Notes:

(1) All amounts in this chart and circular are in Canadian dollars, unless otherwise indicated. All payments received by investors in U.S. dollars will be converted into Canadian dollars using the rate of exchange quoted by the Bank of Montreal at close on the date of acceptance of that investor's subscription agreement. To the extent required the number of shares acquired will be rounded up or down to the nearest whole share. Fractional shares will not be issued. Subcribers will be informed of the exact number of shares they have subscribed for at the time of issuance. No funds will be returned.

(2) The price of the shares may be required to be adjusted at the time of qualification. The $0.35 per share offering price of our common shares was chosen as it reflects a 25% discount of the thirty-day high ($0.45) and it is close to the closing trading price of our common shares on the Canadian Securities Exchange the day prior to filing this offering circular ($0.405). We estimate our offering price range may be from $0.15 to $0.60 depending on market conditions.

(3) The shares are being offered pursuant to Regulation A of Section 3(b) of the Securities Act of 1933, as amended, for Tier 2 offerings.  The shares will only be issued to purchasers who satisfy the requirements set forth in Regulation A.  See "Terms of the Offering."

(4) The shares will be offered on a "best-efforts" basis by our officers, directors and employees. No commission or other compensation will be paid to these individuals in connection with this offering. We do not intend to engage a FINRA registered selling agent or other third party to assist us with this offering at this time.

(5)   The amounts shown are before deducting organization and offering costs to us, which include legal, accounting, printing, due diligence, marketing, consulting, referral fees, selling and other costs incurred in the offering of the shares. Our offering costs will vary depending on the number of shares sold. We estimate our offering costs will be $321,000 if 25% of the shares are sold, $321,000 if 50% of the shares are sold, $321,000 if 75% of the shares are sold and $370,000 if 100% of the shares are sold.   See "Use of Proceeds " and "Plan of Distribution.

Notes:

(1)  On December 31, 2016, we had 58,087,382 shares issued and outstanding.

(2)  Offering costs are estimated at $321,000, or $0.0899 per share of new shares issued. Pro forma net tangible book value of the common shares assuming 25% of the shares are sold in this offering as of December 31, 2016, minus offering costs, would have been approximately $1,408,707.

(3)  Offering costs are estimated at $321,000, or $0.0449 per share of new shares issued. Pro forma net tangible book value of the common shares assuming 50% of the shares are sold in this offering as of  December 31, 2016, minus offering costs, would have been approximately $2,658,707.

(4)  Offering costs are estimated at $321,000, or $0.0300 per share. Pro forma net tangible book value of the common shares assuming 75% of the shares are sold in this offering as of  December 31, 2016, minus offering costs, would have been approximately $3,908,707.

(5)  Offering costs are estimated at $370,000, or $0.0259 per share of new shares issued. Pro forma net tangible book value of the common shares assuming 100% of the shares are sold in this offering as of  December 31, 2016, minus offering costs, would have been approximately $5,109,707.

Future Dilution

Another important way of looking at dilution is the dilution that happens due to future actions by the company. The investor's stake in a company could be diluted due to the company issuing additional shares. In other words, when the company issues more shares, the percentage of the company that new investors own will go down, even though the value of the company may go up. Investors will own a smaller piece of a larger company. This increase in number of shares outstanding could result from a stock offering (such as an initial public offering, another crowdfunding round, a venture capital round, angel investment), employees exercising stock options, or by conversion of certain instruments (e.g. convertible bonds, preferred shares or warrants) into stock.

If the company decides to issue more shares, an investor could experience value dilution, with each share being worth less than before and control dilution, with the total percentage an investor owns being less than before. There may also be earnings dilution, with a reduction in the amount earned per share (though this typically occurs only if the company offers dividends and most early-stage companies are unlikely to offer dividends, preferring to invest any earnings into the company).

The type of dilution that hurts early-stage investors most occurs when the company sells more shares in a "down round," meaning at a lower valuation than in earlier offerings.

Investors making an investment expecting to own a certain percentage of the company or expecting each share to hold a certain amount of value should understand that the value of those shares can decrease by actions taken by the company. Dilution can make drastic changes to the value of each share, ownership percentage, voting control and earnings per share.

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MARKET FOR OUR COMMON SHARES

Trading Market

Our common shares are listed on the Canadian Securities Exchange ("CSE") under the symbol "MJ" and the Deutsche Borse Group on the Frankfurt Stock Exchange in Germany under the trading symbol "TLA". Our common shares began trading on the CSE on February 9, 2015. and on the Frankfurt Stock Exchange on March 16, 2015.

Shown below are the annual high and low sales prices of our common shares for our fiscal years since we began trading on the CSE in Canadian dollars.

Shown below are the quarterly high and low sales prices of our common shares for each quarter of the two most recent fiscal years (since listing on February 9, 2015):

Shown below are the monthly high and low sales prices of our common shares for the most recent six months:

As of the day before filing this offering circular, the closing price of our common shares on the CSE was $0.405.

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PLAN OF DISTRIBUTION

General Plan of Distribution

All dollar amounts in this offering circular are expressed in Canadian dollars unless otherwise indicated.

We are offering a maximum of 14,285,715 common shares on a "best efforts" basis.

Determination of Offering Price

The $0.35 per share offering price of our common shares was chosen as it reflects a 25% discount of the thirty day high ($0.45) and it is close to the closing trading price of our common shares on the CSE prior to filing this offering circular ($0.405). There is no relationship between this price and our assets, earnings, book value or any other objective criteria of value other than our CSE market trading price. The price of the shares may be required to be adjusted at the time of qualification.  The CSE allows issuers to apply for price protection of an offering. This price protection  will expire if the offering  has not closed within 45 days of the day on which notice is given to the CSE. As a result, the price of this offering may need to be adjusted at the time or post-qualification of this offering circular. We estimate our offering price range may be from $0.15 to $0.60 depending on market conditions.

All payments received by investors in U.S. dollars will be converted into Canadian dollars using the rate of exchange quoted by the Bank of Montreal at close on the date of acceptance of that investor's subscription agreement. To the extent required the number of shares acquired will be rounded up or down to the nearest whole share. Fractional shares will not be issued. Subcribers will be informed of the exact number of sharesthey have subscribed for at the time of issuance. No funds will be returned.

Sales

Subscription

In order to subscribe to purchase the shares, a prospective investor must complete a subscription agreement and send payment by check, wire transfer or ACH. The subscription agreement requires investors to answer certain questions to determine compliance with the investment limitation set forth in the securities laws, disclose that the securities will not be listed on a registered national securities exchange upon qualification and that the aggregate purchase price to be paid by the investor for the securities cannot exceed 10% of the greater of the investor's annual income or net worth. In the case of an investor who is not a natural person, revenues or net assets for the investors most recently completed fiscal year are used instead. The investment limitation does not apply to accredited investors, as that term is defined in Rule 501 of Regulation D under the Securities Act of 1933, as amended.

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After the offering statement has been qualified by the Securities and Exchange Commission, we will accept tenders of funds to purchase the shares. We may close on investments on a "rolling" basis (so not all investors will receive their shares on the same date).

Our officers and directors, with assistance from legal counsel, will review each subscription agreement prior to acceptance.

Investor Suitability Standards

Shares will be sold only to a person if the aggregate purchase price paid by such person is no more than 10% of the greater of such person's annual income or net worth, not including the value of his primary residence, as calculated under Rule 501 of Regulation D under Section 4(2) of the Securities Act of 1933, as amended. See the Purchaser Qualification Questionnaire in the Subscription Agreement in Exhibit A to this offering circular. In the case of sales to fiduciary accounts (Keogh Plans, Individual Retirement Accounts (IRAs) and Qualified Pension/Profit Sharing Plans or Trusts), the above suitability standards must be met by the fiduciary account, the beneficiary of the fiduciary account, or by the donor who directly or indirectly supplies the funds for the purchase of shares. Investor suitability standards in certain states may be higher than those described in this offering circular. These standards represent minimum suitability requirements for prospective investors and the satisfaction of such standards does not necessarily mean that an investment in the company is suitable for such persons.

Each investor must represent in writing that he/she meets the applicable requirements set forth above and in the Subscription Agreement, including, among other things, that (i) he/she is purchasing the shares for his/her own account and (ii) he/she has such knowledge and experience in financial and business matters that he/she is capable of evaluating without outside assistance the merits and risks of investing in the shares, or he/she and his/her purchaser representative together have such knowledge and experience that they are capable of evaluating the merits and risks of investing in the shares. Broker-dealers and other persons participating in the offering must make a reasonable inquiry in order to verify an investor's suitability for an investment in us. Transferees of shares will be required to meet the above suitability standards.

Sales to Affiliates

No Selling Security Holders

There are no selling security holders. No officer, director or employee of True Leaf will participate in the sale of securities pursuant to this offering.

Discretion to Terminate Offering

We may terminate the offering at any time for any reason at our sole discretion.

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Transfer Agent and Registrar

Our transfer agent and registrar for our common shares is Computershare Investor Services Inc. who has offices located through-out Canada and the United States.

PERKS

We want all of our investors to share our chews with their favorite dog or cat.  Letting your dog or cat try our products will turn you into a believer and a proud investor. In addition to receiving shares, investors under this offering will be entitled to receive the following additional benefits:

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The value of these benefits, if any, is indeterminable and is not associated with the number of shares you own. We have not attempted to establish a value for these benefits, and we do not consider them material to the determination of the price or value of our shares.

USE OF PROCEEDS TO COMPANY

The net proceeds of this offering to the issuer, assuming the maximum amount of securities offered are sold, will be approximately $4,630,000 after deducting offering expenses. In the discussion below, the company has assumed that, if the maximum amount of securities are sold, it will pay $370,000 in offering expenses. A significant portion of this offering's non-transactional expenses (e.g., accounting fees, legal fees, payment for printing or video

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Use of Proceeds

The net proceeds of this offering will be used primarily to advance our pet supplement and chews business.

The estimated use of the net proceeds of this offering is as follows:

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(2)  At this time we do not anticipate we will engage sales agents or underwriters to assist with the sales of this offering. Instead we plan on relying on management and our website to raise capital under this offering.

(3)  These funds will be used for sales and marketing services from outside professional firms, independent consultants, and our employees to market and promote the company and all of its business segments. Our chief executive officer will lead this campaign and may be paid compensation for his service, expertise, and leadership.

(4)  These funds will be used for sales and marketing services from outside professional firms, independent consultants, and our employees to market and promote the company and all of its business segments. Our chief executive officer will lead this campaign and may be paid compensation for his service, expertise, and leadership.

(5)  Contingency capital may be used to advance our medical marijuana business or other business purposes.

We have identified hemp processors in Canada, the USA and Europe who are able to meet our quality and quantity requirements at a competitive price.Our products are made with natural and fresh ingredients sourced from North America. We have not entered into any long-term supply contracts.  We believe all of our current suppliers have the ability to scale to support our growth in the future. We have identified multiple alternative sources for a majority of our product ingredients that meet our quality and safety standards.

A number of other entities have applications pending, or will seek to obtain licensed producer status under the ACMPR. There are also a number of existing growers of medical marijuana operating under the prior regulatory regime who have or will seek to obtain licensed producer status under the ACMPR.

The company believes that the stringent application and compliance requirements of the ACMPR may prove too onerous for some of those existing producers.

In addition, due to the Federal Court of Canada order described below, existing growers of medical marijuana operating under the MMAR may continue to produce medical marijuana pursuant to their licenses provided they meet the requirements of the court order. How long this situation will continue depends on the ACMPR and any new regulations the Government of Canada may decide to include at the six-month deadline.

As of March 31, 2017, Health Canada has received 1630 applications. 265 of those applications have been refused, 414 applications are in progress, 69 have been withdrawn, and 841 were incomplete or have been returned.

The differentiators between competitors are expected to be price, quality (smell/taste/appearance), organic purity (zero additive, pesticide, mold treatment or anti-biological) and production process. The cost of growing an inexpensive strain (i.e. mass market) is identical to growing premium strains and the crop risks are identical (disease, pests and infrastructure failure). The majority of firms with listed product often overlap in strains and strengths (THC/CBD).

Research and Development

We expect to engage and align ourselves with a reputable research and development testing facility in order to conduct pre-clinical trials, advocacy work, and specific strain research and development.

We will actively publish relevant scientific and industry data through social media streams and search marketing platforms as part of our ongoing marketing efforts.

Pre-License Stage

Prior to License approval, we intend to contract for research and development in order to isolate the appropriate strains of marijuana designed to address specific ailments or conditions.  We will source these strains or plant material from approved Canadian or imported sources. 

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A key part of our production plan is to develop strains of marijuana that are designed to treat particular ailments so that our product is tailored to treat a patient's needs as specifically and effectively as possible.  Different strains of medical marijuana will have a different effect on the patient, and we believe that it is extremely important that each patient should be matched with an appropriate and effective product for their needs.  

Testing

We intend to outsource all testing to Experchem Laboratories Inc., a Canadian subsidiary of Experchem Scientific. The decision to outsource was based on Experchem proven ability to:

• perform fast and accurate testing for all microbial and chemical contaminants required under ACMPR;
• accurately measure THC and CBD levels of all plant material during the research and development and production process; and
• provide cash flow from third party testing services to other licensed producers or research and development facilities, should the need arise in the future.

Governmental Regulations

Medical Marijuana Regulatory Framework in Canada

In 2001, Canada became the second country in the world to recognize the medicinal benefits of marijuana and to implement a government-run program for medical marijuana access through the Marihuana Medical Access Regulations ("MMAR"). The MMAR enabled individuals - with the authorization of their health care practitioner - to access dried marijuana for medical purposes by producing their own marijuana plants, designating someone to produce for them or purchasing Health Canada supply.

Health Canada replaced the MMAR and issued the MMPR in June 2013 which was intended to replace government supply and home-grown medical marijuana with secure and regulated commercial operations capable of producing consistent quality medicine. The MMPR regulations issued in June 2013 covered the production and sale of dried cannabis flowers only.

In June of 2015, the Supreme Court of Canada ruled with R v. Owen Edward Smith that the MMPR`s restricting legal access to only dried marijuana was unconstitutional as it infringed on the rights to liberty and security of the person under section 7 of the Charter. Up until this time, only the dry form of marijuana could be produced or possessed for medical purposes.

On July 8, 2015, Health Canada issued certain exemptions under the Controlled Drugs and Substances Act (Canada) which includes a Section 56 Class Exemption for licensed producers under the MMPR to conduct activities with cannabis. It permits licensed producers to apply for a supplemental license to produce and sell cannabis oil and fresh marijuana buds and leaves in addition to dried marijuana (this does not permit licensed producers to sell plant material that can be used to propagate marijuana).

On February 24, 2016, the Federal Court of Canada released its decision in the case of Allard et al v. Canada. This case began as a result of the government's decision to repeal the MMAR and enact the MMPR. This change overhauled the way that the government provides access to medical marijuana for patients across the country. The plaintiffs in the Allard case argued that the MMPR violates their Charter rights. The court, in a lengthy and detailed judgment, agreed with the plaintiffs and found the entire MMPR to be unconstitutional and of no force or effect. However, the court suspended its declaration of invalidity for six months in order to give the government time to respond and, if thought appropriate, craft a Charter compliant medical marijuana regime.

On August 24, 2016, the Access to Cannabis for Medical Purposes Regulations ("ACMPR") replaced the MMPR. The ACMPR includes a similar framework to the MMPR for commercial production by licensed producers responsible for the production and distribution of quality-controlled fresh or dried marijuana, cannabis oil, or starting materials (i.e., marijuana seeds and plants) in secure and sanitary conditions.  It also provides provisions similar to the former MMAR setting out the rights and requirements for individuals to produce a limited amount of cannabis for their own medical purposes or to designate someone to produce it for them.

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Under the ACMPR, Health Canada continues to accept and process applications to become a licensed producer that were submitted under the former MMPR. Furthermore, all licences and security clearances granted under the MMPR were continued under the ACMPR. This means that licensed producers can continue to register and supply clients with cannabis for medical purposes. New applicants are required to apply for licences to produce under the ACMPR.

Legalization of Recreational Use of Marijuana in Canada

On April 13, 2017, the Canadian federal government introduced the Cannabis Act a bill to legalize the recreational use of marijuana in Canada. This bill must go through a number of stages and be passed by the House of Commons and Senate before it is given Royal Asset and becomes law. The new rule allows Canadians to possess up to 30 g of dried cannabis and grow up to four plants per household for their personal use. Canadians may also purchase cannabis and derivatives from licensed producers through authorized sellers. The bill authorizes provinces to determine who may possess, sell or distribute cannabis for the purpose of sale. Only parties licensed under the Cannabis Act may produce cannabis for commercial purposes.

The import and export of cannabis and cannabis products may only be conducted with a valid permit. Permits may be issued for certain purposes such as medical and scientific purposes, or with respect to industrial hemp. An application for license or permit remains with the Minister of Health Canada in the form and manner specified by the Minister.

Under the proposed bill, provinces, territories and municipalities may adopt rules for their own jurisdictions. These rules may include raising the age limit to use and access products, licensing, distribution, zoning, and limitations on retail and other cannabis businesses as well as taxation.

CIBC World Markets reports estimates of the potential value of the recreational marijuana market in Canada will range from $5 billion to $10 billion per year. The lower market value of $5 billion per year translates into an annual consumption of 770,000 kilograms of marijuana (assuming a price of approximately $6.50 per gram). To put the potential size of the Canadian recreational market into context, Statistics Canada valued the beer market in Canada in 2014 at $8.7 billion.

ACMPR Requirements for License Applicants

Under the ACMPR, a business that wishes to commercially produce and/or distribute medical marijuana must obtain a license to operate as a licensed producer. In order to obtain such a license, the applicant must:

• show that they are an adult who ordinarily resides in Canada or a corporation that has its head office in Canada or operates a branch office in Canada and whose officers and directors are all adults;
• designate one senior person in charge of overall management of the activities carried out by the licensed producer;
• designate one responsible person in charge to work at the licensed producer's site and have responsibility for supervising regulatory compliance of the licensed producer's activities;
• submit details around the identity of the person or company applying for the license as well as the location and contact information for each proposed production site and each building within the site if applicable;
• submit the proposed activities to be conducted at each site, the purpose of the proposed activities, and the substance(s) in respect to which the activities are to be conducted;
• submit a detailed description of the security measures at the proposed site;
• submit a detailed description of the proposed record-keeping method;
• submit the maximum quantity of dried marijuana to be produced under the license and the production period;
• submit the maximum quantity of dried marijuana to be sold or provided by the applicant under the license;
• submit a report written by a quality assurance person establishing that the buildings, equipment and sanitation program to be used in the license activities complies with the ACMPR's Good Production Practices requirements; and
• gain security clearance for the senior person in charge, the responsible person in charge, the individual licensee if the license is issued to an individual and each officer and director of the corporation licensee if the license is issued to a corporation.

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Considering that our quality assurance report, operating and recordkeeping procedures have been reviewed and received an earlier Health Canada approval, we hope to receive a pre-licensing approval of the new application in 2017. Pending this approval and the execution of our business plan, we expect to be testing and producing product under an ACMPR license six months after receiving this approval.

In April 2017, we completed enhanced screening by Health Canada. It is still possible that Health Canada may reject our application for any number of reasons. Pursuant to paragraph 36(1)(h) of the ACMPR, a producer's license must be refused by Health Canada where the license would likely create a risk to the public health, safety or security, including the risk of cannabis being diverted to an illicit market or use. 

Prior to submitting an application for a Producer's License under the ACMPR, the applicant must provide written notice to the local government, the local fire authority and the local police force or the Royal Canadian Mounted Police in the area in which the production site is located. 

A Producer's License is valid for the period indicated on that particular license, which is determined by the issuing Minister at the time of issuance and must not be later than three years after the effective date of the license. Prior to the expiry date of a license the Licensee who wishes to renew their license must submit an application for renewal to Health Canada. The application must contain the original license and a declaration that all of the information shown on the license is correct and complete subsequent to which the Minister must issue a renewed license subject to any of the grounds for refusal in section 36. 

A licensed producer may engage in the following activities:

• possessing, producing, selling, providing, shipping, delivering, transporting and destroying marijuana;
• possessing and producing cannabis (other than marijuana) solely for the purpose of conducting in vitro testing that is necessary to determine the percentages of cannabinoids in dried marijuana; 
• selling, providing, shipping, delivering, transporting, and destroying cannabis (other than marijuana) that was obtained or produced solely for the purpose of conducting the aforementioned in vitro testing;
• shipping dried marijuana to a health care practitioner as referred to in the ACMPR;
• importing marijuana in accordance with an import permit issued under section 95 of the ACMPR; and;
• possessing and exporting marijuana in accordance with an export permit issued under s. 103 of the ACMPR.

A licensed producer may sell or provide marijuana and cannabis that was obtained or produced solely for the purpose of conducting the aforementioned in vitro testing to:

• another licensed producer;
• a Licensed Dealer;
• the Minister; or
• a person to whom an exemption relating to the substance has been granted under section 56 of the Controlled Drugs and Substances Act ("CDSA").

A licensed producer may sell or provide dried marijuana to:

• a client of that Producer or an individual who is responsible for the client;
• a hospital employee, if the purpose of their possession of the dried marijuana is in connection with their employment; or
• a person to whom an exemption relating to the dried marijuana has been granted under section 56 of the CDSA.

The ACMPR allows doctors or nurse practitioners to write a one-page prescription for up to a year's supply of dried medical marijuana with a maximum shipment size of 150 grams per month. All approved licensed producers are listed on a Health Canada website for doctor referral. Patients send the original prescription to their preferred supplier who then ships product directly to them or their doctor for pick-up. The ACMPR essentially allows a free market, direct-to-consumer, mail-order distribution model with no retail sales permitted.

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Employees

We have five employees and engaged nine consultants.

Intellectual Property

Trademarks. Our products are marketed under a number of trademarks owned or licensed by us or one of our subsidiaries. Our major trademarks are listed below.

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Legal Proceedings

We are not currently a party to any legal proceedings. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.

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DESCRIPTION OF PROPERTY

Our principal office is in Canada - located at 100 Kalamalka Lake Road, Unit 32, Vernon, British Columbia, V1T 9G1. The building consists of approximately 3,896 square feet of office and warehouse space. It is currently being leased to us by our Chief Executive Officer, Darcy Bomford, for $2,500 per month, plus applicable sales taxes. The lease expires on March 31, 2018. The lease does not contain any provisions with respect to renewal, but the current intention of the parties is for the lease to be renewed prior to its expiry. The lease is in good standing.

On March 27, 2014, we entered into an option to lease a property and building in Lumby, BC on which we propose to conduct our medical marijuana operations. We expect to enter into a formal lease with the property owner, but there is a risk that the owner may exercise its right to cancel the option to lease in accordance with the terms of the option. If the option were cancelled, we would need to secure another location.

We believe that, if necessary, we could relocate from the foregoing premises at this time without material harm to our operations.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Introduction

The following discussion of our financial condition and results of operations should be read together with the audited financial statements for the period ended March 31, 2016 and the unaudited financial statements for the nine-month period ended December 31, 2016 and related notes. This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors. We prepare our financial statements in conformity with international financial reporting standards ("IFRS"). Our management is responsible for our financial statements and this discussion of our financial condition and results of operations.

All amounts are in Canadian dollars except where otherwise indicated.

Overview

We were incorporated on June 9, 2014 under the Business Corporations Act (British Columbia) ("BCA") and have three wholly-owned subsidiaries, being True Leaf Investments Corp. ("TL Investments"), which was incorporated on March 26, 2014 under the BCA and True Leaf Medicine Inc. ("TL Medicine"), which was incorporated on July 4, 2013 under the BCA and True Leaf Pet Inc. ("TL Pet"), which was incorporated on November 18, 2015 under the BCA.

On May 23, 2014, TL Investments completed a share exchange agreement with TL Medicine in which TL Investments issued 25,000,000 common shares valued at $1,250,000 for all of the outstanding common shares of TL Medicine. The Share Exchange Agreement constituted a reverse takeover, with the sole shareholder of TL Medicine acquiring a control position in TL Investments.

On February 2, 2015, we executed a "plan of arrangement" as defined under the BCA. The plan of arrangement constituted a reverse takeover, with the shareholders of TL Investments acquiring a control position in the company. As a result of the plan of arrangement, the consolidated financial statements have been presented as a continuation of TL Medicine. On February 9, 2015, we began trading on the Canadian Securities Exchange under the symbol "MJ".

We are seeking through our subsidiary TL Medicine to become a licensed producer of medical marijuana under Access to Cannabis for Medical Purposes Regulations ("ACMPR") program administered by Health Canada. The ACMPR has replaced the Marihuana for Medical Purposes Regulations ("MMPR") which is the legislation under which we previously submitted our application to Health Canada.

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As of July 7, 2017, we do not have a license under the ACMPR, and none of our products are in commercial production or use. We will be required to satisfy additional obligations in order to qualify including the completion of a compliant facility on a parcel of leased land in Lumby, British Columbia.  There is a significant risk that we will not receive an ACMPR license, thus rendering us unable to proceed with our business model. We continue to work diligently to comply with all of the requirements of Health Canada.

While we are awaiting approval of our license application from Health Canada, we are focused on our new business with hemp-based nutrition for pets. TL Pet has entered the Canadian, American and European natural pet product market with a product line consisting of hemp-based functional chews and supplemental products for pets.  Our initial products were launched in 2015. We have since expanded the jurisdictions in which we are selling our products and have added OregaPet^TM products as of December 30, 2016.

Results of Operations for the Years Ended March 31, 2016 and March 31, 2015

We incurred a net and comprehensive loss of $1,039,320 for the year ended March 31, 2016 compared to a net and comprehensive loss of $2,166,805 for the year ended March 31, 2015.

Some of the items comprising the loss for the year ended March 31, 2016 were accounting and legal fees of $158,899 (2015 - $315,742), consulting fees of $142,848 (2015 - $164,880), and administrative and office expenses of $181,641 (2015 - $145,907).

Results of Operations for the Three-Months ended March 31, 2016 and March 31, 2015

We incurred a net and comprehensive loss of $249,328 for the three months ended March 31, 2016 compared to a net and comprehensive loss of $236,089 for the three months ended March 31, 2015.

Some of the items comprising the loss for the three months ended March 31, 2016 were accounting and legal fees of $59,906 (2015 - $31,868) and consulting fees of $66,110 (2015 - $41,637).

We increased sales by 52% to $17,268 from the previous quarter - a direct result of additional sales to our Canadian distributors.

Our product inventory increased by $21,578 to service immediate future sales to the US and Canada.

Results of Operations for the Nine Months Ended December 31, 2016 and December 31, 2015

We incurred a net and comprehensive loss of $1,371,718 for the nine-month period ended December 31, 2016 compared to a net and comprehensive loss of $795,026 for the nine months' period ended December 31, 2015.

Some of the items comprising the loss for the nine months' period ended December 31, 2016 were accounting and legal fees of $196,398 (2015 $106,622), consulting fees of $202,424 (2015 - $132,597), advertising and marketing costs of $338,310 (2015 $168,068), and research costs of $58,833 (2015 - $8,022).

We increased sales by 100% to $144,390 from the previous quarter, a direct result of additional sales to our Canadian distributors and launched the product to new US and European distributors.

Closing of a private placement of which the company has raised $737,982 in the first quarter and 416, 650 in the third quarter of 2016 and warrant and stock options exercised in the nine month period ended December 31, 2016 increased the ending cash position to $262,866 (2015 $90,830) and decreased the current liabilities to $277,452 from (2015 - $619,055).

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We completed a debt settlement for the convertible note of $63,193 (2015 - $nil) and settled aggregated debt totaling $282,842 (2015 $5,000) during the nine month period ended December 31, 2016.

Gross margins for the nine month period ending December 31, 2016 are still lower than expected and associated with increased promotional and R&D costs attributed to the start-up sales phase for the hemp-based functional chews and supplemental products.

Liquidity and Capital Resources

As at December 31, 2016, we had cash of $262,866 and working capital of $464,028. Our operations during the nine-month period ended December 31, 2016 was funded by two private placements carried out during this period, exercise of warrants and stock options as described below.

On December 12, 2016, the Company granted a total of 2,799,995 stock options, 1,642,875 options of which were to directors and officers of the Company having a fair value of $184,443.

Our current business expenses average approximately $135,000 per month, excluding capital expenditures specific to new product launches.  Currently, we do not have enough cash on hand to sustain our business operations and, alongside expected revenue, we expect to access external capital resources in the near future.

Our independent auditors have expressed the existence of a material uncertainty that may cast significant doubt about our ability to continue as a going concern, we feel that our revenue potential is sufficient for our business to continue as a going concern. Our efforts are focused on increasing revenue while we explore external funding alternatives as our current cash is insufficient to fund operations for the next 12 months.

Subsequent Events

We completed the following share transactions since December 31, 2016:

All of the foregoing securities were issued outside of the United States, purusant to Regulation S.

On May 29, 2017, the Company granted a total of 3,900,000 stock options, 1,400,000 options of which were to directors and officers of the Company.

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Plan of Operations

Our short-term business objectives for the next 12 months are:

1. Successfully complete up to a $5 million private placement which will be used to develop line extensions and increase market share of our pet products in the Canadian, American and European markets .
2. Enter the US and European natural pet product market with a product line consisting of innovative hemp-based functional chews and supplemental products for pets.
3. (Conditional to Health Canada pre-licensing inspection approval,) complete a $2,500,000 financing for construction of production facilities, grow two crops, and obtain approval from Health Canada to be a licensed producer of medical marijuana.

The company's long-term business objectives are:

1.       For the natural pet market:

a.   Carve a niche in the global pet industry with a hemp-focused family of products that are sold in the pet specialty, mass-pet, veterinary, and food/mass/drug market segments.

b.   Review and assess the feasibility of a new animal drug application for a cannabis-based pet medication sold via veterinary prescription in the pet medication market.

2.       For medical marijuana:

a.       Achieve commercial distribution of medical marijuana.

b.       Increase our patient customer base annually through our marketing campaign.

c.        As demand for the product increases, seek to expand production capacity and increase expenditures on research and development.

Trends in Cash Flow, Capital Expenditures and Operating Expenses

We have only recently launched our pet line (in 2015). As a result, we have generated limited revenue from our operations.

We will need to raise additional capital if we are to continue as a going concern. Our inability to raise additional capital in the future will limit or eliminate our ability to implement any business strategy whatsoever. Future debt financings, if available, may result in increased interest expense, increased amortization expense, decreased leverage, and decreased income available to fund further acquisitions or expansion. It may also limit our ability to withstand competitive pressures and render us more vulnerable to economic downturns. Future equity financing may dilute the equity interest of our existing shareholders.

We expect to see a net increase in capital expenditures over the next twelve months as we further activate our business plan. We plan to fund approximately $2 million to $5 million in capital expenditures through the offering above and offerings of our securities outside of the United States.

Related Party Transactions

During the nine-month period ended December 31, 2016, the company:

1. Paid or accrued a total of $45,000 (2015 - $45,000) to Darcy Bomford, Chief Executive Officer for management fees;
2. Paid or accrued a total of $18,000 (2015 - $18,000) to Chuck Austin, Chief Financial Officer for accounting fees; and
3. Paid or accrued a total of $5,625 (2015 - $5,625) in directors' fees to its three independent Directors.

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As at December 31, 2016, the company is indebted to its Chief Executive Officer in the amount of $6,883 (March 31, 2016 $nil) and is indebted as of December 31, 2016 in the amount of $nil (March 31, 2016 $143,648) for management fees and expenses paid on the company's behalf, its Chief Financial Officer in the amount of $nil (March 31, 2016 $14,000) for accounting fees and expenses paid on the Company's behalf and $5,625 (March 31, 2016 $12,060) in director's fees and expense reimbursement to the company's other directors. The amounts are unsecured, non-interest bearing with no scheduled terms of repayment.

On March 19, 2015, the company granted a total of 3,750,000 stock options, 2,000,000 of which were to directors and officers of the company having a fair value of $121,653. During the nine month period ended December 31, 2016, the company recognized $nil (2015 $205,846) in share-based compensation expense associated with the stock options granted to related parties.

On December 12, 2016, the company granted a total of 2,799,995 stock options, 1,642,875 options of which were to directors and officers of the company having a fair value of $184,443.

Going Concern

The consolidated financial statements were prepared on a going concern basis, which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business. For the nine month period ended December 31, 2016, the Company incurred a loss of $1,371,718 and has earned revenues of $272,276. The continued operations of the Company are dependent on its ability to generate future cash flows, or obtain additional funding through private placement financings. Management is of the opinion that it does not have sufficient working capital to fund future operations and will require external financing. There is a risk that financing will not be available on a timely basis or on terms acceptable to the Company. These material uncertainties may cast significant doubt on the Company's ability to continue as a going concern.

The consolidated financial statements do not give effect to any adjustments which would be necessary should the company be unable to continue as a going concern and, therefore, be required to realize its assets and discharge its liabilities in other than the normal course of business and at amounts different from those reflected in the accompanying financial statements.

Off Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Critical Accounting Policies and Estimates

General

Our condensed consolidated interim financial statements have been prepared using accounting policies consistent with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") and interpretations of the International Financial Reporting Interpretations Committee ("IFRIC"), including International Accounting Standard 34, Interim Financial Reporting ("IAS 34").

Principles of Consolidation

These consolidated financial statements incorporate the financial statements of the company and its controlled subsidiaries. Control exists when the company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The consolidated financial statements include the accounts of the company and its direct wholly-owned Canadian subsidiaries: TL Investments, TL Medicine and TL Pet. All significant intercompany transactions and balances have been eliminated on consolidation.

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Cash and cash equivalents

Cash and cash equivalents include cash on hand, bank deposits, and short-term, highly liquid investments that are readily convertible to known amounts of cash and/or with original maturities of three months or less. As of December 31, 2016, and March 31, 2016, the company did not hold any cash equivalents.

Income taxes

Income tax expense consists of current and deferred tax expense.  Income tax expense is recognized in the statement of comprehensive loss.  Current tax expense is the expected tax payable on the taxable income for the period using tax rates enacted or substantively enacted at period end, adjusted for amendments to tax payable with regards to previous periods.

Deferred tax assets and liabilities 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 profits will be available against which the asset can be utilized.  To the extent that we do not consider it probable that a deferred tax asset will be recovered, the deferred tax asset is reduced.

Revenue Recognition

Revenue is measured at the fair value of the consideration received or receivable.  We recognize revenue when the risks and rewards of ownership have been transferred to the buyer, the amount of revenue can be measured reliably and it is probable that future economic benefits will flow to the entity. We do not sell any of our current products on a consignment basis.

Inventories 

Inventories include finished goods and supplies in respect to hemp-based nutrition for pets. The classification of inventories is determined by the stage in the manufacturing process. Finished goods inventories are valued based on the lower of actual production costs incurred or estimated net realizable value. Production costs include all direct manufacturing costs, freight, labor and other. Supplies are valued at the lower of average cost or net realizable value. If carrying value exceeds net realizable amount, a write-down is recognized. The write-down may be reversed in a subsequent period if the circumstances which caused it no longer exist.

Capital assets

Capital assets are carried at cost, less accumulated depreciation and accumulated impairment losses. Depreciation is recognized using the straight-line method at the following rates:

• Office equipment - 5 years
• Leasehold Improvement - 3 years
• Website costs - 3 years 

Costs incurred toward the construction of a research facility on the company's leased land will be deferred and capitalized until the facility is considered substantially complete and ready for use.

Our capital assets are reviewed for an indication of impairment at the end of each reporting period. If an indication of impairment exists, the asset's recoverable amount is estimated. Impairment losses are recognized in profit or loss. An impairment loss is reversed if there is an indication that there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of amortization, if no impairment loss had been recognized.

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Intangible asset

The company owns an intangible asset consisting of costs associated with the acquisition of a trademark.

Intangible assets are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and any accumulated impairment losses. Subsequent expenditures are capitalized only when they increase the future economic benefits embodied in the specific asset to which they relate. All other expenditures are recognized in profit or loss as incurred. The company does not hold any intangible assets with indefinite lives.

Share capital

Common shares are classified as equity. Transaction costs directly attributable to the issue of common shares, warrants and stock options are recognized as a deduction from equity, net of any tax effects. Common shares issued for consideration other than cash are valued based on their market value at the date the shares are issued. 

We have adopted a residual value method with respect to the measurement of shares and warrants issued as private placement units. The residual value method first allocates value to the more easily measurable component based on fair value and then the residual value, if any, to the less easily measurable component. We consider the fair value of common shares issued in the private placements to be the more easily measurable component and the common shares are valued at their estimated fair value. The balance, if any, is allocated to the attached warrants. Any fair value attributed to the warrants is recorded as reserves.

Share-based payments

The company has a stock option plan that provides for the granting of options to Officers, Directors, related company employees and consultants to acquire shares of the company.  The fair value of the options is measured on grant date and is recognized as an expense with a corresponding increase in reserves as the options vest.   

Options granted to employees and others providing similar services are measured at grant date at the fair value of the instruments issued.  Fair value is determined using the Black-Scholes option pricing model taking into account the terms and conditions upon which the options were granted.  The amount recognized as an expense is adjusted to reflect the actual number of share options that are expected to vest.   Each tranche in an award with graded vesting is considered a separate grant with a different vesting date and fair value. Each grant is accounted for on that basis.

Options granted to non-employees are measured at the fair value of the goods or services received, unless their fair value cannot be estimated reliably, in which case the fair value of the equity instruments issued is used.  The value of the goods or services is recorded at the earlier of the vesting date or the date the goods or services are received. 

On vesting, share-based payments are recorded as an operating expense and as reserves.  When options are exercised, the consideration received is recorded as share capital.  In addition, the related share-based payments originally recorded as reserves are transferred to share capital.  When an option is cancelled or expires, the initial recorded value is reversed and charged to reserves.

Financial Instruments

Financial instruments consist of financial assets and financial liabilities and are initially recognized at fair value net of transaction costs, if applicable. Measurement in subsequent periods depends on whether the financial instrument has been classified as "fair value through profit or loss," "loans and receivables," "available-for-sale," "held-to-maturity," or "financial liabilities measured at amortized cost" as follows:

Financial assets

Financial assets classified as fair value through profit or loss are measured at fair value with unrealized gains and losses recognized in net loss for the period in which such gains or losses occur. The company's cash and marketable securities are classified as fair value through profit or loss.

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Financial assets classified as loans and receivables and held-to-maturity are measured at amortized cost using the effective interest rate method. Under this method, all cash flows from these instruments are discounted, where material, to their present value. Over time, this present value is accreted to the future value of remaining cash flows, and this accretion is recorded as interest income. The company does not hold any financial assets that are classified as loans and receivables and no financial assets have been classified as held-to-maturity.

Financial assets classified as available-for-sale are measured at fair value with unrealized gains and losses recognized in other comprehensive income except for losses in value that are considered other than temporary. Upon disposal of an available-for-sale financial asset, any accumulated other comprehensive income or loss at the time of disposal is recognized in profit or loss. The company does not hold any financial assets that have been classified as available-for-sale by the company.

Transaction costs associated with fair value through profit or loss financial assets are expensed as incurred, while transaction costs associated with all other financial assets are included in the initial carrying amount of the asset.

The company assesses, at each reporting date, whether there is objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset and that event has an impact on the estimated future cash flows of the financial asset or group of financial assets.

Financial liabilities

Financial liabilities classified as other financial liabilities are initially recognized at fair value less directly attributable transaction costs. After initial recognition, other financial liabilities are subsequently measured at amortized cost using the effective interest rate method. The effective interest rate method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period. Our accounts payable and accrued liabilities and any amounts due to related parties are classified as other financial liabilities.

Earnings (loss) per share

We present basic and diluted earnings (loss) per share ("EPS") data for our common shares, calculated by dividing the profit or loss attributable to our equity shareholders by the weighted average number of common shares issued and outstanding during the period.  Diluted EPS is calculated by adjusting the profit or loss attributable to equity shareholders and the weighted average number of common shares outstanding for the effects of all potentially dilutive common shares.  The calculation of diluted EPS assumes that the proceeds to be received on the exercise of dilutive stock options and warrants are used to repurchase common shares at the average market price during the period.  For the periods presented, the calculation proved to be anti-dilutive as we were in a loss position.

Recently issued accounting pronouncements

During the nine-month period ended December 31, 2016, there were no new IFRS or IAS accounting standards that became effective that had a material impact on the company's consolidated financial statements. There are however a number of new standards and amendments to existing standards effective in future periods.

The following may impact the reporting and disclosures of the company:

• New standard IFRS 9 "Financial Instruments" This new standard is a partial replacement of IAS 39

Financial Instruments: Recognition and Measurement. This new standard is tentatively effective for annual periods beginning on or after January 1, 2018.

The company has not early adopted the amended and new standards and is currently assessing the impact that these standards will have on its consolidated financial statements.

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Notes:

(1) The business address for each of our directors and officers is: 100 Kalamalka Lake Road, Unit 32, Vernon, British Columbia V1T 9G1.

(2)  The number of common shares beneficially owned, or controlled or directed, directly or indirectly, at the date of this offering circular is based upon information furnished to us by the individual directors.

(3)  Our directors and officers as a group held 27,053,794 of our common shares or 45.79%.

(4)  Mr. Bomford's securities are subject to a stock restriction agreement dated February 2, 2015, entered into at the time we listed on the CSE. As of July 7, 2017, 6,085,336 common shares remain in escrow. On August 15, 2017 and February 15, 2018, an additional 3,651,202 common shares will be released from escrow.

(5)  The 1,363,747 common shares held indirectly by Mr. Bomford are held in the name of First Pacific Enterprises Inc.

(6)  328,570 of these stock options expire on December 12, 2018 and 300,000 stock options expire on May 29, 2019. The 328,570 stock options that expire in 2018 can be exercised to acquire one additional common share at $0.185 per share. The 200,000 stock options that expire in 2019 can be exercised to acquire one addiontal common share at $0.395 per share.

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(7)  300,921 warrants can be exercised to acquire one additional common share at an exercise price of $0.15 prior to May 12, 2018 and are held in the name of First Pacific Enterprises Inc. The remaining 895,237 warrants can be exercised to acquire one additional common share at an exercise price of $0.45 prior to May 29, 2019 and are held directly by Mr. Bomford.

(8)  Mr. Ausitin's securities are subject to a stock restriction agreement dated February 2, 2015, entered into at the time we listed on the CSE. As of July 7, 2017, 112,500 common shares remain in escrow. On August 15, 2017 and February 15, 2018, an additional 37,500 common shares will be released from escrow.

(9)  Includes 9,341,347 common shares held by Darcy Bomford. Other than Mr. Bomford, management is unaware of the beneficial holders of the shares registered in the name of CDS & Co., a depositary trust company. CDS& Co has several offices in Canada including: 650 West Georgia Street, Suite 2700, Vancouver, BC, V6B 4N9.

(10)  992,475 warrants can be exercised to acquire one additional common share at an exercise price of $0.15 prior to January 18, 2018 and 523,923 warrants can be exercised to acquire one additional common share at an exercise price of $0.15 prior to August 11, 2017.

(11) These stock options expire on May 29, 2019. They can be exercised to acquire one additional common share at $0.395 per share.

(12) The warrants can be exercised to acquire one additional common share at an exercise price of $0.55 prior to June 12, 2019.

INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS

To the best of our knowledge other than as set forth below, since the date of the company's formation on June 9, 2014, there were no material transactions or series of similar transactions nor were there any currently proposed transactions or series of similar transactions to which we were or are to be a party to in which the amount involved exceeds the lesser of $120,000 or one percent of the average of our assets at year end for the last two completed fiscal years. To the best of our knowledge, there have been no transactions in which any director, executive officer, or security holder is known by us to own of record or beneficially more than 5% of any class of our common shares or any member of the immediate family of any of the foregoing persons has an interest (other than compensation to our officers and directors in the ordinary course of business).

Management Agreements

On May 1, 2014, we entered into an executive management agreement with our Chief Executive Officer, Darcy Bomford. The terms of the agreement are as described above under "Compensation of Directors and Executive Officers - Management Agreements".

On June 20, 2014, we entered into an executive consulting agreement with our Chief Financial Officer, Chuck Austin. The terms of the agreement are as described above under "Compensation of Directors and Executive Officers - Management Agreements".

Lease Agreement

On April 1, 2015, we entered into a lease agreement with our Chief Executive Officer, Darcy Bomford. The terms of the agreement are described above under "Description of Property".

SECURITIES BEING OFFERED

General

The company is offering up to 14,285,715 common shares.

Our authorized share capital consists of an unlimited number of common shares without par value and an unlimited number of preferred shares without par value. As of July 7, 2017, 69,239,577 common shares and no preferred shares were issued and outstanding, 6,064,285 common shares were issuable upon exercise of outstanding stock options, and 9,950,041 common shares were issuable upon exercise of warrants.

The following description summarizes the most important terms of the company's capital stock. This summary does not purport to be complete and is qualified in its entirety by the provisions of True Leaf's constating documents. Copies of these provisions have been filed as exhibits to the offering statement of which this offering circular is a part. For a complete description of True Leaf's common shares and preferred shares, you should refer to our notice of articles and to the applicable provisions of the BCA.

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Common Shares

Dividend Rights

"Holders of common shares are entitled to share - on a per share basis - in dividends and other distributions of cash, property, or shares of stock of the company as may be declared by the board of directors with respect to the common share out of assets or funds of the company legally available to pay dividends; provided, however, that In the event that such dividends are paid in the form of common shares or rights to acquire common shares, the holders of common shares shall receive common shares or rights to acquire common shares, as the case may be.

Voting Rights

Each holder of our common share is entitled to receive notice of any meeting of the shareholders of the company, to attend such a meeting, and to vote at the meeting. Each common share holds one vote per share on matters to be voted on by shareholders.

Liquidation Rights

Rights and Preferences

TRUE LEAF MEDICINE INTERNATIONAL LTD.
Consolidated Statements of Financial Position

(Expressed in Canadian dollars)

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

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TRUE LEAF MEDICINE INTERNATIONAL LTD.
Consolidated Statements of Loss and Comprehensive Loss

(Expressed in Canadian dollars)

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

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TRUE LEAF MEDICINE INTERNATIONAL LTD.
Consolidated Statements of Changes in Shareholders' Equity (Deficit)

(Expressed in Canadian dollars)

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

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TRUE LEAF MEDICINE INTERNATIONAL LTD.
Consolidated Statements of Cash Flow

(Expressed in Canadian dollars)

Supplemental disclosure with respect to cash flow (Note 13)

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

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TRUE LEAF MEDICINE INTERNATIONAL LTD.
Notes to Consolidated Financial Statements
March 31, 2016

(Expressed in Canadian dollars)

1.         NATURE OF OPERATIONS AND GOING CONCERN

True Leaf Medicine International Ltd. (the "Company") was incorporated under the Business Corporations Act of the Province of British Columbia on June 9, 2014 and is the legal parent of True Leaf Investments Corp. ("TL Investments"), True Leaf Medicine Inc. ("TL Medicine") and True Leaf Pet Inc. ("TL Pet"). TL Investments, TL Medicine and TL Pet were all incorporated under the Business Corporations Act of the Province of British Columbia on March 26, 2014, July 4, 2013 and November 18, 2015 respectively. The Company's head office and registered office is located at Suite 1820, 925 West Georgia Street, Vancouver, BC V6C 3L2.

On May 23, 2014, TL Investments completed a Share Exchange Agreement with TL Medicine in which TL Investments issued 25,000,000 common shares valued at $1,250,000 for all of the outstanding common shares of TL Medicine (Note 4). The Share Exchange Agreement constituted a reverse takeover, with the sole shareholder of TL Medicine acquiring a control position in TL Investments.

On February 2, 2015, the Company executed a Plan of Arrangement as further described in Note 5. The Plan of Arrangement constituted a reverse takeover, with the shareholders of TL Investments acquiring a control position in the Company. As a result of the Plan of Arrangement, the consolidated financial statements have been presented as a continuation of TL Medicine. On February 9, 2015, the Company began trading on the Canadian Securities Exchange (the "CSE") under the symbol "MJ".

The Company, through TL Medicine, is seeking to become a licensed producer of medical marijuana under Canada's Marihuana for Medical Purposes Regulations ("MMPR") program administered by Health Canada. As at March 31, 2016, the Company does not have a license with the MMPR and no products are in commercial production or use. The Company has not been granted an MMPR license and will be required to satisfy additional obligations in order to qualify including the completion of a compliant facility on a parcel of leased land in Lumby, British Columbia. There is a significant risk that the Company will not receive an MMPR license, thus rendering the Company unable to proceed with its business model. The Company continues to work diligently to comply with all of the requirements of Health Canada.

As the Company awaits approval of its license application from Health Canada it is looking at new opportunities with hemp-based nutrition for pets. TL Pet has entered the Canadian market and is planning to enter the US natural pet product market with a product line consisting of hemp-based functional chews and supplemental products for pets.

(a)     Going Concern

These consolidated financial statements have been prepared on the going concern basis, which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business. For the year ended March 31, 2016, the Company incurred a loss of $1,039,320 and has earned $37,330 in revenues since inception, all of which was associated with the Company`s TL Pet operations during the current year. The continued operations of the Company are dependent on its ability to generate future cash flows or obtain additional funding through private placement financings. Management is of the opinion that it does not have sufficient working capital to fund future operations and will require external financing. There is a risk that financing will not be available on a timely basis or on terms acceptable to the Company. These material uncertainties may cast significant doubt on the Company's ability to continue as a going concern.

These consolidated financial statements do not give effect to any adjustments which would be necessary should the Company be unable to continue as a going concern and, therefore, be required to realize its assets and discharge its liabilities in other than the normal course of business and at amounts different from those reflected in the accompanying financial statements.

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TRUE LEAF MEDICINE INTERNATIONAL LTD.
Notes to Consolidated Financial Statements
March 31, 2016
(Expressed in Canadian dollars)

2.         BASIS OF PREPARATION

(a)     Statement of Compliance

These consolidated financial statements have been prepared using accounting policies consistent with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") and interpretations of the International Financial Reporting Interpretations Committee ("IFRIC"). These consolidated financial statements were authorized for issue by its Directors on April 19, 2017.

(b)     Principles of consolidation

These consolidated financial statements incorporate the financial statements of the Company and its controlled subsidiaries.  Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities.  The consolidated financial statements include the accounts of the Company and its direct wholly-owned Canadian subsidiaries: TL Investments, TL Medicine and TL Pet. All significant intercompany transactions and balances have been eliminated on consolidation.

(c)     Basis of Measurement and Use of Estimates

The consolidated financial statements have been prepared on a historical cost basis, except for certain financial instruments which are measured at fair value. All amounts on the consolidated financial statements are presented in Canadian dollars which is the functional currency of the Company and its subsidiaries.

The preparation of these consolidated financial statements requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and reported amounts of expenses during the period. These estimates are, by their nature, uncertain. The impacts of such estimates are pervasive throughout the consolidated financial statements, and may require accounting adjustments based on future occurrences. Revisions to accounting estimates are recognized in the period in which the estimate is revised and future periods if the revision affects both current and future periods. These estimates are based on current and future economic conditions and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Significant assumptions about the future and other sources of estimation uncertainty that management has made at the reporting date that could result in a material adjustment to the carrying amounts of assets and liabilities, in the event that actual results differ from assumptions made, relate to, but are not limited to, the following:

(i)       Share-based payments and compensation

The Company has applied estimates with respect to the valuation of shares issued for non-cash consideration and shares determined to have been issued at a discount. Shares are valued at the fair value of the equity instruments granted at the date the Company receives the goods or services.

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TRUE LEAF MEDICINE INTERNATIONAL LTD.
Notes to Consolidated Financial Statements
March 31, 2016
(Expressed in Canadian dollars)

2.        BASIS OF PREPARATION (cont'd...)

(i)       Share-based payments and compensation (cont'd...)

Prior to listing on the Exchange, the Company estimated the fair value of shares issued with reference to private placements with arm's length parties. The Company continues to be thinly traded and will continue this basis for measurement until such time that an active market is established for the Company's equity.

The Company measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. Estimating fair value for share- based payment transactions requires determining the most appropriate valuation model, which is dependent on the terms and conditions of the grant.

(ii)        Income taxes

The determination of income tax is inherently complex and requires making certain estimates and assumptions about future events. While income tax filings are subject to audits and reassessments, the Company has adequately provided for all income tax obligations. However, changes in facts and circumstances as a result of income tax audits, reassessments, jurisprudence and any new legislation may result in an increase or decrease in the Company's provision for income taxes.

3.         SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Financial instruments

Financial instruments consist of financial assets and financial liabilities and are initially recognized at fair value net of transaction costs, if applicable. Measurement in subsequent periods depends on whether the financial instrument has been classified as "fair value through profit or loss," "loans and receivables," "available-for-sale," "held-to-maturity," or "other financial liabilities" as follows:

(i) Financial assets

Financial assets classified as fair value through profit or loss are measured at fair value with unrealized gains and losses recognized in net loss for the period in which such gains or losses occur. The Company's cash and marketable securities are classified as fair value through profit or loss.

Financial assets classified as loans and receivables and held-to-maturity are measured at amortized cost using the effective interest rate method. Under this method, all cash flows from these instruments are discounted, where material, to their present value.  Over time, this present value is accreted to the future value of remaining cash flows, and this accretion is recorded as interest income. Certain of the Company's receivables are classified as loans and receivables and no financial assets have been classified as held-to-maturity.

Financial assets classified as available-for-sale are measured at fair value with unrealized gains and losses recognized in other comprehensive income except for losses in value that are considered other than temporary. Upon disposal of an available-for-sale financial asset, any accumulated other comprehensive

income or loss at the time of disposal is recognized in profit or loss. The Company does not hold any financial assets that have been classified as available-for-sale by the Company.

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TRUE LEAF MEDICINE INTERNATIONAL LTD.
Notes to Consolidated Financial Statements
March 31, 2016
(Expressed in Canadian dollars)

3.        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd...)

Financial instruments (cont'd...)

Transaction costs associated with fair value through profit or loss financial assets are expensed as incurred, while transaction costs associated with all other financial assets are included in the initial carrying amount of the asset.

The Company assesses, at each reporting date, whether there is objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset and that event has an impact on the estimated future cash flows of the financial asset or group of financial assets.

ii) Financial liabilities

Financial liabilities classified as other financial liabilities are initially recognized at fair value less directly attributable transaction costs. After initial recognition, other financial liabilities are subsequently measured at amortized cost using the effective interest rate method. The effective interest rate method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period. The Company's accounts payable and accrued liabilities, debt component of convertible debt and amounts due to related parties are classified as other financial liabilities.

             Cash and cash equivalents

Cash and cash equivalents include cash on hand, bank deposits and short-term, highly liquid investments that are readily convertible to known amounts of cash and/or with original maturities of three months or less. As at March 31, 2016 and 2015, the Company did not hold any cash equivalents.

            Share capital

Common shares are classified as equity. Transaction costs directly attributable to the issue of common shares, warrants and stock options are recognized as a deduction from equity, net of any tax effects. Common shares issued for consideration other than cash are valued based on their market value at the date the shares are issued.

The Company has adopted a residual value method with respect to the measurement of shares and warrants issued as private placement units. The residual value method first allocates value to the more easily measurable component based on fair value and then the residual value, if any, to the less easily measurable component.

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TRUE LEAF MEDICINE INTERNATIONAL LTD.
Notes to Consolidated Financial Statements
March 31, 2016
(Expressed in Canadian dollars)

3.         SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd...)

Share capital (cont'd…)

The Company considers the fair value of common shares issued in the private placements to be the more easily measurable component and the common shares are valued at their estimated fair value. The balance, if any, is allocated to the attached warrants. Any fair value attributed to the warrants is recorded as reserves.

Share-based payments

The Company has a stock option plan that provides for the granting of options to Officers, Directors, related company employees and consultants to acquire shares of the Company.  The fair value of the options is measured on grant date and is recognized as an expense with a corresponding increase in reserves as the options vest.  

Options granted to employees and others providing similar services are measured at grant date at the fair value of the instruments issued.  Fair value is determined using the Black-Scholes option pricing model taking into account the terms and conditions upon which the options were granted.  The amount recognized as an expense is adjusted to reflect the actual number of share options that are expected to vest.   Each tranche in an award with graded vesting is considered a separate grant with a different vesting date and fair value. Each grant is accounted for on that basis. 

Options granted to non-employees are measured at the fair value of the goods or services received, unless that fair value cannot be estimated reliably, in which case the fair value of the equity instruments issued is used.  The value of the goods or services is recorded at the earlier of the vesting date, or the date the goods or services are received.

On vesting, share-based payments are recorded as an operating expense and as reserves.  When options are exercised the consideration received is recorded as share capital.  In addition, the related share-based payments originally recorded as reserves are transferred to share capital.  When an option is cancelled or expires, the initial recorded value is reversed and charged to reserves.

    Revenue Recognition

Revenue is measured at the fair value of the consideration received or receivable.  The Company recognizes revenue when the risks and rewards of ownership have been transferred to the buyer, the amount of revenue can be measured reliably and it is probable that future economic benefits will flow to the entity. The Company does not sell any of its current products on a consignment basis.

    Earnings (loss) per share

The Company presents basic and diluted earnings (loss) per share ("EPS") data for its common shares, calculated by dividing the profit or loss attributable to equity shareholders of the Company by the weighted average number of common shares issued and outstanding during the period.  Diluted EPS is calculated by adjusting the profit or loss attributable to equity shareholders and the weighted average number of common shares outstanding for the effects of all potentially dilutive common shares.  The calculation of diluted EPS assumes that the proceeds to be received on the exercise of dilutive stock options and warrants are used to repurchase common shares at the average market price during the period.  For the periods presented, the calculation proved to be anti-dilutive as the Company was in a loss position.

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TRUE LEAF MEDICINE INTERNATIONAL LTD.
Notes to Consolidated Financial Statements
March 31, 2016
(Expressed in Canadian dollars)

3.         SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd...)

    Income taxes

Income tax expense consists of current and deferred tax expense.  Income tax expense is recognized in the statement of loss and comprehensive loss.  Current tax expense is the expected tax payable on the taxable income for the period, using tax rates enacted or substantively enacted at period end, adjusted for amendments to tax payable with regards to previous periods.

Deferred tax assets and liabilities 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 profits will be available against which the asset can be utilized.  To the extent that the Company does not consider it probable that a deferred tax asset will be recovered, the deferred tax asset is reduced.

            Inventories

Inventories include finished goods and supplies in respect of hemp-based nutrition for pets. The classification of inventories is determined by the stage in the manufacturing process. Finished goods inventories are valued based on the lower of actual production costs incurred or estimated net realizable value. Production costs include all direct manufacturing costs, freight, labour and other. Supplies are valued at the lower of average cost or net realizable value. If carrying value exceeds net realizable amount, a write-down is recognized. The write-down may be reversed in a subsequent period if the circumstances which caused it no longer exist.

Capital assets

Capital assets are carried at cost, less accumulated depreciation and accumulated impairment losses. Depreciation is recognized using the straight-line method at the following rates:

Office equipment - 5 years

Website costs - 3 years

Costs incurred toward the construction of a research facility on the Company's leased land will be deferred and capitalized until the facility is considered substantially complete and ready for use.

The Company's capital assets are reviewed for an indication of impairment at the end of each reporting period. If an indication of impairment exists, the asset's recoverable amount is estimated. Impairment losses are recognized in profit or loss. An impairment loss is reversed if there is an indication that there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of amortization, if no impairment loss had been recognized.

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TRUE LEAF MEDICINE INTERNATIONAL LTD.
Notes to Consolidated Financial Statements
March 31, 2016
(Expressed in Canadian dollars)

3.         SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd...)

Intangible asset

The Company owns an intangible asset consisting of costs associated with the acquisition of a trademark. Intangible assets are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and any accumulated impairment losses. Subsequent expenditures are capitalized only when they increase the future economic benefits embodied in the specific asset to which they relate. All other expenditures are recognized in profit or loss as incurred. The Company does not hold any intangible assets with indefinite lives.

Provisions

Provisions are recorded when a present legal, statutory or constructive obligation exists as a result of past events where it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made. The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the statement of financial position date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, if the effect is material, its carrying amount is the present value of those cash flows.

New standards not yet adopted

During the year ended March 31, 2016, there were no new IFRS or IAS accounting standards that became effective that had a material impact on the Company's consolidated financial statements. There are however a number of new standards and amendments to existing standards effective in future periods.

The following may impact the reporting and disclosures of the Company:

• Amendment to IFRS 7 Financial Instruments - Disclosures Changes were made to the offsetting of certain interim disclosures and the effective date is April 1, 2016.
• Amendment to IAS 34 - Interim Financial Reporting Changes were made to clarifying the reporting of redundant information and the effective date is April 1, 2016.
• New standard IFRS 9 "Financial Instruments" This new standard is a partial replacement of IAS 39 Financial Instruments: Recognition and Measurement. This new standard is tentatively effective for annual periods beginning on or after January 1, 2018.

The Company has not early adopted the amended and new standards and is currently assessing the impact that these standards will have on its consolidated financial statements.

On May 23, 2014, pursuant to the terms of the Share Exchange Agreement (the "Agreement"), TL Investments acquired 100% of the issued and outstanding capital stock of TL Medicine by issuing 25,000,000 common shares representing one common share of TL Investments for every ten common shares of TL Medicine. 

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TRUE LEAF MEDICINE INTERNATIONAL LTD.
Notes to Consolidated Financial Statements
March 31, 2016
(Expressed in Canadian dollars)

As a result of the Agreement, the former shareholder of TL Medicine (for accounting purposes) is considered to have acquired control of TL Investments. Accordingly, the Agreement has been accounted for as a reverse takeover. As TL Investments did not meet the definition of a business the transaction was accounted for as a purchase of the net assets (liabilities) of TL Investments. The net purchase price was determined as an equity settled share-based payment under IFRS 2, Share-based Payment. As TL Medicine is deemed to be the acquirer for accounting purposes, its assets and liabilities and operations since incorporation on July 4, 2013 are included in the consolidated financial statements at their historical carrying value. The consolidated financial statements are a continuation of TL Medicine in accordance with accounting standards. TL Investments' results of operations are included from May 23, 2014 onwards.

At the time of the execution of the Agreement, TL Investments was in a net liability position as follows:

On completion of the Agreement, TL Medicine recognized transaction costs of $1,322,402 associated with the acquisition of TL Investments, representing the fair value of the 25,000,000 common shares issued ($1,250,000), 550,000 common shares valued at $27,500 issued as finders' shares, as well as the net liabilities assumed on execution of the Agreement.

5.         PLAN OF ARRANGEMENT

In June 2014, the Company entered into a Plan of Arrangement (the "Arrangement") with Noor Energy Corporation ("Noor"), which was the former parent of the Company, and TL Investments for the purpose of becoming a publicly traded entity. The Arrangement was executed on February 2, 2015. Pursuant to the terms of the Arrangement:

(i)         TL Investments purchased all the issued and outstanding shares of the Company (the "Purchase Shares") from Noor for consideration of $20,000 (paid);

(ii)        The Company acquired all of the 37,083,330 outstanding shares of TL Investments from the TL Investments shareholders through a 1-for-1 share exchange;

(iii)       Noor issued 5,000 of its common shares to the Company and received in exchange 355,000 common shares of the Company (the "Distribution Shares");

(iv)       The Distribution Shares were distributed as dividends to Noor's shareholders on a pro rata basis; and

(v)        The Purchase Shares were then cancelled.

88

TRUE LEAF MEDICINE INTERNATIONAL LTD.
Notes to Consolidated Financial Statements
March 31, 2016
(Expressed in Canadian dollars)

5.       PLAN OF ARRANGEMENT (cont'd…)

As a result of the Arrangement, the former shareholders of TL Investments (for accounting purposes) are considered to have acquired control of the Company. Accordingly, the Arrangement has been accounted for as a reverse takeover. As the Company did not meet the definition of a business, the transaction was accounted for as a purchase of the net assets of the Company. The net purchase price was determined as an equity settled share-based payment under IFRS 2, Share-based Payment. TL Medicine is deemed to be the acquirer for accounting purposes. The consolidated financial statements are a continuation of TL Medicine in accordance with accounting standards. The Company's results of operations are included from February 2, 2015 onwards. At the time of the execution of the Arrangement, the Company had net assets totaling $1 consisting of a nominal cash balance with no other assets or liabilities.

The listing expense of $49,949 was determined as follows:

(i)         Number of common shares of TL Investments held by former TL Investments shareholders outstanding prior to the RTO was 37,083,330 or 99.97% of the combined entity.

(ii)        Number of outstanding shares of the Company prior to the RTO is determined to be 10,000 or 0.03% of the combined entity.

(iii)       Estimated fair value of TL Investments being $5,562,500 based on the financing price of $0.15 per common share being completed concurrently with the RTO being executed. The Company had a fair value of $1,500 under these measurements.

(iv)       The difference between the fair value of the 200,000 shares (net of 155,000 shares subsequently returned to treasury and cancelled) issued ($30,000) being the consideration paid and the estimated fair value of the net assets of the Company of $1, in addition to the payment made to the Noor shareholders of $20,000 (net of the fair value of the 5,000 common shares of Noor that were received of $50), amounts to a listing expense of $49,949.

Upon issuance of the Distribution Shares, 155,000 shares were returned to treasury and immediately cancelled in accordance with the Arrangement.

6.         RECEIVABLES AND INVENTORIES

                Receivables

Trade receivables are non-interest bearing and are due within 30 days. As at March 31, 2016, the Company did not have any trade receivables that were past due. The Company's allowance for doubtful accounts at March 31, 2016 was $nil (2015 - $nil).

89

TRUE LEAF MEDICINE INTERNATIONAL LTD.
Notes to Consolidated Financial Statements
March 31, 2016
(Expressed in Canadian dollars)

6.         RECEIVABLES AND INVENTORIES (cont'd…)

During the year ended March 31, 2016, revenues from the two largest customers amounted to 96.57% of total sales. As at March 31, 2016, these two customers amounted to 99.9% of total trade receivables.

            Inventories

During the year ended March 31, 2016, the Company wrote off $2,081 (2015 - $nil) associated with inventory obsolescence.

7.         MARKETABLE SECURITIES

             In connection with the Arrangement (Note 5), the Company received 5,000 common shares of Noor Energy Corporation valued at $0.01 per share.

8.         CAPITAL ASSETS

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