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Let's Toke Business

Week Ended March 10, 2017

x Current correction getting close to the end?..............................................................p1 x Australia ? a progress report...............................................................................p2 x Blair says legislation "on time"...........................................................................p3 x Health Canada provides perspective on myclobutanil contamination.......................p3 x ACB introduces new product testing reports........................................................p5 x Whistler Medical Marijuana expansion plans approved..........................................p5 x ACB acquisition of Peloton out of bankruptcy approved........................................p5 x Lexaria to raise up to $2.5 million in equity...........................................................p6 x Toronto police hassle Marc and Jody Emery in Vancouver.....................................p6 x Medbox was a scam..........................................................................................p6 x Applications Watch: DelShen becomes 39th Licensed Producer...............................p7 x See our recent articles on Seeking Alpha

Why Organigram Merits a 'Must Buy" Rating March 8, 2017 How Attorney General Sessions can Derail the Marijuana Gravy Train February 27, 2017 High Growth Cannabis Company Trading Less Than One Times Sales February 20, 2017 Reassessing the Ever Changing Outlook for Canadian Cannabis Stocks January 30, 2017 Update: My Confidence in Buying Organigram is Affirmed January 20, 2017 Canadian Cannabis Stocks 2017 Outlook January 3, 2017 It's Time to Buy Canadian Cannabis Licensed Producers December 27, 2016 7 Winners Identified by the Canadian Cannabis Task Force Report December 19, 2016 (3 Profitable Ideas for Canadian Cannabis Investors this Week) December 12, 2016

Marijuana Stock Market Review & Outlook

LTB MJ INDEX: 1wk -2.9% 1 mo -4.9% 3 mo +5.8% 6 mo +27.5% 1 yr +89.0%

LTB Marijuana Composite Index

(Hi 1073.5 1/27/17 Lo 409.4 1/15/16 Last 1004.7 3/10/17)

The Let's Toke Business Composite Index dipped for a third week in a row as the "Sessions-Spicer" correction continued. The Licensed Producer group suffered a 5.4% decline and the Low Priced Index dropped just .1%.

3/18/16 4/1/16

4/15/16 4/29/16 5/13/16 5/27/16 6/10/16 6/24/16

7/8/16 7/22/16

8/5/16 8/19/16

9/2/16 9/16/16 9/30/16 10/14/16 10/28/16 11/7/16 11/18/16 12/2/16 12/16/16 12/30/16 1/13/17 1/27/17 2/10/17 2/24/17 3/10/17

An important development last week was a memo from Health Canada (HC) that put some perspective on the myclobutanil contamination issue. See more details in Breaking & Corporate News below. Suffice it to say here that it was very good news for Canopy Growth (TSX: WEED) that now owns Mettrum and Organigram (TSXV: OGI). In a

nutshell, HC says based on the trace amounts of myclobutanil found in the offending material, the amount of additional cyanide that would be produced is 1,000 times less than the amount generated by the marijuana alone.

Although it is not as big a deal as if it was happening with a major U.S. stock index, we learned this week that Canopy Growth (TSX: WEED) is being added to the S&P-TSX Composite Index effective March 17, 2017. In the U.S., exchange traded funds and index funds are more common and being added to an index brings in a lot of buying from funds that buy the newly listed stock to keep the portfolio in line with the index. But let's not overlook the fact this is still a very significant development for the Canadian cannabis industry. If anyone had said a year ago that Canopy would be going into the TSX Composite by March, you could have won a lot of money on side bets. It's another first for Canopy, a boost to their credibility and it also reflects well on the entire Canadian industry.

This chart shows the average length of rallies and reactions in our Marijuana Composite Index his-

torically. In summary:

Number of Corrections Number of Weeks

14

1

5

2

3

3

4

4

2

5

1

6

2

7

This means there have been 14 corrections that lasted 1 week, 5 lasted 2 weeks, 3 lasted 3 weeks

and so on. Based on history alone, we think there may be one more down week ahead but if that

hppens, we would be comfortable look for a move to the upside. The big unknown is the marijuana

group (mainly the Licensed Producers) did a lot of private placements around four months ago and

those shares will be coming free trading in the weeks ahead. This might put a bit of a damper on

the recovery as the market plows through some overhead supply.

Marijuana Matters

We thought a brief update on the progress of marijuana legalization in Australia would be timely since a number of Canadian cannabis companies have established connections with that market.

Australia has had a relatively high marijuana usage rate. With a population of 23.13 million people, around 33% of those over 14 years of age have tried it and over 7% have used it in the past year. Indigenous Australians, the Aboriginal and Torres Strait Islanders, have a higher marijuana usage rate consistent with higher tobacco and alcohol use. By comparison, of 35.16 million Canadians, 44% report having tried it at least once and 18% have used it in the past year.

Recreational cannabis use has been illegal in Australia since the International Hague Convention on Narcotics was signed in 1913. Active drug use is often traced back to the late 1960's when U.S. military personnel serving in Vietnam began taking R & R in Australia and a black market grew to satisfy their drug demand. In 1973, an event involving "hippies" attending a festival in New South Wales resulted in a major clash with police over marijuana use. From that point forward, there has been a strong decriminalization movement in Australia and the country has largely avoided a punitive drug policy focusing on harm-minimization strategies and treatment as a basic part of law enforcement. As time went along, support for marijuana increased and in recent years more politicians have advocated legalization from both sides.

On February 24, 2016, Australia legalized medicinal cannabis at the federal level to become effective November 2016. Medical marijuana for therapeutic purposes will be included on what is called the Schedule 8 list that includes restricted drugs provided they are obtained by prescription from a doctor under state or territorial laws for medical purposes.

Here are some companies with exposure to the Australian market:

x Canopy Growth (TSX: WEED) expanded into Australia through a partnership with AusCann Group Holdings in May 2016.

x Aphria Inc. (TSXV: APH) has entered into a cannabis supply agreement with Medlab Clinical Limited (ASX: MDC) of Australia to supply MDC with Canadian grown medical marijuana.

x Namaste Technologies (CSE: N) is acquiring Australian Vaporizers that will make it the leading Internet marketer of vaporizers and accessories in Australia.

x Lexaria Technologies (OTCQB: LXRP) was recently notified by the Australian Patent Office that its patent application for its bioavailability and taste enhancing technology has been accepted.

x MMJ Phytotech Ltd (ASX: MMJ) is an Australian listed company that owns Canadian Licensed Producer United Greeneries located in Duncan, B.C.

Breaking & Corporate News

Bill Blair is the Liberal MP representing the riding of Scarborough Southwest. He is also Parliamentary Secretary to the Minister of Justice and heads up the planning and implementation of marijuana legalization in Canada. Recently he was interviewed by Dale Carruthers of the London Free Press. In the interview, Blair confirmed that introducing the new cannabis legislation this spring is on track. But people must understand, this is not simply legalizing marijuana. They want to replace the body of criminal sanctions that have been used to try to control cannabis with a system of strict regulation of production, distribution and consumption.

He elaborated that at present, production is dominated by criminals and they sell a product that is untested, unregulated and unsafe. Under the upcoming regime, the product will be grown using best practices, taxes will be collected and licensed producers will be accountable for what is sold to the adult public. On the question of dispensaries, Blair went on to say, the provinces will regulate where it is sold and who it is sold to (not children). They will set limits on packaging and advertising so adults who choose to use marijuana can make informed decisions.

In summary, the objective is to lift the sanctions that now exist and replace them with strict regulations. The public policy goals are to take away the dollars that are now flowing to criminal enterprise, keep marijuana out of the hands of children and protect the health and safety of our citizens.

We can take from this that the program is moving ahead on time and following the recommendations the Task Force presented last November.

An article updated on March 9, 2017, titled `Clarification from Health Canada (HC) on Myclobutanil and Cannabis' had some strong words that we have paraphrased with respect to the issue. Here are the highlights that certainly must rank as heavily favouring the case of Canopy Growth (TSX: WEED) owner of Mettrum and Organigram (TSXV: OGI).

x HC's first priority is to protect the health and safety of Canadians. This is the guiding principle of the regulations governing the Access to Cannabis for Medical Purposes Regulations (ACMPR) regulations.

x Canada has some of the most stringent controls on the medical cannabis industry in the world, and licensed producers are required to adhere to strict Good Production Practices designed to provide a safe supply of medical cannabis for Canadians.

x The regulations and the compliance and enforcement measures have worked effectively. During the 2015-16 fiscal year, HC conducted more than 300 unannounced inspections of 30 licensed producers. If these inspections identify non-compliance, the Department has a range of enforcement options available, including education, recalls, adding terms and conditions to a license, license suspension or revocation.

x Recent media reports about these recalls have suggested that there was a significantly increased risk to the health of Canadians who inhaled the recalled cannabis products, due to the release of hydrogen cyanide. Here are the facts: 1. When the cannabis plant is combusted, a number of compounds are produced, including very low amounts of hydrogen cyanide. 2. HC's analysis of the recalled cannabis products show that the trace levels of myclobutanil that were present would have produced a negligible amount of additional hydrogen cyanide upon combustion, in comparison to the levels already produced by marijuana alone. 3. The level of cyanide from the burning of myclobutanil found on the cannabis samples is more than 1000 times less than the cyanide in cannabis smoke alone, and is 500 times below the acceptable level established by the U.S. National Institute for Occupational Safety and Health. 4. As such, the risk of serious adverse health consequences resulting from the inhalation of combusted myclobutanil in the recalled products was determined by HC to be low.

x In each instance, HC moved quickly to verify that compromised products were removed from the market and that clients of the licensed producers were contacted.

x HC's enforcement considered the low health risk posed by the trace amounts of unauthorized pesticides detected and took into account the companies' full cooperation with the Department during the recall process and subsequent investigations.

x To help ensure adherence to the Good Production Practices, Health Canada added new terms and conditions to the licenses of the affected producers requiring testing for unauthorized pesticides.

x While the risk of harm to Canadians was low in these recent cases, HC has engaged all licensed producers to ensure they understand the regulatory requirements around authorized pesticide use, and a repeat of the situation leading to these recalls is unacceptable. HC has already announced it will begin random unannounced testing of cannabis and cannabis products from licensed producers to verify the overall state of compliance. HC will undertake additional measures, as required, consistent with its evidence and risk-based approach to regulation.

Health Canada would like to assure Canadians that had there been any evidence to show that a licensed producer had acted with indifference or recklessness and engaged in activities that put the health or safety of Canadians in danger, the Department would have responded with appropriate enforcement actions, including license suspension or revocation.

Although we have argued that evidence suggests the cases of Mettrum and Organigram were completely different, we accept HC's explanation as laid out in this memo. This is extremely good news for OGI shareholders who have suffered more than WEED investors in recent weeks.

Aurora Cannabis Inc. (TSXV: ACB) (OTCQB: ACBFF) has introduced a comprehensive product testing disclosure process. In taking the first step in a two-step process, ACB is providing their clients and the general public with access to a Certificate of Analysis (CoA) for every cannabis product available from the company. The purpose of the new protocol is to provide clients with secure knowledge that every Aurora product has been certified by an independent third-party laboratory as having passed testing for the widest possible range of potential contaminants.

The system developed in partnership with Anandia Labs Inc ("Anandia"), Canada's foremost cannabis genetics and testing laboratory, provides a certification link for each product featured on Aurora's menu through ACB's website and its mobile application. The link leads to a product-specific webpage, providing a simplified CoA indicating that the product in question has been analyzed with high accuracy for potency, and passed Anandia's rigorous testing procedures for the presence of contaminants. The first step, now complete, adds these certifications to ACB's website. The next step, to be completed soon, will update ACB's online shop to provide a certification link beside each product for sale.

Given the recent product recalls, we think this is an idea that should be adopted by the industry in Canada. It could prove that every cloud has a silver lining.

Whistler Medical Marijuana Corp (WMMC) has received affirmation from Health Canada regarding the announced 65,000 square foot expansion in Pemberton, British Columbia. Cronos Group (TSXV: MJN) owns 21.5% of WMMC and continues to be impressed with the capital efficiencies, brand equity, premium organic product and the unique culture, vision and leadership at WMMC. Accordingly, Cronos will maintain its equity position through an additional $1,085,000 investment to support WMMC's next phase of growth.

WMMC is the only actively selling LP whose entire product line is 100% certified organic. In response to significant growth in sales and increases in demand for products, WMMC is preparing to break ground on a new purpose-built expansion facility in Pemberton, located just 20 minutes from the company's flagship facility. It is anticipated that Phase I of the expansion will be completed in the second quarter of 2018. In addition, WMMC plans to build another 80,000 square foot indoor cultivation facility with its Phase II expansion and possesses an option to expand on a neighbouring 160 acre land parcel in the future.

Aurora Cannabis (TSXV: ACB) (OTCQB: ACBFF) announces its proposal to acquire Peloton Pharmaceuticals Inc. ("Peloton"), a late-stage ACMPR-applicant, out of bankruptcy protection was approved by Peloton's creditors at a recent creditor meeting. Peloton is constructing a 40,000 square foot cannabis production facility in Pointe Claire, Quebec estimated to be 80% complete and expects to be ready for Health Canada inspection pursuant to a License to Produce by the summer of 2017.

Under the terms of the Proposal, and subject to all conditions precedent being satisfied, the Company will provide a total investment pool of $7,000,000 of cash and common shares of Aurora for distribution to creditors. Completion of the acquisition of Peloton is conditional upon the proposal being approved by the Quebec Superior Court of Justice and the TSX Venture Exchange.

The motion to approve the Proposal is scheduled to be heard by the Court in late March. The company anticipates that the Court will grant approval for the proposal. The proposal was approved by the required majority of Peloton creditors with no creditors voting against. It is supported by Peloton's management.

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