,479,029) - (4,013,936)
Foreign exchange (gain) loss (66,788) 133,342 409,578 460,776
Total non-operating items (1,176,098) (928,078) 840,725 19,630,647
The Company’s non-operating items increased by $248,020 to a gain of $1,176,098 for the three months
ended May 31, 2018 compared with a gain of $928,078 for the three months ended February 28, 2018. A
gain in fair value on the Company’s investment in Isodiol, included in other income and a foreign
exchange gain, in addition to decreases in investor relations and filing fees and application costs were
partially offset by a decrease in the quarter over quarter gain on an embedded derivative and an increase
in transaction costs. Other income includes interest income from the Company’s term deposits in addition
to fair value adjustments on the Company’s investments. Interest accretion represents the interest charge
on the convertible debentures issued in November 2017. The change in fair value of embedded derivative
represents changes in the fair value of the convertible feature of the debenture issued in November 2017.
As the closing share price of the Company’s Common Shares decreased at May 31, 2018 relative to
February 28, 2018, the conversion feature also decreased in value, resulting in a non-cash gain to
Liberty.
Other comprehensive gain (loss)
The Company recorded other comprehensive gain for the three months ended May 31, 2018 of $478,297
compared with other comprehensive loss for the three months ended February 28, 2018 of $327,993 and
other comprehensive gain of $36,698 for the period from May 1, 2017 to May 31, 2017. The other
comprehensive gain for the three months ended May 31, 2018 is a result of the Company’s wholly-owned
subsidiary Liberty Florida using the United States dollar as its functional currency and the changes in the
US dollar to Canadian dollar exchange rate during the period. The closing foreign exchange rate (United
States dollar stated in Canadian dollars) were as follows: May 31, 2018 – 1.2948, February 28, 2018 –
1.2809, May 31, 2017 – 1.3500.
Net loss
The Company recorded a net loss for the three months ended May 31, 2018 of fiscal 2019 of $3,174,432
or $0.010 per share compared with the three months ended February 28, 2018 of $4,035,254 or $0.014
per share and the period from May 1, 2017 to May 31, 2017 of $1,019,454 or $0.005 per share. The
improvement in net income was due primarily to the ramp-up in sales revenues at the Company’s
operations in Florida as described above.

Adjusted EBITDA

Adjusted EBITDA is a non-GAAP financial measure that does not have any standardized meaning
prescribed by IFRS and may not be comparable to similar measures presented by other companies. The
Company calculates EBITDA as net income (loss), plus (minus) income taxes (recovery), plus (minus)
foreign exchange loss (gain), plus (minus) change in fair value of embedded derivative, plus interest
accretion, plus share-based compensation, plus depreciation, plus interest expense, plus change in fair
value of biological assets, plus changes in fair value in cost of goods sold and certain one-time nonoperating
expenses, as determined by management, all as follows:
Three months
ended May 31,
2018
Three months
ended
February 28,
2018
From May 1,
2017 to May
31, 2017
From May 1,
2017 to
February 28,
2018
Net loss (3,174,432) (4,035,254) (1,019,454) (28,845,506)
Adjustments
Deferred income tax - 377,831 - 377,831
Foreign exchange (gain) loss (66,788) 133,342 409,578 460,776
Change in fair value of
embedded derivative (1,577,173) (2,479,029) - (4,013,936)
Interest accretion 463,751 422,866 - 461,181
Legal settlement - - - 595,900
Transaction costs 247,268 143,107 435,555 20,817,958
Share-based compensation 1,137,933 1,759,253 - 2,440,895
Depreciation 635,383 552,825 41,340 1,576,225
Interest expense 463,553 456,666 - 530,863
Change in fair value of biological
assets (468,130) (601,503) (1,172) (1,311,671)
Adjustments to cost of goods
sold 285,665 172,439 - 443,550
Adjusted EBITDA (2,052,970) (3,097,457) (134,153) (6,465,934)
SELECTED QUARTERLY RESULTS
The following table sets out certain financial information for each of the fiscal quarters from May 1, 2017
up to and including the first quarter of fiscal 2019, ended May 31, 2018.
Three months
ended May 31,
2018
Three months
ended
February 28,
2018
Three months
ended
November 30,
2017
Three months
ended August
31, 2017
Revenue 1,141,118 432,249 121,207 47,024
Net loss (3,174,432) (4,035,254) (1,112,603) (22,678,195)
Net comprehensive loss (2,696,135) (4,363,247) 274,558 (26,223,791)
Loss per share – basic & diluted (0.010) (0.014) (0.004) (0.090)
From May 1,
2017 to May
31, 2017
Revenue 4,793
Net loss (1,019,454)
Net comprehensive loss (982,756)
Loss per share – basic & diluted (0.005)

LIQUIDITY AND CAPITAL RESOURCES

The Company monitors its capital structure and manages its cash flows to assess the liquidity necessary
to fund its operations and activities. As at May 31, 2018, Liberty maintained $38,844,035 of cash and
term deposits on hand, compared to $26,145,379 in cash and term deposits at February 28, 2018.
Cash used in operational activities was $1,786,486, primarily due to the continued ramp-up of the
Company’s Florida operations, while cash used in investing activities of $6,805,030 primarily consisted of
the purchase and construction of capital assets at Liberty 360 and the issuance of a promissory note
related to the acquisition of WNWF. To support these activities, Liberty raised $21,290,172 in cash
generated from financing activities during the quarter from its Bought Deal Offering in May 2018.
Working capital is a common measure of a Company’s short-term financial health and its ability to meet
its upcoming operational and capital requirements. As at May 31, 2018, the Company maintained working
capital of $22,193,000. Management believes that it will have sufficient positive operating cash flow and
funds available on hand to meet its stated operational goals over the next fiscal year, including i)
completing the retrofit of the Alico facilities and opening up the Liberty 360 Campus; ii) constructing and
opening up to twelve dispensaries and five delivery hubs by the end of fiscal 2019; and iii) initiating
required construction for Liberty’s operations in Massachusetts. Although the Company anticipates that it
will have positive cash flow from operating activities in future periods, to the extent that the Company has
negative cash flow in any future period, the Company may be required to take additional measures to
increase its liquidity and capital resources, including obtaining additional equity or debt financing.

COMMITMENTS

As part of the acquisition of Chestnut Hill Tree Farm LLC, the Company acquired a finance lease
obligation for production equipment. The finance lease is repayable over a one-year period ending
October 2018.
During the period, the Company entered into a lease for office space until October 31, 2023. The
minimum payments are as follows:
Fiscal year ending February 28, Amount
2019 $ 137,017
2020 183,985
2021 186,576
2022 187,872
Thereafter 317,438
$ 1,012,887
Except as disclosed elsewhere in this MD&A, there have been no material changes with respect to the
contractual obligations of the Company during the period.

SHARE CAPITAL

Liberty has the following securities issued and outstanding, as at the date of this MD&A:
Presently
outstanding Exercisable Exercisable &
in-the-money* Fully diluted
Common shares 339,006,806 339,006,806
Warrants 39,492,080 39,492,080 2,995,192 2,995,192
Stock options 10,449,832 2,534,832 500,000 500,000
Fully diluted 342,501,998
*Based on closing price on July 25, 2018

RELATED PARTY BALANCES AND TRANSACTIONS

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 members of the senior management group. Included in employee
and staff costs and share-based compensation are $149,891 and $1,104,273, respectively, for the three
months ended May 31, 2018 paid to key management personnel.
Under the Trademark License Agreement, Liberty accrued $53,154 of royalty expenses payable to Aphria
as at May 31, 2018 in respect of sales of products licensed by Aphria.
ISSUERS WITH U.S. CANNABIS-RELATED ACTIVITIES
On February 8, 2018, the Canadian Securities Administrators revised their previously released Staff
Notice 51-352 Issuers with U.S. Marijuana-Related Activities (the “Staff Notice”) which provides specific
disclosure expectations for issuers that currently have, or are in the process of developing, cannabisrelated
activities in the United States as permitted within a particular state’s regulatory framework. All
issuers with United States cannabis-related activities are expected to clearly and prominently disclose
certain prescribed information in prospectus filings and other required disclosure documents.
As a result of the Company’s existing operations and recent acquisitions in the United States, Liberty is
properly subject to the Staff Notice and accordingly provides the following disclosure:
Nature of Involvement
As of May 31, 2018, the date of the Q1 Financials, all of the Company’s business was directly derived
from US cannabis-related activities, based on the existing operations of the Company in Florida. As such,
the Company’s balance sheet and operating statement exposure to US cannabis-related activities is
100%.
Florida

The Company is licensed to operate as a “medical marijuana treatment center” under applicable Florida
law pursuant to the terms of the License issued by the Florida Department of Health, Office of
Compassionate Use under the provisions of the Compassionate Medical Cannabis Act of 2014. The
Company operates the 36-acre Chestnut property in Alachua, Florida where the Company cultivates and
sells medical cannabis. The Chestnut Facility currently employs or has under contract approximately 90
full or part time staff, including lab technicians, horticulturalists, operations, sales, marketing and security
personnel. The Company anticipates that it will begin full production at the Liberty 360 Campus in
Gainesville in early 2019. The Company has received approval from the Florida Department to open four
dispensaries to date, and has signed leases to open a further six locations.

Massachusetts

On March 27, 2018, the Company announced that it had agreed to acquire a 75% ownership interest in
Massachusetts-based WNWF for US$16.0 million, pursuant to a binding term sheet. WNWF owns an
integrated medical cannabis license in the Commonwealth of Massachusetts and has a cultivation facility
and dispensary location both of which are partially completed. This acquisition is expected to give Liberty
the opportunity to tap into the growing Massachusetts medical cannabis marketplace which currently has
only 17 licensees (and only 22 dispensaries) serving 47,424 patients and a total population of nearly
seven million people. With a integrated medical license, the Company would also have priority to receive
three new adult-use licenses, one for cultivation, one for processing and one for a dispensary.
The WNWF acquisition is subject to the receipt of all required governmental approvals from the
Commonwealth of Massachusetts, Medical Use of Marijuana Program or the Massachusetts Cannabis

Control Commission. The Company is completing required due diligence activities.
Ohio
On June 4, 2018, the State of Ohio Board of Pharmacy awarded a dispensary license for the southwest
portion of the state to Schottenstein Aphria III LLC, of which Liberty holds a 50.1% ownership interest.
Over 375 applications were submitted for 56 licenses in Ohio. The Company is developing plans to open
a dispensary over the next several months, targeting operation by the end of calendar 2018. Liberty has
also submitted an application for a processing license in the State of Ohio and is awaiting final decision
from the State of Ohio Board of Pharmacy