Form 6-K ORGANIGRAM HOLDINGS INC. For: Nov 30

January 11, 2022 3:31 PM EST

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of January 2022
Commission File Number: 001-39240
ORGANIGRAM HOLDINGS INC.
(Translation of registrant’s name into English)

35 English Drive
Moncton,New Brunswick,Canada E1E 3X3
(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F [ ]           Form 40-F [ X ]
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  [ ]
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): [ ]






SUBMITTED HEREWITH

Exhibits
Management's Discussion and Analysis for the three months ended November 30, 2021
Condensed Consolidated Interim Unaudited Financial Statements for the three months ended November 30, 2021
Form 52-109F2 - Certification of Interim Filings of Chief Executive Officer dated January 11, 2022
Form 52-109F2 - Certification of Interim Filings of Chief Financial Officer dated January 11, 2022
News Release announcing results for the three months ended November 30, 2021 dated January 11, 2022





SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

ORGANIGRAM HOLDINGS INC.



/s/ Derrick West
Derrick West
Chief Financial Officer

Date: January 11, 2022







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INTRODUCTION
This Management’s Discussion and Analysis dated January 10, 2022 (this “MD&A”), should be read in conjunction with the condensed consolidated interim financial statements (the “Interim Financial Statements”) of Organigram Holdings Inc. (the “Company” or “Organigram”) for the three months ended November 30, 2021 (“Q1 Fiscal 2022”) and the audited consolidated financial statements for the year ended August 31, 2021 (the “Annual Financial Statements”), including the accompanying notes thereto.

Financial data in this MD&A is based on the Interim Financial Statements of the Company for the three months ended November 30, 2021, and has been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting as issued by the International Accounting Standards Board (“IASB”), unless otherwise stated. All financial information in this MD&A is expressed in thousands of Canadian dollars (“$”), except for share and per share calculations, references to $ millions and $ billions, per gram (“g”) or kilogram (“kg”) of dried flower and per milliliter (“mL”) or liter (“L”) of cannabis oil calculations.

This MD&A contains forward-looking information within the meaning of applicable securities laws, and the use of non-IFRS measures. Refer to “Cautionary Statement Regarding Forward-Looking Information” and “Cautionary Statement Regarding Certain Non-IFRS Measures” included within this MD&A.

The financial data in this MD&A contains certain financial and operational performance measures that are not defined by and do not have any standardized meaning under International Financial Reporting Standards (“IFRS”) but are used by management to assess the financial and operational performance of the Company. These include, but are not limited to, the following:

Yield per plant (in grams);
Plants per room;
Target production capacity;
Adjusted gross margin; and
Adjusted EBITDA.

The Company believes that these non-IFRS financial measures and operational performance measures, in addition to conventional measures prepared in accordance with IFRS, enable investors to evaluate the Company’s operating results, underlying performance and prospects in a similar manner to the Company’s management. The non-IFRS financial performance measures are defined in the sections in which they appear. Adjusted gross margin and adjusted EBITDA are reconciled to IFRS in the “Financial Review and Discussion of Operations” section of this MD&A.

As there are no standardized methods of calculating these non-IFRS measures, the Company’s approaches may differ from those used by others, and the use of these measures may not be directly comparable. Accordingly, these non-IFRS measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.

The Company’s wholly-owned subsidiary, Organigram Inc., is a licensed producer of cannabis and cannabis derived products (a “Licensed Producer” or “LP”) under the Cannabis Act (Canada) and the Cannabis Regulations (Canada) (together, the “Cannabis Act”) and regulated by Health Canada. The Company’s wholly-owned subsidiaries, The Edibles and Infusions Corporation (“EIC”) and Laurentian Organic Inc. ("Laurentian") are also licensed under the Cannabis Act as described below.

The Company’s head and registered office is located at 35 English Drive, Moncton, New Brunswick, E1E 3X3. The Company’s common shares (“Common Shares”) are listed under the ticker symbol “OGI” on both the Nasdaq Global Select Market (“NASDAQ”) and on the Toronto Stock Exchange (“TSX”). Any inquiries regarding the Company may be directed by email to investors@organigram.ca.

Additional information relating to the Company, including the Company’s most recent annual information form (the “AIF”), is available under the Company’s issuer profile on the Canadian Securities Administrators’ System for Electronic Document Analysis and Retrieval (“SEDAR”) at www.sedar.com. The Company’s reports and other information filed with or furnished to the United States Securities and Exchange Commission (“SEC”) are available on the SEC’s Electronic Document Gathering and Retrieval System (“EDGAR”) at www.sec.gov.

MANAGEMENT’S DISCUSSION AND ANALYSIS | FOR THE THREE MONTHS ENDED NOVEMBER 30, 2021 AND 2020    1


CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
Certain information herein contains or incorporates comments that constitute forward-looking information within the meaning of applicable securities legislation (“forward-looking information”). Forward-looking information, in general, can be identified by the use of forward-looking terminology such as “outlook”, “objective”, “may”, “will”, “could”, “would”, “might”, “expect”, “intend”, “estimate”, “anticipate”, “believe”, “plan”, “continue”, “budget”, “schedule” or “forecast” or similar expressions suggesting future outcomes or events. They include, but are not limited to, statements with respect to expectations, forecasts or other characterizations of future events or circumstances, and the Company’s objectives, goals, strategies, beliefs, intentions, plans, estimates, projections and outlook, including statements relating to the Company’s plans and objectives, or estimates or predictions of actions of customers, suppliers, partners, distributors, competitors or regulatory authorities; and statements regarding the Company’s future economic performance. These statements are not historical facts but instead represent management beliefs regarding future events, many of which by their nature are inherently uncertain and beyond management control. Forward-looking information has been based on the Company’s current expectations about future events.

Certain forward-looking information in this MD&A includes, but is not limited to the following:

Moncton Campus (as defined herein) and Winnipeg Facility (as defined herein) licensing and target production capacity and timing thereof;
Expectations regarding production capacity, facility size, THC (as defined herein) content, costs and yields;
Expectations regarding the prospects of the Company’s collaboration with a wholly-owned subsidiary of British American Tobacco plc (together, "BAT");
Expectations regarding the prospects for the Company’s subsidiary EIC;
Expectations regarding the prospects for the Company's newly acquired subsidiary Laurentian (as defined below);
The impact of the current global health crisis caused by COVID-19 (as defined below);
Expectations around demand for cannabis and related products, future opportunities and sales, including the relative mix of medical versus adult-use recreational products, the relative mix of products within the adult-use recreational category including wholesale, the Company’s financial position, future liquidity and other financial results;
Legislation of additional cannabis types and forms for adult-use in Canada including regulations relating thereto and the implementation thereof and our future product forms;
Expectations around branded products and derivative-based products with respect to timing, launch, product attributes, composition and consumer demand;
Strategic investments and capital expenditures, and expected related benefits;
Expectations regarding the resolution of litigation and other legal proceedings;
The general continuance of current, or where applicable, assumed industry conditions;
Changes in laws, regulations and guidelines, including those relating to the recreational and/or medical cannabis markets domestically and internationally;
The price of cannabis and derivative cannabis products;
Expectations around the availability and introduction of new genetics including consistency and quality of plants and the characteristics thereof;
The impact of the Company’s cash flow and financial performance on third parties, including its supply partners;
Fluctuations in the price of Common Shares and the market for the Common Shares;
The treatment of the Company’s business under governmental regulatory regimes and tax laws, including the Excise Act (as defined herein) and the renewal of the Company’s licenses thereunder and the Company’s ability to obtain export licenses from time to time;
The Company’s growth strategy, targets for future growth and forecasts of the results of such growth;
Expectations concerning access to capital and liquidity and the Company’s ability to access the public markets to fund operational activities and growth;
The Company’s ability to remain listed on the TSX and NASDAQ and the impact of any actions it may be required to take to remain listed;
The ability of the Company to generate cash flow from operations and from financing activities;
The competitive conditions of the industry, including the Company’s ability to maintain or grow its market share;
Moncton Campus (as defined below) and Laurentian expansion plans, capital expenditures, current and targeted production capacity and timing thereof; and
Expectations concerning Fiscal 2022 performance including with respect to revenue, adjusted gross margins and SG&A.

Forward-looking information is provided for the purposes of assisting the reader in understanding the Company and its business, operations, risks, financial performance, financial position and cash flows as at and for the periods ended on certain dates, and to present information about management’s current expectations and plans relating to the future, and the reader is cautioned that such statements may not be appropriate for other purposes. In addition, this MD&A may contain forward-looking information attributed to third party industry sources. Undue reliance should not be placed on forward-looking
MANAGEMENT’S DISCUSSION AND ANALYSIS | FOR THE THREE MONTHS ENDED NOVEMBER 30, 2021 AND 2020    2


information, as there can be no assurance that the plans, intentions or expectations upon which they are based will occur. Forward-looking information does not guarantee future performance and involves known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in the forward-looking information. By its nature, forward-looking information involves numerous assumptions, known and unknown risks and uncertainties, both general and specific, that contribute to the possibility that the expectations, predictions, forecasts, projections and conclusions will not occur or prove accurate, that assumptions may not be correct, and that objectives, strategic goals and priorities will not be achieved. These and other factors that may cause actual results or events to differ materially from those anticipated in the forward-looking information.

Factors that could cause actual results to differ materially from those set forth in forward-looking information include, but are not limited to: financial risks; dependence on senior management, the board of directors of the Company (the “Board of Directors”), consultants and advisors; availability and sufficiency of insurance including continued availability and sufficiency of director and officer and other forms of insurance; the Company and its subsidiaries being able to, where applicable, cultivate cannabis pursuant to applicable law and on the currently anticipated timelines; industry competition; general economic conditions and global events, including COVID-19 retail store closures or reduced sales at retail stores or otherwise due to COVID-19; heightened economic and industry uncertainty as a result of COVID-19 and governmental action in respect thereto, including with respect to impacts on production, operations, product development, new product launches, disclosure controls and procedures or internal control over financial reporting, including as they may be impacted by delays in remediation due to work from home policies and other COVID-19 impacts, demand for products and services, third-party suppliers or service providers, and any existing or new international business partnerships; production facilities running at less than full capacity due to reduced workforce for reasons related to COVID-19 (as described herein) and market demand; potential supply chain and distribution disruptions; product development, facility and technological risks; changes to government laws, regulations or policy, including environmental or tax, or the enforcement thereof; agricultural risks; ability to maintain any required licenses or certifications; supply risks; product risks; construction delays or postponements; packaging and shipping logistics; expected number of medical and adult-use recreational cannabis users in Canada and internationally; potential time frame for the implementation of legislation to legalize cannabis internationally; the Company’s, its subsidiaries' and its investees’ ability to, where applicable, obtain and/or maintain their status as Licensed Producers (as defined herein) or other applicable licenses; risk factors affecting its investees; availability of any required financing on commercially attractive terms or at all; the potential size of the regulated adult-use recreational cannabis market in Canada; demand for and changes in the Company’s cannabis and related products, including the Company’s derivative products (as defined herein), and the sufficiency of the retail networks to supply such demand; ability to enter and participate in international market opportunities; general economic, financial market, regulatory, industry and political conditions affecting the Company; the ability of the Company to compete in the cannabis industry and changes in the competitive landscape; a material decline in cannabis prices; the Company’s ability to manage anticipated and unanticipated costs; the Company’s ability to implement and maintain effective internal control over financial reporting and disclosure controls and procedures; and, other risks and factors described from time to time in the documents filed by the Company with securities regulators. Material factors and assumptions used in establishing forward-looking information include that construction and production activities will proceed as planned, and demand for cannabis and related products will change in the manner expected by management, in each case after taking into account any impacts related to COVID-19 that are currently known or predicted by management based on the limited information available and the fluidity and uncertainty of the crisis. All forward-looking information is provided as of the date of this MD&A.

The Company does not undertake to update any such forward-looking information whether as a result of new information, future events or otherwise, except as required by law.

ADDITIONAL INFORMATION ABOUT THE ASSUMPTIONS, RISKS AND UNCERTAINTIES OF THE COMPANY’S BUSINESS AND MATERIAL FACTORS OR ASSUMPTIONS ON WHICH INFORMATION CONTAINED IN FORWARD-LOOKING INFORMATION IS BASED IS PROVIDED IN THE COMPANY’S DISCLOSURE MATERIALS, INCLUDING IN THIS MD&A UNDER “RISK FACTORS” AND THE COMPANY’S CURRENT AIF UNDER “RISK FACTORS”, FILED WITH THE SECURITIES REGULATORY AUTHORITIES IN CANADA AND AVAILABLE UNDER THE COMPANY’S ISSUER PROFILE ON SEDAR AT WWW.SEDAR.COM, AND FILED WITH OR FURNISHED TO THE SEC AND AVAILABLE ON EDGAR AT WWW.SEC.GOV. ALL FORWARD-LOOKING INFORMATION IN THIS MD&A IS QUALIFIED BY THESE CAUTIONARY STATEMENTS.

CAUTIONARY STATEMENT REGARDING CERTAIN NON-IFRS MEASURES
This MD&A contains certain financial and operational performance measures that are not recognized or defined under IFRS (“Non-IFRS Measures”). As there are no standardized methods of calculating these Non-IFRS Measures, the Company's approaches may differ from those used by others, and,, this data may not be comparable to similar data presented by other licensed producers of cannabis and cannabis companies. For an explanation of these measures to related comparable financial information presented in the Interim Financial Statements prepared in accordance with IFRS, refer to the discussion below.

MANAGEMENT’S DISCUSSION AND ANALYSIS | FOR THE THREE MONTHS ENDED NOVEMBER 30, 2021 AND 2020    3


The Company believes that these Non-IFRS Measures are useful indicators of operating performance and are specifically used by management to assess the financial and operating performance of the Company. These Non-IFRS Measures include, but are not limited, to the following:

Net revenue represents revenue from the sale of cannabis and non-cannabis products. Net revenue is further broken down as follows:
Medical net revenue represents Canadian net revenue for medical cannabis sales direct to patient and to Canadian medical wholesale only.
Recreational net revenue represents net revenue for recreational consumer sales only.
International and Wholesale net revenue represents cannabis net revenue from international and domestic wholesale bulk cannabis only.
Other net revenue represents non-cannabis net revenue for other support functions only.

Management believes the net revenue measures provide more specific information about the net revenue purely generated from its core cannabis business and by market type.

Average net selling price per gram and per unit are calculated by taking net revenue, which is then divided by total grams or total units sold in the period. Average net selling price per gram and per unit is further broken down as follows:
Average net selling price per gram of dried flower represents the average net selling price per gram for dried flower sales only, including medical sales, domestic and international wholesale bulk cannabis sales in the period.

Management believes the average net selling price per gram or per unit provide more specific information about the pricing trends over time by product type.

Yield per plant in grams is calculated by taking the total amount of grams of dried flower harvested, excluding trim, and dividing it by the total number of plants harvested.

Management believes that yield per plant in grams provides a useful measure about the efficiencies gained through its operating activities.

Gross margin before fair value adjustments is calculated by subtracting cost of sales, before the effects of unrealized gain (loss) on changes in fair value of biological assets, realized fair value on inventories sold and other inventory charges from total net revenue. Gross margin before fair value adjustments percentage is calculated by dividing gross profit before fair value adjustments (defined above) divided by net revenue.

Management believes that these measures provide useful information to assess the profitability of our cannabis operations as it excludes the effects of non-cash fair value adjustments on inventory and biological assets, which are required by IFRS.

Adjusted gross margin is calculated by subtracting cost of sales, before the effects of (i) unrealized gain (loss) on changes in fair value of biological assets; (ii) realized fair value on inventories sold and other inventory charges; (iii) provisions and impairment of inventories and biological assets; (iv) provisions to net realizable value; (v) COVID-19 related charges; and (vi) unabsorbed overhead relating to underutilization of the production facility grow rooms and manufacturing equipment, most of which is related to non-cash depreciation expense, from net revenue. Adjusted gross margin percentage is calculated by dividing adjusted gross margin by net revenue. Adjusted gross margin is reconciled to IFRS in the "Financial Review and Discussion of Operations" section of this MD&A.

Management believes that these measures provide useful information to assess the profitability of our operations as it represents the cash gross margin generated from operations and excludes the effects of non-cash fair value adjustments on inventories and biological assets, which are required by IFRS.

Adjusted EBITDA is calculated as net income (loss) excluding: financing costs, net of investment income; income tax expense (recovery); depreciation, amortization, impairment, gain (loss) on disposal of property, plant and equipment (per the statement of cash flows); share-based compensation (per the statement of cash flows); share of loss and impairment loss from loan receivable and investments in associates; change in fair value of contingent consideration; change in fair value of derivative liabilities; expenditures incurred in connection with research & development activities; unrealized gain (loss) on changes in fair value of biological assets; realized fair value on inventories sold and other inventory charges; provisions to net realizable value of inventories; COVID-19 related charges; government subsidies; legal provisions; and share issuance costs. Adjusted EBITDA is reconciled to IFRS in the "Financial Review and Discussion of Operations" section of this MD&A.
MANAGEMENT’S DISCUSSION AND ANALYSIS | FOR THE THREE MONTHS ENDED NOVEMBER 30, 2021 AND 2020    4



Adjusted EBITDA is intended to provide a proxy for the Company’s operating cash flow and derive expectations of future financial performance for the Company, and excludes adjustments that are not reflective of current operating results.

Non-IFRS Measures should be considered together with other data prepared in accordance with IFRS to enable investors to evaluate the Company’s operating results, underlying performance and prospects in a manner similar to the Company’s management. Accordingly, these non-IFRS measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.

BUSINESS OVERVIEW
NATURE AND HISTORY OF THE COMPANY’S BUSINESS
The Company’s wholly-owned subsidiary Organigram Inc. is a Licensed Producer of cannabis under the Cannabis Act.

The Company conducts most of its operations at its facility located in Moncton, New Brunswick. The Company has expanded its main facility over time to create additional production capabilities by strategically acquiring land and buildings adjacent to the main facility (together, the “Moncton Campus”), including to add capacity for the manufacture of derivative products allowed for legal sale by Licensed Producers under amendments to the Cannabis Act.

Patients order medical cannabis dried flower and cannabis derivative-based products from the Company primarily through the Company’s online store or by phone. Medical cannabis dried flower and cannabis derivative-based products are and will continue to be delivered by secure courier or other methods permitted by the Cannabis Act. The Company’s prices may vary based on grow time, strain yield, THC level, terpene profile and market conditions.

The Company is also authorized for wholesale shipping of cannabis plant cuttings, dried flower, blends, pre-rolls and cannabis derivative-based products to approved retailers and wholesalers for adult-use recreational cannabis under the individual provincial and territorial regulations as per the Cannabis Act.

In March 2021, the Company formed a partnership, with BAT, a leading, multi-category consumer goods business, to establish a "Centre of Excellence" to focus the next generation of cannabis products with an initial focus on CBD. The Center of Excellence is being established at the Company's Moncton Campus, which holds the Health Canada licenses required to conduct research and development activities with cannabis products. Both companies will contribute scientists, researchers, and product developers to the Center of Excellence which will be governed and supervised by a steering committee consisting of an equal number of senior members from both companies. Under the terms of the Product Development Collaboration ("PDC") Agreement, both Organigram and BAT have access to certain of each other’s intellectual property (“IP”) and, subject to certain limitations, have the right to independently, globally commercialize the products, technologies and IP created by the Center of Excellence pursuant to the PDC Agreement.

During April 2021, the Company expanded its manufacturing and production footprint with the acquisition of The Edibles & Infusions Corporation ("EIC"), located in Winnipeg, Manitoba. EIC holds a research license and standard processing license under the Cannabis Act, and is in the process of completing its application to add the sale of derivative products, including cannabis edibles, to its standard processing license. As a recently acquired wholly-owned subsidiary, EIC enables the Company to penetrate a new product category and gain access to EIC’s expertise in the confectionary space. EIC also provides the Company with a share of the cannabis infused gummies market.

The Company has additional cannabis production capacity at its newly wholly-owned subsidiary, Laurentian Organic Inc. ("Laurentian"), located in Lac-Supérieur, Quebec, acquired on December 21, 2021. The facility acquired has a cultivation focus on artisanal craft flower and on the production of hash, an extract. Laurentian adds to the Company's premium product portfolio and provides further opportunities for margin expansion. Laurentian holds a standard processing and cultivation license under the Cannabis Act.

STRATEGY
Organigram’s strategy is to leverage its broad brand and product portfolio and culture of innovation to increase market share, drive profitability and grow into an industry leader that delivers long-term shareholder value. The pillars of the Company’s strategy are:
1.Innovation
2.Consumer Focus
3.Efficiency
4.Market Expansion


MANAGEMENT’S DISCUSSION AND ANALYSIS | FOR THE THREE MONTHS ENDED NOVEMBER 30, 2021 AND 2020    5



1. Innovation
Meeting the demands of a fast-growing industry with changing consumer preferences requires the ability to innovate and create breakthrough products that are embraced by the market and establish a long-term competitive advantage.

The Company is committed to maintaining a culture of innovation and has established a track record of introducing differentiated products that have quickly captured market share, specifically:

SHRED: the first milled flower product, blended to create curated flavour profiles; and
Edison JOLTS: Canada’s first flavoured high-potency lozenge with 100 mg of THC per package.

Consistent with its innovation culture, in Fiscal 2021, the Company announced the launch of its Centre of Excellence (“CoE”) in collaboration with BAT, a leading multi-category consumer goods business. The CoE will focus on research and development to develop the next generation of cannabis products, with an initial focus on CBD.

The Company has also made a strategic investment in Hyasynth Biologicals Inc. (Hyasynth"), a biotechnology company that is deploying proprietary technology to develop cannabinoids using biosynthesis. Subsequent to quarter end, the Company made an additional investment in Hyasynth as described herein.

2. Consumer Focus
The Company seeks to address the changing needs of the adult cannabis consumer through its broad product portfolio with offerings in the most popular categories and price points. Based on ongoing consumer research, the portfolio is refreshed frequently with different flower strains, new package formats and new product introductions. The Company’s alignment with consumers is evidenced by its growing market share and category leadership.
SHRED Topic Thunder and Funk Master: #1 and #2 top selling flower products1
Edison JOLTS: #1 position in ingestible extract category1
SHRED’ems gummies: reached #3 share of the gummy segment by the month of December 20211
Monjour: New wellness brand launched in November 2021 to capture the growing large format CBD segment.

In addition to third-party and direct consumer research, the Company maintains close contact with consumers through an active social presence and has established a Cannabis Innovators Panel. This online panel engages with up to 2,500 participants across Canada to engage with consumers on a real-time basis.

3. Efficiency
From inception, the Company has committed to being an efficient operator.

The Company’s growing facility in Moncton, New Brunswick utilizes three-tier cultivation technology to maximize square footage utilization. The facility has a proprietary information technology in place to track all aspects of the cannabis cultivation and harvest process. The Company maintains a continuous improvement program to maximize harvest yield while reducing operating costs. This is complemented by the introduction of automation in post-harvest production, including two pre-roll machines.

The Company’s EIC facility is highly-automated and able to efficiently handle both small-batch artisanal manufacture of edibles as well as large-scale nutraceutical-grade production. The facility provides the Company with the unique ability to produce a wide range of high-quality edible products at attractive price points.

At the Company's Laurentian growing and derivative processing facility, $7 million in growth capital expenditures has been committed to drive cultivation growth, expand processing and storage space and to invest in automation.

Key efficiency milestones achieved in Q1 of Fiscal 2022 include:
50% reduction in cultivation cost since Q1 of Fiscal 2021
Doubling the harvest volume exceeding THC levels of 22% compared to Q1 Fiscal 2021
Commissioning of second pre-roll machine at Moncton Facility






1 HiFyre, January 3, 2022
MANAGEMENT’S DISCUSSION AND ANALYSIS | FOR THE THREE MONTHS ENDED NOVEMBER 30, 2021 AND 2020    6



4. Market Expansion
The Company is committed to expanding its market presence through adding to its product offering and enhancing its geographical presence. This strategy is enabled through reviewing of select Merger & Acquisition opportunities and assessing expansion into international markets. Recent examples of market expansion include:
December 2021 acquisition of Laurentian which adds hash to the Company's product portfolio and increases its presence in Quebec;
Shipments to Canndoc in Israel and Cannatrek in Australia to supply bulk cannabis into these markets with over 1,400 kilograms of dried flower shipped to Israel in Q1 Fiscal 2022;
Subject to the terms and conditions of its arrangements with BAT, the PDC is developing IP that the Company expects in the future to be able to sub-licence into various international markets.

KEY QUARTERLY FINANCIAL AND OPERATING RESULTS
Q1-2022
Q1-2021
CHANGE% CHANGE
Financial Results
Gross revenue$44,345 $25,280 $19,065 75 %
Net revenue$30,378 $19,331 $11,047 57 %
Cost of sales$27,924 $23,173 $4,751 21 %
Gross margin before fair value adjustments and other charges$2,454 $(3,842)$6,296 
Gross margin % before fair value adjustments and other charges(1)
%(20)%28 %nm
Operating expenses$14,333 $11,539 $2,794 24 %
Adjusted EBITDA(2)
$(1,887)$(5,741)$3,854 (67)%
Net loss
$(1,305)$(34,336)$33,031 (96)%
Net cash (used in) provided by operating activities
$(9,341)$294 $(9,635)nm
Adjusted Gross Margin(3)
$5,475 $1,948 $3,527 181 %
Adjusted Gross Margin %(3)
18 %10 %%80 %
Financial Position
Working capital(4)
$217,834 $130,121 $87,713 67 %
Inventories and biological assets$46,420 $53,921 $(7,501)(14)%
Total assets$545,365 $473,372 $71,993 15 %
Operating Results
Kilograms harvested - dried flower
11,603 3,901 7,702 197 %
Kilograms sold - dried flower13,336 4,820 8,516 177 %

Note 1: Equals gross margin before fair value adjustments (as reflected in the Interim Financial Statements) divided by net revenue.
Note 2: Adjusted EBITDA is a non-IFRS measure that the Company defines as net income (loss) before: financing costs, net of investment income; income tax expense (recovery); depreciation, amortization, impairment, gain (loss) on disposal of property, plant and equipment (per the statement of cash flows); share-based compensation (per the statement of cash flows); share of loss and impairment loss from loan receivable and investments in associates; change in fair value of contingent consideration; change in fair value of derivative liabilities; expenditures incurred in connection with research & development activities; unrealized gain (loss) on changes in fair value of biological assets; realized fair value on inventories sold and other inventory charges; provisions to net realizable value of inventories; COVID-19 related charges; government subsidies; legal provisions; and share issuance costs. See the cautionary statement regarding non-IFRS financial measures in the “Introduction” section at the beginning of this MD&A and the reconciliation to IFRS measures in the "Financial Results and Review of Operations" section of this MD&A.
Note 3: Adjusted gross margin is a non-IFRS measure that the Company defines as net revenue less: (i) cost of sales, before the effects of unrealized gain (loss) on changes in fair value of biological assets, realized fair value on inventories sold and other inventory charges; excluding (ii) provisions and impairment of inventories and biological assets; (iii) provisions to net realizable value; (iv) COVID-19 related charges; and (v) unabsorbed overhead relating to underutilization of the production facility and equipment, most of which is related to non-cash depreciation expense. See the cautionary statement regarding non-IFRS financial measures in the “Introduction” section at the beginning of this MD&A and the reconciliation to IFRS measures in the "Financial Results and Review of Operations section of this MD&A. Adjusted gross margin % equals adjusted gross margin divided by net revenue.
Note 4: Equals current assets less current liabilities (as reflected in the Interim Financial Statements).

REVENUE
For the three months ended November 30, 2021, the Company reported $30,378 in net revenue. Of this amount $25,020 (82%) was attributable to sales to the adult-use recreational market, $3,429 (11%) to the international market, $1,908 (6%) to the medical market and $21 (1%) to other revenues. Q1 Fiscal 2022 net revenue increased 57%, or $11,047, from the prior year comparative period’s net revenue of $19,331, primarily due to an increase of $8,232 in adult-use recreational revenue, and an increase in international revenue by $3,189, which is partly offset by the $(343) decrease in medical revenue. Net
MANAGEMENT’S DISCUSSION AND ANALYSIS | FOR THE THREE MONTHS ENDED NOVEMBER 30, 2021 AND 2020    7


revenue from the adult-use recreational market was higher by $8,232 (49%), generated from a significant increase in sales volumes from value oriented product sold in Q1 Fiscal 2022, which also carry a lower average selling price.

Sale of flower from all product categories and distribution channels comprised 83% of net revenue in the quarter. The net ASP of flower decreased to $1.89 per gram on a quarter-over-quarter basis compared to $3.24 per gram for Q1 Fiscal 2021, as both the Company and the Canadian cannabis industry continued to experience general price compression in the adult-use recreational and medical markets as these markets matured, and the customer and product mix evolved to focus more on value offerings. Selling prices are prone to fluctuation and there may be further price compression if the market remains oversupplied. The Company is committed to refining its product mix as customer preferences evolve and it continues to revitalize its higher margin Edison branded flower products.

The volume of flower sales in grams increased 177% to 13,336 kg in Q1 Fiscal 2022 compared to 4,820 kg in the prior year comparative quarter, primarily as a result of the market shift towards large format value products and the success of the Company's products in these brands and formats.

COST OF SALES
Cost of sales for the three months ended November 30, 2021 increased to $27,924 compared to $23,173 in the prior year comparative period, primarily as a result of increased sales volume in the adult-use recreational market. Included in Q1 Fiscal 2022 cost of sales are $2,312 of inventory provisions related to provisions for unsaleable inventories and to reflect an estimated decline in selling prices. Additionally, $709 was incurred with respect to unabsorbed fixed overhead costs as a result of lower production volumes of certain derivative products relative to the equipment's capacity at the Moncton Campus. The prior fiscal year’s comparative period had inventory provisions and net realizable value adjustments of $3,126, as well as unabsorbed fixed overhead costs of $2,664.

GROSS MARGIN BEFORE FAIR VALUE ADJUSTMENTS AND ADJUSTED GROSS MARGIN
The Company realized gross margin before fair value adjustments for the three months ended November 30, 2021 of $2,454, or 8% as a percentage of net revenue, compared to $(3,842), or (20)%, in the prior year comparative period. The increase in gross margin before fair value adjustments as a percentage of net revenue is largely due to higher net revenue, reduction in unabsorbed overhead costs and lower cost of sales per unit sold in Q1 Fiscal 2022.

Adjusted gross margin2 for the three months ended November 30, 2021 was $5,475, or 18% as a percentage of net revenue, compared to $1,948, or 10%, in the prior year comparable quarter. This was largely due to the current period's lower cultivation costs and higher overall sales volumes, net of the impact of the lower net ASP from the shift in the sales mix to value priced products and brands. Please refer to the “Financial Review and Discussion of Operations” section of this MD&A for a reconciliation of adjusted gross margin to net revenue.

OPERATING EXPENSES
Operating expenses include: General and administrative; sales and marketing; research and development; share-based compensation expenses; along with impairment losses on property, plant and equipment, and intangible assets. During Q1 Fiscal 2022, the operating expenses were $14,333 which is an increase from the prior year comparative amount of $11,539, primarily due to the higher employee costs from the growth of the team, higher trade and marketing spend, an increase in technology spend, as well as research and development costs.

General and administrative expenses of $7,984 increased from the prior year's comparison quarter of $6,802, primarily due to an increase in general office expenses, an increase in employee costs and an increase to professional fees that occurred as a consequence of the new requirement to have an integrated audit.

Sales and marketing expenses of $4,660 increased from the prior year's comparative quarter of $3,672, primarily due to higher advertising and promotion costs, and marketing initiatives related to the launch of the Company's gummy products.

ADJUSTED EBITDA
Negative adjusted EBITDA3 was $1,887 in Q1 Fiscal 2022 compared to negative adjusted EBITDA of $5,741 in Q1 Fiscal 2021. The decrease in negative adjusted EBITDA is primarily attributed to the increase in adjusted gross margins due to the higher volume of products sold, the impact of lower production costs that decreased cost of sales per unit sold, offset by the impact of lower ASP from higher quantities of value brands sold and by the increase in administrative expenses during Q1 Fiscal
2 Adjusted gross margin is a non-IFRS financial measure. See the cautionary statement regarding non-IFRS financial measures in the “Introduction” section of this MD&A, and the discussion under the heading “Adjusted EBITDA” and the reconciliation to IFRS measures in the "Financial Results and Review of Operations" section of this MD&A.
3 Adjusted EBITDA is a non-IFRS financial measure. See the cautionary statement regarding non-IFRS financial measures in the “Introduction” section of this MD&A, and the discussion under the heading “Adjusted EBITDA” and the reconciliation to IFRS measures in the "Financial Results and Review of Operations" section of this MD&A.
MANAGEMENT’S DISCUSSION AND ANALYSIS | FOR THE THREE MONTHS ENDED NOVEMBER 30, 2021 AND 2020    8


2022. Please refer to the “Financial Review and Discussion of Operations” section of this MD&A for a reconciliation of adjusted EBITDA to net loss.

NET LOSS
The net loss was $1,305 in Q1 Fiscal 2022 compared to a net loss of $34,336 in Q1 Fiscal 2021. The decrease in net loss was primarily attributed to higher gross margin as described above and the impact of change in the fair value of derivative liabilities compared to Q1 Fiscal 2021.

FINANCIAL POSITION
Working capital as at November 30, 2021 decreased to $217,834 from $234,349 as at August 31, 2021 mainly due to the purchase of property, plant and equipment of $7,004 and cash used for operating activities.
KEY DEVELOPMENTS DURING THE QUARTER AND SUBSEQUENT TO NOVEMBER 30, 2021
On November 1, 2021, the Company provided a corporate update regarding its market share growth trajectory in Canada, moving from a 3.9% market share position in January 2021 to a 7.7% national market share position in September 2021, representing the #4 position among Canadian LPs. (source: HiFyre, Sept 2021)

On November 18, 2021, the Company announced the launch of Monjour, the Company's new wellness brand, offering high-quality, CBD-forward products. Monjour's first offerings include both vegan-friendly as well as sugar-free soft chews, both in assorted flavours.

On December 21, 2021, the Company announced the acquisition of Laurentian, a Quebec-based licenced producer of artisanal craft cannabis and hash for $36 million plus earnout share consideration, if any. The acquisition is expected to be accretive, added more premium products to the Company's portfolio and strengthened its presence in the province of Quebec.

On December 22, 2021, the Company announced that it had made an additional $2.5 million investment in Hyasynth Biologicals Inc. The Company has to date invested $10 million in Hyasynth, a pioneer in the field of cannabinoid science and biosynthesis. The investment positions the Company to benefit from advances in cannabinoid technology and deploy new active ingredients for consumer products in the medical, wellness and recreational spaces.

OPERATIONS AND PRODUCTION
Moncton Cultivation Campus
While the vast majority of incremental production capacity in the initial period of recreational legalization by the Company’s competitors was generated from greenhouse (not indoor) production, Organigram focused on a core competency of controlling conditions in precisely built indoor environments with a commitment to continuous improvement and investment in information technology.

The Company continually assesses the critical facets of the lighting and environmental elements in its facilities in an effort to drive maximum quality and yield in the plants it cultivates. It is the Company’s intention to continually improve and refine its cultivation and post-harvesting practices in an effort to achieve a competitive advantage in the space.

In Fiscal 2021, as part of its continuous improvement program, the Company implemented various new initiatives at the Moncton Campus such that the average THC content per plant and average yield per plant both increased in the second half of Fiscal 2021. "THC" refers to tetrahydrocannabinol, the principal psychoactive compound in cannabis. Higher THC content continues to be desired by consumers and the higher yield per plant combined with greater economies of scale on ramping up cultivation capacity has resulted in lower cultivation costs per gram and ultimately benefits adjusted gross margins when the product is sold. The Company continues to believe it is well-positioned and supported by the flexibility of the Facility to continue to see improvement in these areas. As the Company works with a number of different genetics and cultivars this process of improvement may not be linear or consistent across plants.

As part of its review of the continually expanding Canadian cannabis markets, its long-term demand forecast model and its cultural commitment to continuous improvement, management is reviewing its production capacity and methodologies with a focus on cost reductions which will improve margins over time. Management obtained approval from the Board of Directors to complete the Phase 4C expansion of its Moncton Campus which will significantly increase capacity enabling the Company to meet the increased consumer demand for its products. The Company has also identified additional changes to its growing and harvesting methodologies, including facility design improvements that should assist the operating conditions of the Moncton Campus resulting in higher quality flower and a reduction to production costs. The current approximate annual capacity is 55,000 kg of flower as of the date of this MD&A and the increase to the number of growing rooms and yield
MANAGEMENT’S DISCUSSION AND ANALYSIS | FOR THE THREE MONTHS ENDED NOVEMBER 30, 2021 AND 2020    9


improvements are targeted when complete to result in an approximate annual production capacity of 75,000 kg of flower. The total capacity of the Moncton Campus will continue to fluctuate as the Company further refines its growing methods and room utilization.

The Company harvested 11,603 kg of flower during Q1 Fiscal 2022 compared to 3,901 kg of flower in Q1 Fiscal 2021. The increase of 7,702 kg (197%) from the comparative period was primarily related to increased cultivation planting and staffing during Q4 Fiscal 2021 and Q1 Fiscal 2022, that was done in order to meet the increased demand for many of its new products as part of its product portfolio revitalization as well as the increase in industry demand on the back of the ongoing accelerated retail store build out particularly in Ontario.

Moncton Edibles and Derivatives Facility
Contained in the 56,000 square foot expansion referred to as Phase 5 of the Moncton Campus is the Company's edibles and derivative facility. This space includes, among other things, additional extraction capacity and, office space and was designed under European Union GMP (“EU GMP”) standards. EU GMP describes the minimum standard that a manufacturer must meet in its production processes. EU GMP certification is subject to inspections coordinated by the European Medicines Agency. The Company has no plans to seek certification in the immediate future but continues to evaluate paths to certification. The facility includes CO2 and Hydrocarbon Extraction equipment, as well as expanded areas for formulation including short path distillation for edibles and vape pen formulas, high speed cart filling and automated packaging. Some of this equipment remains in the commissioning and research and development phase.

Winnipeg Edibles Facility
As part of the EIC acquisition completed in Q3 Fiscal 2021, the Company now has a purpose-built, highly-automated, 51,000 square-foot manufacturing facility in Winnipeg, Manitoba (the “Winnipeg Facility”) which was also designed under EU GMP standards. The Company has no plans to seek certification in the immediate future but continues to evaluate paths to certification. The facility design and the equipment specifications were also designed to handle both smaller-batch artisanal manufacturing as well as large-scale nutraceutical-grade high-efficiency manufacturing and to produce highly customizable, precise, and scalable cannabis-infused products in various formats and dosages including pectin, gelatin, and sugar-free soft chews (gummies), chocolates, toffee and caramel with novel capabilities such as infusions, striping and the possibility of using fruit purees.

EIC currently holds a research license and a standard processing license issued under the Cannabis Act; it is in the process of completing its application to add the activity of sale of derivative cannabis products to its Standard Processing License. Until EIC receives its sales license, it is capable of manufacturing products in bulk for further processing, review and sale by Organigram or third-party Licensed Producers, for which it may provide white-label services in future. Since the acquisition, EIC has hired approximately 43 new employees as the Winnipeg Facility prepared for commercial production and sales, which commenced during Fiscal 2021. The Company is in the process of reviewing the capabilities and efficiencies of the Moncton Campus and Winnipeg Facility to determine how best to allocate its resources and functions across the two sites.

Laurentian Facility
The Company acquired Laurentian in December 2021. The Laurentian Facility has 6,800 square feet of cultivation area, which is currently being expanded to 33,000 feet. The Laurentian Facility is equipped to supply approximately 600 kilograms of flower and 1 million units of hash annually. The expansion program currently underway is expected to increase annual capacity to 3,000 kilograms of flower and 2 million units of hash. The Company has committed $7 million towards completing the expansion and management believes that there are opportunities for costs savings from further investments in automation.

CANADIAN ADULT-USE RECREATIONAL MARKET
Organigram continues to increase its focus on generating meaningful consumer insights and applying these insights to the ongoing optimization of its brand and product portfolio with a goal of ensuring that they are geared towards meeting consumer preferences. Over the course of Fiscal 2021, the Company aggressively and successfully revitalized its product portfolio to meet rapidly evolving consumer preferences, and through its increased focus on insights in Fiscal 2022, will continue its expansion of brands and products aimed at driving continued momentum in the marketplace.

DRIED FLOWER AND PRE-ROLLS
Dried flower and pre-rolls remain the first and second largest product categories, respectively, in the Canadian adult-use recreational market and the Company believes that these categories will continue to dominate based on the sales history in mature legal markets in certain U.S. states as well as regulatory restrictions on other form factors (e.g. the 10 mg per package THC limit in the edibles category). While we expect consumer preferences will slowly evolve away from THC and price being the key purchase drivers, today they appear to be the most important attributes to consumers for flower products. Over time, genetic diversity and other quality related attributes such as terpene profile, bud density, and aroma, are expected to become increasingly important. While the Company’s efforts are focused on delivering on consumer expectations today, it is
MANAGEMENT’S DISCUSSION AND ANALYSIS | FOR THE THREE MONTHS ENDED NOVEMBER 30, 2021 AND 2020    10


concurrently planning for the eventual evolution towards a more nuanced approach to cannabis appreciation through its ongoing work in genetic breeding and pheno-hunting with the goal of offering a unique and relevant assortment to consumers. Additionally, the strategic acquisition of Laurentian in December 2021 provides the Company with the opportunity to participate in the growing craft cannabis segment, through its craft facility located in the province of Quebec.

The Company's portfolio of brands continues to show strong momentum within the flower segment in Canada, especially its two value brands, SHRED and Big Bag o' Buds. Two SHRED SKUs are currently the top selling flower products in Canada4, and Big Bag o' Buds continues to see continued month over month market share momentum in the large format category. The growth and significant contribution of the dried flower value segment, however, has also contributed to an overall decline in margins for Organigram and many of its peers over the last number of quarters. In an effort to counteract this phenomenon, Organigram is dedicated to revitalizing the Edison brand and product portfolio, by launching new dried flower offerings and unique genetics and higher potency THC. The successful completion of these initiatives is expected to increase Edison sales, that have a higher ASP than as compared to value brands and therefore attract higher margins.

CANNABIS DERIVATIVES
While dried flower and pre-rolls are currently the largest categories in Canada, derivative cannabis products, including vapes, concentrates and edibles, are projected to continue to increase in market share over the next several years at the expense of flower market share.

Organigram is committed to these growing categories. The strategic acquisition of EIC in April 2021 provides the Company with the opportunity to produce high quality, edible products such as soft chews (gummies) and chocolates, at scale, positioning the Company to effectively compete in this segment. The acquisition of Laurentian in December 2021 also provides the Company with the ability to produce high-quality hash products in the growing hash segment.

In Q1 Fiscal 2022, SHRED'ems, the Company's cannabis-infused gummies and an extension of Organigram's popular, value-priced SHRED brand, continued to gain momentum within the gummy segment, capturing a 6.6% national retail market share of the gummy category. (Source: HiFyre, December 2021). Within the quarter, the Company launched Monjour, a new CBD-forward wellness brand dedicated to those in pursuit of a better daily wellness regime. Monjour's four launched SKUs are available across Canada and are available in both vegan and sugar-free options. In the short time since launch, Monjour is already seeing positive sales momentum.

Organigram intends to leverage the capabilities of the Winnipeg Facility and EIC beyond soft chews and is working to offer new and novel chocolate and confectionary product offerings into the Canadian market during Fiscal 2022.

In late Fiscal 2021, the Company launched a first-to-market product, Edison JOLTS, these mint flavoured, high potency THC lozenges combine the benefits of sublingual oil with the convenience and portability of soft gels. Each package contains 100mg of THC. In December, JOLTS reached #1 share5 within the ingestible extracts category. Organigram intends to build on the positive momentum of Jolts with further line extensions in the near future.

Organigram has renewed its focus on building share within the vape category through unique formulations, premium hardware, and high-quality inputs. Fiscal 2022 will see numerous innovative offerings in the vape segment, all geared towards building our share in this category.

RESEARCH AND PRODUCT DEVELOPMENT
The Company’s management believes the cannabis industry is still in the nascent stages of product development and that product innovation backed by core fundamental research and development is necessary to establish a long-term competitive advantage in the industry. Research and development and innovation remain a hallmark of Organigram. In fact, there have been many recent efforts and investments made in Fiscal 2021 and anticipated in Fiscal 2022 which will strengthen the Company's focus in this area and are expected to allow Organigram to continue to position itself to be at the forefront of launching new, innovative, differentiated products and formulations that appeal to adult consumers.

BAT Product Development Collaboration and Centre of Excellence ("the CoE")
In early Q4 Fiscal 2021, the Company announced the successful launch of the CoE outlined in the PDC Agreement with BAT which was established to focus on research and product development activities for the next generation of cannabis products, as well as cannabinoid fundamental science, with an initial focus on CBD. The CoE is located at the Moncton Campus, which holds the Health Canada licenses required to conduct research and development activities with cannabis products. The Company and BAT have already created a number of new full-time product development, analytical science and innovation
4 Source: HiFyre, January 3, 2022
5 Source: HiFyre January 2, 2022
MANAGEMENT’S DISCUSSION AND ANALYSIS | FOR THE THREE MONTHS ENDED NOVEMBER 30, 2021 AND 2020    11


related roles which is expected to ramp up in the second phase of the CoE expansion in Fiscal 2022 when further full time employees will be added. The CoE is governed and supervised by a steering committee consisting of an equal number of senior members from each of the Company and BAT. To date, the CoE remains on schedule for staffing, construction and project planning, and the remaining core construction projects are anticipated to be completed by Q2 Fiscal 2022. The CoE includes state of the art shared research and development, Good Production Practices ("GPP") food preparation, sensory testing and bio-lab research spaces and the strategic collaboration has already begun moving from planning to implementation.

As previously disclosed, under the terms of the PDC Agreement, both Organigram and BAT have access to certain of each other’s intellectual property (“IP”) and, subject to certain limitations, have the right to independently, globally commercialize the products, technologies and IP created pursuant to the PDC Agreement. Approximately $31 million of BAT’s investment in Organigram has been reserved for Organigram’s portion of its funding obligations under a mutually agreed initial budget. Costs relating to the CoE are being funded equally by Organigram and BAT. BAT will own all IP developed under this collaboration and will grant to Organigram a royalty-free, perpetual, global license to all such IP. Each party has also agreed to grant to the other a non-exclusive, perpetual and irrevocable license to certain existing IP of such party and its affiliates for purposes of conducting the development activities and exploiting the products, technologies and IP created per the PDC Agreement, subject to certain restrictions.

Plant Science, Breeding and Genomics Research and Development in Moncton
The Company’s cultivation plans focus on developing a pipeline of unique and sought-after genetics, maximizing flower quality in terms of THC yield, terpene profiles and general plant health to meet evolving consumer demand. The Company plans to pursue the expansion of its in-house breeding program dedicating significant research and development space for breeding, phenotyping, screening and various plant science trials while prioritizing commercial cultivation capacity.

As part of its ongoing genetic exploration program, Organigram now has the benefit of leveraging BAT's tremendous depth of expertise in plant science and is excited about the developments in progress.

Organigram also works with a range of nurseries with different competencies and genetic portfolios in order to screen and identify the latest genetics that will resonate with consumers and grow in the Company's unique environment. The Company believes this kind of strategic and creative product development process is a key differentiator for both the Edison portfolio and the Company overall and looks forward to introducing more new genetics over the next few quarters.

OUTLOOK
The Company remains positive on the cannabis market both in Canada and internationally. Canada-wide recreational retail sales are expected to total $5.9 billion in calendar 2022.6

The Company believes there are a few factors creating tailwinds to facilitate further industry growth. First, the legalization in October of 2019 of cannabis derivative products has attracted consumers who were not interested in smoking or vaporizing dried flower (including pre-rolls). Newer categories such as vape pens, edibles (soft chews, chocolates), beverages and other ingestible products have significantly expanded the addressable market and proliferation of SKUs continues in these categories offering consumers a wider range of product formulations, flavours and price points. Second, the number of brick-and-mortar retail stores has increased significantly, particularly in Ontario where the number of stores surpassed 1,270 with the national count now surpassing 2,800 stores. Third, the industry as a whole has made a concerted effort to match or beat illicit market pricing, particularly on dried flower, which has helped to accelerate the conversion of consumers from illicit to legal consumption.

Notwithstanding the above, the cannabis industry in Canada remains highly competitive and generally oversupplied versus the current market demand considering both regulated Licensed Producers and the still largely unfettered operations of the illicit market including many online delivery platforms. Since adult-use recreational legalization in Canada, consumer trends and preferences have continued to evolve, including significant growth in the large format value segment, a desire for higher THC potency particularly in dried flower, as well as a penchant for newness, including new genetic strains and novel products. Organigram continues to revitalize its product portfolio to address these changing consumer trends and preferences in order to grow sales and capture market share. We have also seen supply and demand dynamics brought into a more equilibrated state as many of the larger LPs have shuttered surplus cultivation capacity including as a direct result of M&A activities. At the same time, the number of retail stores in Canada began to grow meaningfully for the first time since legalization. In December 2020, Ontario’s cannabis retail regulator increased the pace of authorizations from 40 to 80 per month with a target of issuing 20 per week and again in February 2021, the regulator increased the number of store authorizations from 80 to up to 120 stores per month. Since November 2020, the number of retail stores in Canada’s 10 provinces more than doubled to 2,803 retail stores driven by growth in Ontario of 400% to 1,277 cannabis retail stores.
6 BDSA Canada Market Forecast, January 7, 2022
MANAGEMENT’S DISCUSSION AND ANALYSIS | FOR THE THREE MONTHS ENDED NOVEMBER 30, 2021 AND 2020    12



Against this backdrop of strong industry growth, increased demand for the Company's products is evidenced by Organigram's growing national adult-use recreational retail market share ("market share") in Canada. The Company's market share grew from 4.4% in Q1 Fiscal 2021 to 7.5% in Q1 Fiscal 2022, ranking Organigram as the #4 licensed producer (LP) in Canada by market share 7. Management believes that the Company is better equipped to fulfill demand in Q2 Fiscal 2022 with larger harvests expected as compared to Q1 Fiscal 2022. In addition to the domestic sales growth, during Q1 Fiscal 2022, Organigram resumed shipments to Canndoc Ltd. in Israel. With a full year of revenues from EIC, and commencing in late December new revenues from Laurentian, management expects that the Company will generate higher revenue in Fiscal 2022 as compared to Fiscal 2021.

The Company intends to continue to leverage its Moncton cultivation Campus which it believes can provide a sustainable competitive advantage over its peers as a result of having over 100 three-tiered cultivation rooms each with the ability to deliver bespoke growing environmental conditions (lighting, humidity, fertigation, plant density) tailored individually to a wide variety of genetics. With an improved genetics portfolio (including some genetics which are not widely sold in the legal market) and a higher average THC being grown than the previous year, the Company believes it is well positioned to take advantage of the dried flower and pre-roll categories which collectively represents approximately 71%7 of the Canadian legal market.

Opportunities to scale up new genetics require a patient and deliberate process where cultivation protocols are trialed for each strain and adjusted through multiple growth cycles before full roll-out to multiple rooms in the facility. The Company has successfully launched new genetics including the industry-leading Ultra Sour (Limelight) and Black Cherry Punch strains both under the Edison brand. Organigram’s commitment to invest in new genetics continues and the Company expects to launch more new high THC genetics in the near term.

In addition to traditional dried flower and pre-roll offerings, Organigram expects to be in a position to generate more revenue growth from the production of soft chews and other confectionary products with the specialized equipment in the Winnipeg Facility under the direction of EIC leadership that brings significant expertise in confectionary manufacturing. The Company completed its first sales of EIC manufactured soft chews during Q4 Fiscal 2021, and with several line extensions planned for Fiscal 2022, management expects meaningful growth in this product category.

Laurentian was acquired in December 2021 and adds hash and artisanal craft cannabis to the Company's offering. Laurentian has generated revenue for the Company in Q2 Fiscal 2022 and is expected to have an annual net revenue run rate of $17 million. The application of the Company's direct sales force and national distribution, along with the increased capacity from the completion of Laurentian's expansion program, is expected to generate additional revenue in Fiscal 2022.

The negative non-cash adjustment for unabsorbed fixed overhead costs was $709 in Q1 Fiscal 2022, which was a significant reduction from the $1,399 in Q4 Fiscal 2021 the previous quarter and $3,470 in Q1 2021 the prior year's comparison quarter. The prior periods had significant unabsorbed fixed overhead costs as a consequence of the unused or idled grow rooms. With the Company's cultivation operating at capacity there was no current period charge for idled or unused rooms and the $709 cost related to the underutilization of certain derivative products manufacturing equipment. This expense is expected to have further declines or be eliminated for the rest of Fiscal 2022.

The Company expects to begin to see a sequential improvement in adjusted gross margins in Q2 Fiscal 2022 largely due to lower cultivation costs (from higher plant yields and other economies of scale as it continues to ramp up cultivation), and realizes the benefit of several ongoing cost efficiency improvements including increased automation such as the second pre-roll machine which reduces the reliance on manual labour.

The overall level of Q2 Fiscal 2022 adjusted gross margins versus Q1 Fiscal 2021 adjusted gross margins will also be dependent on other factors including, but not limited to, product category and brand sales mix.

Organigram has identified the following opportunities which it believes have the potential to further improve adjusted gross margins over time:
Economies of scale and efficiencies gained as it continues to scale up cultivation, including the grow rooms that will be available after completing the construction of Phase 4C of the Moncton Campus;
The Company has planned for additional changes to its cultivation and harvesting methodologies and design improvements that should enhance the operating conditions of the Moncton Campus resulting in higher quality flower and improved yields (which reduces production costs). See “Balance Sheet, Liquidity and Capital Resources” section of this MD&A for more detail;
International sales have historically attracted higher margins and are expected to represent a greater proportion of the Company’s revenue following the resumption of shipments to Canndoc Ltd. (see “International” section below);
7 Source: HiFyre national sales data, as of January 3 2021
MANAGEMENT’S DISCUSSION AND ANALYSIS | FOR THE THREE MONTHS ENDED NOVEMBER 30, 2021 AND 2020    13


More sales in the vape category, that generally attract higher margins;
Continued investment in automation is expected to drive cost efficiencies and reduce dependence on manual labour;
Q2 2022 will be the first full quarter that has the benefit of the price increases to SHRED's pre-milled flower SKUs;
The recent launches of new products such as Edison JOLTS (ingestible extracts), SHRED'ems (THC and THC/CBD soft chews), and most recently Monjour (large format CBD soft chews) represent new potential avenues of growth with expected attractive long-term margin profiles for the Company;
The launch of additional products across different derivative categories; and
The margin contribution from the addition of the Laurentian portfolio of products.

Lastly, Q2 Fiscal 2022 SG&A (as defined below) is expected to increase slightly from Q1 Fiscal 2022 as a consequence of the addition of Laurentian. Starting with Q1 2022, research and development activities is shown separately from general and administrative expenses, but will still be grouped with operating expenses.

Outside of Canada, the Company serves international markets (including Israel and Australia) from Canada via export permits and is looking to augment sales channels internationally over time. In early Q1 Fiscal 2021, the Israeli Ministry of Health amended its quality standards for imported medical cannabis. In June 2021, the Company received its Good Agricultural Practice certification from Control Union Certifications under the Control Union Medical Cannabis Standard (“CUMCS”) in order to permit it to continue its shipments to Israel under the amended Israeli quality standards. Shipments to Canndoc Ltd., resumed during Q1 Fiscal 2022 and are expected to continue in Fiscal 2022 subject to regulatory conditions. Future shipments are contingent upon the timing and receipt of regulatory approval from Health Canada, including obtaining an export permit, as well as timing and receipt of regulatory approval from the Israeli regulatory authority, including obtaining an import permit. Recent political changes and cannabis election ballot initiatives for both medical and recreational use in the United States suggest that the potential movements to U.S. federal legalization of cannabis (THC) have increased momentum but the timing and outcome remains difficult to predict. As the Company continues to monitor and develop a potential U.S. THC strategy, it continues to evaluate CBD entry opportunities in the United States.

With the significant capital injection from BAT and the PDC Agreement, the Company is well positioned to expand into the U.S. and further international markets at the appropriate time and subject to applicable laws. Under the PDC Agreement, the Company is granted a worldwide, royalty-free, sub-licensable, perpetual license to exploit IP developed under the PDC Agreement in any field. This license which is non-exclusive outside of Canada and sole in Canada will also enhance Organigram’s ability to enter markets outside of Canada, including through sublicensing arrangements with established operators.

Without limiting the generality of risk factor disclosures referenced in the “Risk Factors” section of this MD&A, the expectations concerning revenue, adjusted gross margins and SG&A are based on the following general assumptions: consistency of revenue experience with indications of second quarter 2022 performance to date, consistency of ordering and return patterns or other factors with prior periods and no material change in legal regulation, market factors or general economic conditions. The Company disclaims any obligation to update any of the forward looking information except as required by applicable law. See cautionary statement in the “Introduction” section at the beginning of this MD&A.

MEDICAL MARKET
BDSA estimates the Canadian medical market value for calendar 2021 at $455M, a 14% year-over-year decline8. Also, the number of medical patients are projected to decrease by 17%9 within the year. With this projected decline, largely due to migration to the recreational channel, Organigram has shifted its medical strategy and will focus on the important veteran community all while continuing to serve its civilian patient base with superior patient care and an ongoing portfolio optimization. The main change to the Company's strategy is the termination of its existing agreements with the majority of cannabis clinics aimed at patient acquisition.

STRATEGIC INVESTMENTS AND DEVELOPMENTS
The Company remains committed to the development and acquisition of cannabis or hemp related businesses and production assets in Canada and abroad (subject to compliance with applicable laws), intellectual properties, technologies or other assets that are synergistic to the Company’s Canadian and international strategies.

Hyasynth Strategic Investment
On September 12, 2018, the Company entered into a strategic investment to purchase an aggregate of $10,000 convertible secured debentures (the “Hyasynth Debentures”) of Hyasynth Biologicals Inc. (“Hyasynth”), a biotechnology company based in Montreal and pioneer in the field of cannabinoid science and biosynthesis, in three separate tranches. Organigram purchased $5,000 in secured convertible 8% Hyasynth Debentures on September 12, 2018 and advanced an additional $2,500 on
8 BDSA Market Forecast, September 2021
9 BDSA Market Forecast, September 2021
MANAGEMENT’S DISCUSSION AND ANALYSIS | FOR THE THREE MONTHS ENDED NOVEMBER 30, 2021 AND 2020    14


October 23, 2020, as a result of Hyasynth’s achievement of the contractual production-related milestone for the second tranche (“Tranche 2”). On December 22, 2021, following the waiver of the remaining milestone, the Company acquired an additional $2.5 million of Hyasynth Debentures. Additionally, the parties have amended certain terms of the Debenture Purchase Agreement governing the Debentures’ purchased by Organigram from Hyasynth in previous tranches. The Company has instituted a series of detailed milestones for Hysaynth to achieve by specified target dates. The failure to achieve any such milestone constitutes an Event of Default under the Debentures. In addition, the Company has a veto right over future financings conducted by Hyasynth. This brings the Company’s total face value of convertible debentures investment in Hyasynth to $10,000, which provides the Company with a potential ownership interest of up to 48.9% on a fully diluted basis. The Company has appointed two nominee directors to the board of Hyasynth, which currently has seven members.

Hyasynth has patent-pending enzymes, yeast strains and processes that make it possible to produce phytocannabinoids and phytocannabinoid analogues in genetically modified strains of yeast. These proprietary enzymes and yeast strains have allowed Hyasynth to produce CBG, CBD and THC for novel and specialized products such as vaporizable cannabis products and cannabis infused beverages for a fraction of the cost of traditional plant-based production. The Company anticipates that its investment in Hyasynth has the potential to provide the Company with access to what it expects to be the future of cannabinoid production. The Company expects that cost-effectiveness and scalability will be necessary to meet the needs of both the Canadian and global cannabis markets.

In addition to the investment, Organigram has the right to purchase all of Hyasynth’s cannabinoid or cannabinoid-related production at a 10% discount to the wholesale market price for a period of ten years. In addition to the major cannabinoids such as CBD and THC, Hyasynth is also pursuing the production and scale-up of minor cannabinoids found only in limited quantities in the cannabis plant. One subset of these minor cannabinoids includes propyl-cannabinoids such as cannabigerivarin (CBGV) and tetrahydrocannabivarin (THCV). While the Company expects that there will always be a need for premium indoor grown cannabis flowers, working with Hyasynth offers the potential to more quickly respond to market demand for cannabinoid-based recreational and medical cannabis products.

SUPPLY AGREEMENT FOR HEMP FOR CBD EXTRACTION
On January 18, 2019, the Company entered into an agreement (the “Supply Agreement”) with 703454 N.B. Inc. (carrying on business as 1812 Hemp) (“1812 Hemp”), a New Brunswick based industrial hemp research company to secure supply of hemp.

Pursuant to the Supply Agreement, the Company receives a 25% discount on all dried product purchased from 1812 Hemp and has continued access to future 1812 harvests until December 16, 2023, with the option to extend for an additional five-year period. The Company made a payment of $1,500 to 1812 Hemp in connection with the Supply Agreement. Organigram acquired access to approximately 6,000 kg of dried hemp flower harvested in the fall of 2018, which it mostly acquired in Q3 Fiscal 2019.

In addition, pursuant to the Supply Agreement, Organigram has a right-of-first refusal on future procurement of hemp from 1812 Hemp.

On July 26, 2019, the Company entered into an advance payment and support agreement (“Payment Agreement”) with 1812 Hemp. Under the terms of the Payment Agreement, the Company advanced $3.0 million to 1812 Hemp in the form of a secured loan. These amounts may be applied against future purchases of hemp under the Supply Agreement. The aggregate amount of advances outstanding under the Payment Agreement as of January 1, 2020 will accrue interest of 9.0% per annum, calculated monthly, until the entire balance of advances is paid.

During the three months ended August 31, 2020, management became aware that 1812 Hemp was facing financial hardship due to a lack of customer demand and a change in market conditions, and as a result had significantly scaled back operations. Separately, the Company’s forecasted hemp purchases have decreased significantly as a result of slower than expected progression in Canadian hemp and CBD regulations. Thus, as a result of the aforementioned challenges, management impaired the Supply Agreement intangible asset to its recoverable amount, which was estimated to be $nil, by recording an impairment charge of $1,303 at August 31, 2020.

At February 28, 2021, $2,229 in principal was outstanding under the Payment Agreement, and the Company demanded repayment of the entire amount owing by 1812 Hemp to the Company pursuant to the terms of the Payment Agreement. At February 28, 2021, management reassessed 1812 Hemp’s liquidation value and as a result an impairment of $500 was recorded against the loan receivable, bringing the carrying value of the loan receivable to $1,729. At May 31, 2021 and August 31, 2021, as a result of additional information obtained, management reassessed the liquidation value of 1812 Hemp's assets over which the Company has security and recorded additional impairments of $800 and $679, respectively, against the loan receivable, bringing the carrying value of the loan receivable to $250. At November 30, 2021, the balance was re-
MANAGEMENT’S DISCUSSION AND ANALYSIS | FOR THE THREE MONTHS ENDED NOVEMBER 30, 2021 AND 2020    15


evaluated and an impairment charge of $250 was recorded by the management as a result of recoverable amount estimated to be $nil, reducing the balance receivable to $nil.

USE OF PROCEEDS OF PRIOR FINANCINGS
On November 12, 2020, the Company closed an underwritten public offering of units for net proceeds of $64.8 million. The Company used $55.0 million of the proceeds to repay a portion of the Company’s term loan on December 1, 2020 and intends to use the balance of the net proceeds for working capital and other general corporate purposes. Please refer to the “Balance Sheet, Liquidity, and Capital Resources” section of the MD&A for further information.

FINANCIAL REVIEW AND DISCUSSION OF OPERATIONS
CAUTIONARY NOTE REGARDING NON-IFRS FINANCIAL MEASURES
The Company uses certain non-IFRS performance measures such as adjusted EBITDA (excluding fair value adjustment to inventory and biological assets) and adjusted gross margin in its MD&A or other public documents, which are not measures calculated in accordance with IFRS and have limitations as analytical tools. These performance measures have no prescribed meaning under IFRS and therefore amounts presented may not be comparable to similar data presented by other companies. The data is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance such as net income or other data prepared in accordance with IFRS. See the cautionary statement in the “Introduction” section at the beginning of this MD&A.

FINANCIAL HIGHLIGHTS
Below is the quarter-over-quarter analysis of the changes that occurred for the three months ended November 30, 2021 and November 30, 2020. Commentary is provided in the pages that follow.

Q1-2022
Q1-2021
$ CHANGE% CHANGE
Financial Results
Gross revenue$44,345 $25,280 $19,065 75 %
Net revenue$30,378 $19,331 $11,047 57 %
Cost of sales$27,924 $23,173 $4,751 21 %
Gross margin before fair value adjustments$2,454 $(3,842)$6,296 (164)%
Gross margin % before fair value adjustments%(20)%28 %(140)%
Realized fair value on inventories sold and other inventory charges$(12,313)$(12,718)$405 (100)%
Unrealized gain (loss) on changes in fair value of biological assets$10,469 $(114)$10,583 (9,283)%
Gross margin$610 $(16,674)$16,879 (104)%
Operating expenses$14,333 $11,539 $2,794 24 %
Loss from operations
$(13,723)$(28,213)$14,085 (51)%
Other expenses (income)$(12,418)$6,123 $(18,541)(303)%
Net loss
$(1,305)$(34,336)$32,626 (96)%
Net loss per common share, basic
$(0.004)$(0.170)$0.166 (98)%
Net loss per common share, diluted
$(0.004)$(0.170)$0.166 (98)%
Net cash (used in) provided by operating activities
$(9,341)$294 $(9,635)(3,277)%
Adjusted Gross Margin(1)
$5,475 $1,948 $3,527 181 %
Adjusted Gross Margin %(1)
18 %10 %%80 %
Adjusted EBITDA(1)
$(1,887)$(5,741)$3,854 (67)%
Financial Position
Working capital$217,834 $130,121 $87,713 67 %
Inventory and biological assets$46,420 $53,921 $(7,501)(14)%
Total assets$545,365 $473,372 $71,993 15 %
Non-current financial liabilities(2)
$3,074 $75,466 $(72,392)(96)%
Note 1:    Non-IFRS measures that have been defined and reconciled within their respective sections of the MD&A.
Note 2: Non-current financial liabilities excludes non-monetary balances related to contingent share consideration and derivative liabilities.

MANAGEMENT’S DISCUSSION AND ANALYSIS | FOR THE THREE MONTHS ENDED NOVEMBER 30, 2021 AND 2020    16


NET REVENUE
Net revenue for the Company is defined as gross revenue, net of customer discounts, rebates, and sales returns and recoveries, less excise taxes. Revenue consists primarily of dried flower and cannabis derivative products sold to the adult-use recreational, medical, wholesale, and international marketplaces.

For the three months ended November 30, 2021, the Company reported $30,378 in net revenue. Of this amount $25,020 (82%) was attributable to sales to the adult-use recreational market, $3,429 (11%) to the international market, $1,908 (6%) to the medical market and $21 (1%) to other revenues. Q1 Fiscal 2022 net revenue increased 57%, or $11,047, from the prior year comparative period’s net revenue of $19,331, primarily due to an increase of $8,232 in adult-use recreational revenue, and an increase in international revenue by $3,189, which is partly offset by the $(343) decrease in medical revenue. Net revenue from the adult-use recreational market was higher by $8,232 (49%), generated from a significant increase in sales volumes from value oriented product sold in Q1 Fiscal 2022, which also carry a lower average selling price.

Sale of flower from all product categories and distribution channels comprised 83% of net revenue in the quarter. The net ASP of flower sales decreased to $1.89 per gram on a quarter-over-quarter basis compared to $3.24 per gram for Q1 Fiscal 2021, as both the Company and the Canadian cannabis industry continued to experience general price compression in the adult-use recreational and medical markets as these markets matured, and the customer and product mix evolved to focus more on value offerings. Selling prices are prone to fluctuation and there may be further price compression if the market remains oversupplied. The Company is committed to refining its product mix as customer preferences evolve and it continues to revitalize its higher margin Edison branded flower products.

The volume of flower sales in grams increased 177% to 13,336 kg in Q1 Fiscal 2022 compared to 4,820 kg in the prior year comparative quarter, primarily as a result of the market shift towards large format value products and the success of the Company's products in these brands and formats.

REVENUE COMPOSITION
The Company’s management reviews revenue composition by product category as follows for three months ended November 30, 2021 and 2020:

Q1-2022
Q1-2021
International Flower and Oil3,429 240 
Medical, net of excise duty
1,908 2,251 
Recreational Oil, net of excise duty
43 224 
Recreational Flower, net of excise duty21,315 14,838 
Recreational Vapes, net of excise duty1,148 1,115 
Recreational Edibles, net of excise duty1,888 487 
Recreational Ingestible Extracts, net of excise duty626 — 
Recreational Powder, net of excise duty— 125 
Wholesale and Other21 51 
Total Net Revenue30,378 19,331 


COST OF SALES AND GROSS MARGIN
The gross margin for the three months ended November 30, 2021 was $610 compared to $(16,674) for the prior year comparative period. The increases in gross margin quarter-over-quarter was primarily a result of: (i) lower cultivation and post-harvest costs; (ii) higher unrealized gains on changes in the fair value of biological assets; (iii) lower inventory provisions of excess and unsaleable inventories as well as inventory provisions to net realizable value; (iv) lower unabsorbed overhead as a result of increased production volumes; and (v) a lower ASP from increased competition and the ongoing evolution of the customer and product mix.

Included in gross margin is $12,313 (November 30, 2020 - $(12,718)) of realized fair value on inventories sold and other inventory charges and unrealized gain of $10,469 (November 30, 2020 - unrealized loss of $114) on change in fair value of biological assets related to IFRS standard IAS 41 – Agriculture. The net increase in fair value adjustments on a quarter-to-date basis compared to the prior year is primarily due to the current quarter's decrease in cultivation costs and the increase to the overall number of plants (due to the increased room usage).

Cost of sales primarily consists of the following:

Costs of sales of cannabis (dried flower, pre-rolls, and wholesale/international bulk flower), cannabis oil, vapes, chocolates, and other wholesale formats such as extract include the direct costs of materials and packaging, labour,
MANAGEMENT’S DISCUSSION AND ANALYSIS | FOR THE THREE MONTHS ENDED NOVEMBER 30, 2021 AND 2020    17


including any associated share-based compensation, and depreciation of manufacturing related items such as building and equipment related to the production of cannabis and derivatives sold. This includes cultivation costs (growing, harvesting, drying, and processing costs), extraction, vape filling, quality assurance and quality control, as well as packaging and labelling;
Costs related to other products, such as vaporizers and other accessories;
Shipping expenses to deliver product to the customer;
The production cost of late-stage biological assets that are disposed of, plants destroyed that do not meet the Company’s quality assurance standards, provisions for excess and unsaleable inventories and provisions related to adjustments to net realizable value that reduce the carrying value of inventory below the original production or purchase cost, and other production overhead; and
Unabsorbed fixed overhead charges, comprised of depreciation, insurance, and property taxes, resulting from the underutilization of cultivation and production capacity.


Illustrative Overview of Composition and Flow of Biological Assets, Inventories, and Cost of Sales

assets_inventory.jpg
Note 1:    The above illustration is for informational purposes only and should not be viewed as an exact representation of the actual flow of inputs and outputs. Certain items referenced above may not have a standard meaning under IFRS and therefore should be considered non-IFRS measures. Readers should refer to the notes of the Interim Financial Statements for the official accounting policies.
Note 2:    The majority of stock options and depreciation expense related to the manufacturing and operations departments are capitalized as part of cultivation and inventory production costs; however, a certain amount of these expenses that relate to overhead departments and underutilization of the Moncton Campus are expensed directly to cost of sales.
Note 3:    Fair value adjustments are made to the cost basis of biological assets which collectively become the cost basis of inventories. Inventories are then carried at the lower of cost and net realizable value. When sold a portion of inventory is charged to cost of sales (actual costs) with the remainder (fair value adjustments) to “Realized fair value on inventories sold and other inventory charges” on statements of operations and comprehensive loss.
Note 4:    Excise taxes are excluded from this diagram and are reflected as a netting adjustment against gross revenue to arrive at net revenue for presentation purposes in the statements of operations and comprehensive loss.

GROSS MARGIN BEFORE REALIZED FAIR VALUE ON INVENTORIES SOLD AND OTHER INVENTORY CHARGES AND UNREALIZED GAIN (LOSS) ON CHANGES IN FAIR VALUE OF BIOLOGICAL ASSETS AND ADJUSTED GROSS MARGIN
The fair value adjustment to biological assets, inventories sold, and other charges is comprised of the non-cash fair value gains (losses) for inventories sold, growth of biological assets, and adjustments to net realizable value.

The increase in gross margin before fair value changes to biological assets and inventories in Q3 and Q4 Fiscal 2021 and in Q1 Fiscal 2022 are due to the combination of higher net revenue, lower cultivation and post-harvest costs, lower inventory provisions, and lower unabsorbed overhead.

Adjusted gross margin is a non-IFRS measure that the Company defines as net revenue less: (i) cost of sales, before the effects of fair value changes to biological assets, inventories sold, and other charges; excluding (ii) provisions and impairment of inventories and biological assets; (iii) provisions to net realizable value; (iv) COVID-19 related charges; and (v) unabsorbed
MANAGEMENT’S DISCUSSION AND ANALYSIS | FOR THE THREE MONTHS ENDED NOVEMBER 30, 2021 AND 2020    18


overhead relating to underutilization of the production facility grow rooms and manufacturing equipment, most of which is related to non-cash depreciation expense. Management believes this measure is useful and relevant as it more fairly represents the gross margin for the revenues generated in the period as it is based on the direct and indirect costs of production related to these revenues and excludes impairments and provisions related to other inventories resulting from internal or external influences. See the cautionary statement regarding non-IFRS financial measures in the “Introduction” section at the beginning of this MD&A and the reconciliation to IFRS measures in the “Financial Results and Review of Operations” section of this MD&A. The most directly comparable measure to adjusted gross margin calculated in accordance with IFRS is gross margin before fair value changes to biological assets and inventories sold.

Gross margin before realized fair value on inventories sold and other inventory charges and unrealized gain (loss) on changes in fair value of biological assets and Adjusted Gross Margin
Q2-F20
Q3-F20
Q4-F20
Q1-F21
Q2-F21
Q3-F21
Q4-F21
Q1-F22
Net revenue$23,221 $18,021 $20,400 $19,331 $14,643 $20,324 $24,865 $30,378 
Cost of sales before adjustments14,772 13,909 14,244 17,383 15,323 21,046 21,848 24,903 
Adjusted Gross margin8,449 4,112 6,156 1,948 (680)(722)3,017 5,475 
Adjusted Gross margin %36 %23 %30 %10 %(5)%(4)%12 %18 %
Less:
Provisions (recoveries) and impairment of inventories and biological assets
1,027 19,940 11,019 3,051 10,050 (59)1,997 1,845 
Provisions to net realizable value12 2,661 80 75 3,499 669 622 467 
COVID-19 related charges— 5,901 194 — — — — — 
Unabsorbed overhead— 1,964 3,470 2,664 2,274 1,725 1,400 709 
Gross margin before fair value adjustments$7,410 $(26,354)$(8,607)$(3,842)$(16,503)$(3,057)$(1,002)$2,454 
Gross margin % (before fair value adjustments)32 %(146)%(42)%(20)%(113)%(15)%(4)%%
Add/(Deduct):
Realized fair value on inventories sold and other inventory charges
$(29,793)$(33,489)$(24,928)$(12,718)$(7,208)$(8,509)$(7,286)$(12,313)
Unrealized gain (loss) on changes in fair value of biological assets$33,671 $9,627 $4,779 $(114)$6,516 $13,685 $11,639 $10,469 
Gross margin(1)
$11,288 $(50,216)$(28,756)$(16,674)$(17,195)$2,119 $3,351 $610 
Gross margin %(1)
49 %(279)%(141)%(86)%(117)%10 %13 %%

Note 1:    Gross margin reflects the IFRS measure per the Company’s Financial Statements.

GENERAL AND ADMINISTRATIVE
For the three months ended November 30, 2021, general and administrative expenses increased to $7,984 compared to $6,802 in the prior year comparative period. The increase mainly relates to higher employee costs due to more general and administrative full-time employees, general wage increases and higher professional and technology fees.
SALES AND MARKETING
For the three months ended November 30, 2021, the Company incurred sales and marketing expenses of $4,660 compared to $3,672 for the three months ended November 30, 2020. The increase in expenses in the current quarter was due to the continued development by the Company of the adult-use recreational market. These expenses include advertising and promotion, client service and sales staff, educational materials, as well as trade investment.

Sales and marketing and general and administrative expenses, excluding non-cash share-based compensation (“SG&A”), were $12,644 for Q1 Fiscal 2022, an increase from $10,474 in Q1 Fiscal 2021. As a percentage of net revenue, SG&A expenses decreased to 42% in Q1 Fiscal 2022 from 54% in Q1 Fiscal 2021 due in part to the increases noted above and the impact of increased net revenues.

SHARE-BASED COMPENSATION
The Company recognized $674 in share-based compensation in relation to general and administrative, sales and marketing, and research and development employees for the three months ended November 30, 2021, compared to $419 for the prior year comparative period. For the three months ended November 30, 2021, 520,000 options were granted to employees of the Company, valued at $934, compared to nil options granted in the prior year comparative period, valued at $nil. There were 500,000 and nil, respectively, options granted to key management personnel during the three months ended November 30, 2021 and 2020. The increase in share-based compensation expense year-over-year is primarily a result of a reduced level of options granted during the last 12 months, than as compared to the 12 months ending November 30, 2020.

During the three months ended November 30, 2021, 391,248 restricted share units (“RSUs”) and 169,843 performance share units (“PSUs”) were granted to employees (November 30, 2020 – nil and nil), of which 361,942 RSUs and 140,537 PSUs were
MANAGEMENT’S DISCUSSION AND ANALYSIS | FOR THE THREE MONTHS ENDED NOVEMBER 30, 2021 AND 2020    19


issued to key management personnel and members of the Board of Directors compared to nil and nil, respectively, issued for both for the three months ended November 30, 2020.

Share-based compensation represents a non-cash expense and was valued using the Black-Scholes valuation model for stock options and using the fair value of the shares on the date of the grant for RSUs. The fair value of PSUs was based on the Company’s share price at the grant date, adjusted for an estimate of likelihood of achievement of the defined performance criteria.

FINANCING COSTS AND INVESTMENT INCOME
Financing costs are comprised of cash interest expense and the amortization of transaction costs during the period. The decrease in financing costs for the three months ended November 30, 2021 to $83, from $1,588 in the prior year is mainly attributable to the repayment of the term loan balance during Fiscal 2021.

Investment income of $326 was earned for the three months ended November 30, 2021, compared to $116 for the prior year. The change in investment income was due to year-over-year changes cash and short-term investments that resulted in an increase to the interest earned during the current period.

GOVERNMENT SUBSIDIES
On April 1, 2020, Department of Finance Canada announced the Canada Emergency Wage Subsidy (“CEWS”), which would subsidize 75% of employee wages, retroactive to March 15, 2020, to Canadian employers whose business had been affected by COVID-19 to enable them to re-hire workers previously laid off as a result of pandemic, help prevent further job losses, and to better position companies to resume normal operations following the crisis. Also, on October 9, 2020, the creation of the new Canada Emergency Rent Subsidy ("CERS") program was announced to provide support to qualifying tenants and property owners in the form of rent subsidy that is made available to organizations that continue to endure declining revenues, and the lockdown support, which provides an additional top-up to those entities that must either close or significantly restrict their activities due to a public health order. Under these programs, the Company applied for subsidies for the three months ended November 30, 2021 of $nil (November 30, 2020 - $1,832).

INVESTMENTS IN ASSOCIATES AND CONTINGENT CONSIDERATION
During Q1 Fiscal 2019, the Company made three strategic and international investments as described previously in this MD&A, which are being accounted for as investments in associates in the Company’s financial statements. During the three months ended November 30, 2021, the Company’s share of loss from these investments in associates was $144 and $242 in the prior year comparative period. Since these investments are effectively in the research and development or early phases of their operations, these losses are generally to be expected.

In connection with the Alpha-Cannabis Germany investment, the Company had committed to contingent consideration to be paid in the form of Common Shares upon the achievement of certain milestones by Alpha-Cannabis Germany. This contingent consideration liability is carried at fair value in the Company’s statement of financial position. The Company determined the recoverable amount to approximate $nil based on the higher of fair value less cost of disposal and value in use, as a result of the current financial difficulties including negligible projected revenues for future years; expected cash flow deficits; the lack of GMP certified inventory; and a significant decline in ACG's market share, and as such had recorded an impairment loss of $3,266 in the consolidated statement of operations and comprehensive loss for the year ended August 31, 2021. Concurrently the probability of ACG achieving the milestone was adjusted to 0% resulting in the related contingent share consideration adjusted to nil.

In connection with the Company's acquisition of the Edibles and Infusions Corporation as described in Note 26 of the Interim Financial Statements, the Company had commitments to deliver additional consideration. At November 30, 2021, the Company revalued the remaining contingent liability and recorded a corresponding gain in the statement of operations and comprehensive loss of $182 (November 30, 2020 - $nil) reducing the contingent liability from $5,538 to $5,356.

DERIVATIVE WARRANT LIABILITIES
On November 12, 2020, the Company closed an underwritten public offering of units of the Company (the “Units”) for total gross proceeds of $69,143 (the “Offering”). The Company sold 37,375,000 Units at a price of $1.85 per Unit, including 4,875,000 Units sold pursuant to the full exercise of the over-allotment option granted to the underwriters. The offering was underwritten by a syndicate of underwriters led by Canaccord Genuity Corp. Each Unit consisted of one Common Share of the Company and one half of one Common Share purchase warrant of the Company (each full common share purchase warrant, a “Warrant”), therefore resulting in 18,687,500 Warrants being issued. Each Warrant is exercisable to acquire one Common Share of the Company (a “Warrant Share”) for a period of three years following the closing date of the Offering (i.e. until November 12, 2023) at an exercise price of $2.50 per Warrant Share, subject to adjustment in certain events. The holders of the Warrants issued pursuant to the Offering may elect, if the Company does not have an effective registration statement under the U.S. Securities Act, or the prospectus contained therein is not available for the offer and sale of the Common Shares
MANAGEMENT’S DISCUSSION AND ANALYSIS | FOR THE THREE MONTHS ENDED NOVEMBER 30, 2021 AND 2020    20


to the Warrant holder, in lieu of exercising the Warrants for cash, a cashless exercise option to receive Common Shares equal to the fair value of the gain implied by the Warrants at the time of exercise. The fair value is determined by multiplying the number of Warrants to be exercised by the weighted average market price less the exercise price with the difference being divided by the weighted average market price. If a Warrant holder exercises this option, there will be variability in the number of shares issued per Warrant.

In accordance with IAS 32 Financial Instruments: Presentation, a contract to issue a variable number of shares fails to meet the definition of equity and must instead be classified as a derivative liability and measured at fair value with changes in fair value recognized in the statement of operations and comprehensive loss at each reporting period. The derivative warrant liabilities are expected to ultimately be converted into the Company’s equity (Common Shares) when the Warrants are exercised or will be extinguished on the expiry of the outstanding Warrants and will not result in the outlay of any cash by the Company.

At initial recognition on November 12, 2020, the Company recorded derivative liabilities of $12,894 based on the estimated fair value of the Warrants at this date using the Black-Scholes option pricing model. Share issuance costs of $803 were recognized and allocated to derivative liabilities, such amount represents on a pro-rata allocation of total issuance costs attributable to the Units sold in the Offering based on the relative fair value of the underlying Common Shares and Warrants.

As at November 30, 2021, the Company revalued the derivative warrant liabilities at an estimated fair value of $22,967. The Company recorded a decrease in the fair value of the derivative warrant liabilities of $12,052 for the three months ended November 30, 2021 (November 30, 2020 – an increase of $4,672) in the statements of operations and comprehensive loss. There were nil exercises of Warrants during the three months ended November 30, 2021, resulting in 16,943,650 Warrants outstanding at November 30, 2021 (November 30, 2020 - 18,687,500).

DERIVATIVE TOP-UP RIGHTS LIABILITIES
On March 10, 2021, through the strategic investment from BAT, the Company issued 58,336,392 Common Shares, resulting in BAT's beneficial ownership in the Company at approximately 19.9%, as described in Note 13 of the Interim Financial Statements.

Pursuant to the investor rights agreement (the "IRA") between the Company and BAT, the Company granted BAT certain rights, including pre-emptive rights, to participate in distributions of Common Shares to maintain its proportionate ownership in certain circumstances, as well as other rights ("Top-up Rights") to subscribe for additional Common Shares in specified circumstances where the pre-emptive rights are not applicable (referred to in the IRA as "Exempt Distributions") and in specified circumstances where pre-emptive rights were not exercised (referred to in the IRA as “bought deal Distributions”).

The price per Common Share to be paid by BAT pursuant to the exercise of its Top-Up Rights will equal the price paid by other participants in the Exempt Distribution or bought deal Distribution, subject to certain restrictions (including, if such price is not permitted pursuant to stock exchange requirements, at the lowest price permitted thereunder).

The Company has classified the Top-up Rights as a derivative liability and pursuant to the exercise of stock options, restricted share units, performance share units and warrants that were outstanding at initial recognition on March 10, 2021 (the date of the IRA), the Company recorded a derivative liability of $2,740 based on the estimated fair value of the Top-up Rights at this date using a Monte Carlo pricing model.

As at November 30, 2021, the Company revalued the Top-up Rights at an estimated fair value of $1,862 (August 31, 2021 – $2,508). The Company recorded a decrease in the estimated fair value change of the Top-up Rights for the three months ended November 30, 2021 of $646 (November 30, 2020 - $nil).

OTHER
During the three months ended November 30, 2021, the Company recorded a further impairment charge on its loan receivable with 1812 Hemp of $250. This adjustment was made as management re-assessed 1812 Hemp’s liquidation value.

During the three months ended November 30, 2021, the Company did not record any legal provisions for claims and other contingencies, compared to $730 for the prior year comparative period.

NET LOSS
Net loss for the three months ended November 30, 2021 was $(1,305) or $(0.004) per Common Share (basic and diluted), compared to $(34,336) or $(0.170) per Common Share (basic and diluted) for the prior year comparative period. The decrease in net loss for the current quarter compared to the prior year comparative period was a result of higher gross margin from higher revenues, lower inventory provisions for obsolete items, higher unrealized gain on changes in fair value of biological assets, lower financing costs, higher fair value gain on the derivative warrant liabilities, partly offset by increased operating expenses.
MANAGEMENT’S DISCUSSION AND ANALYSIS | FOR THE THREE MONTHS ENDED NOVEMBER 30, 2021 AND 2020    21



SUMMARY OF QUARTERLY RESULTS
Q2-F20
Q3-F20
Q4-F20
Q1-F21
Q2-F21
Q3-F21
Q4-F21
Q1-F22
Financial Results
Adult-use recreational revenue (net of excise)$15,009 $15,349 $15,063 $16,788 $11,988 $16,839 $22,898 $25,020 
Direct to patient medical revenue (net of excise)$2,384 $2,482 $2,403 $2,251 $2,438 $2,015 $1,968 $1,908 
International, wholesale and other revenue$5,828 $190 $2,934 $292 $217 $1,470 $(1)$3,450 
Net revenue$23,221 $18,021 $20,400 $19,331 $14,643 $20,324 $24,865 $30,378 
Net loss
$(6,833)$(89,871)$(38,590)$(34,336)$(66,389)$(4,008)$(25,971)$(1,305)
Net loss per common share, basic
$(0.041)$(0.512)$(0.199)$(0.170)$(0.285)$(0.014)$(0.090)$(0.004)
Net loss per common share, diluted
$(0.041)$(0.512)$(0.199)$(0.170)$(0.285)$(0.014)$(0.090)$(0.004)
Operational Results
Dried flower yield per plant (grams)(1)
103 92 101 86 115 117 127 129 
Harvest (kg) - dried flower8,8984,741 8,751 3,901 4,467 8,379 12,085 11,603 
Registered medical patients (#)16,781 14,312 18,934 18,342 11,658 9,741 8,811 7,983 
Employee headcount (#)816 474 552 516 619 647 727 738 

Note 1:    The Company significantly reduced the harvesting of trim from the cannabis plant during Q3 Fiscal 2020. The yield is therefore measured to only include the yield from the flower portion of the cannabis plant.

The net loss during Q3 and Q4 Fiscal 2021 decreased from Q2 Fiscal 2021 largely due to higher gross margin and gains on the fair value adjustment of the derivative liabilities. Q4 Fiscal 2021 net loss increased from Q3 Fiscal 2021 mainly due to impairment charges recorded on intangible assets, property, plant and equipment, investments in associates, decreased government subsidies and loss on fair value change in contingent consideration. The net loss decreased during Q1 Fiscal 2022 due to improvements in net revenues, continued improvements in cultivation costs and lower inventory provisions, and unabsorbed overhead.

Adjusted EBITDA
This is a non-IFRS measure and the Company calculates adjusted EBITDA as net income (loss) before financing costs, net of investment income; income tax expense (recovery); depreciation, amortization, impairment, and (gain) loss on disposal of property, plant and equipment (per the statement of cash flows); share-based compensation (per the statement of cash flows); share of loss and impairment loss from loan receivable and investments in associates; unrealized loss (gain) on changes in fair value of contingent consideration; change in fair value of derivative liabilities; expenditures incurred in connection with research and development activities; realized fair value on inventories sold and other inventory charges; unrealized (gain) loss on changes in fair value of biological assets; provisions and impairment of inventories and biological assets; provisions of inventory to net realizable value; COVID-19 related charges, net of any government subsidies; legal provisions; and share issuance costs recorded in the statement of operations and comprehensive loss. Management believes the exclusion of the fair value adjustment is an alternative representation of performance. The fair value adjustment is a non-cash gain (loss) and is based on the valuation of biological assets and inventory using a fair value less cost to sell model. The most directly comparable measure to adjusted EBITDA calculated in accordance with IFRS is net income (loss).

Management changed the calculation of adjusted EBITDA during Q4 Fiscal 2020 and has conformed prior quarters accordingly to include an add-back for provisions and impairment of inventories and biological assets and provisions to net realizable value. During Q4 Fiscal 2021, management further amended the calculation of adjusted EBITDA and has conformed prior quarters accordingly to include an add-back for the Company's research and development expenditures, including its share of the expense from the CoE.

The Fiscal 2021 adjusted EBITDA was lower then Fiscal 2020 as a consequence of both lower revenues and a higher cost of production. At the end of Fiscal 2021, during Q4 2021 the Company had decreased its cost of production and with increased revenues this reduced the quarter's adjusted EBITDA loss to $4.8M, a 48% decrease from Q3 2021 loss of $9.2M. During Q1 2022, with further reductions to the cost of production combined with 22% increase to net revenues, the adjusted EBITDA loss was reduced to $1.9M.

For Fiscal 2022, the Company plans to operate at increased levels of production, with improved yields that together are expected to result in lower cost of production, which is expected to improve margins while providing more product available for sale. As a consequence of these key factors, management forecasted that the Company would be Adjusted EBITDA positive during Fiscal Q4 2022, and this was accelerated to Fiscal Q3 2022 with the accretive acquisition of Laurentian.




MANAGEMENT’S DISCUSSION AND ANALYSIS | FOR THE THREE MONTHS ENDED NOVEMBER 30, 2021 AND 2020    22


Adjusted EBITDA (Non-IFRS Measure)
Adjusted EBITDA Reconciliation
Q2-F20
Q3-F20
Q4-F20
Q1-F21
Q2-F21
Q3-F21
Q4-F21
Q1-F22
Net loss as reported
$(6,833)$(89,871)$(38,590)$(34,336)$(66,389)$(4,008)$(25,971)$(1,305)
Add/(Deduct):
Financing costs, net of investment income1,804 2,175 784 1,472 669 251 (286)(243)
Income tax recovery
(698)(9,975)— — — — — — 
Depreciation, amortization, and gain (loss) on disposal of property, plant and equipment (per statement of cash flows)
4,406 5,033 5,537 5,262 5,222 5,626 17,349 6,378 
Impairment of intangible assets— — — — — — 1,701 — 
Impairment of property, plant and equipment— 37,740 2,031 — — — — — 
Share of loss and impairment loss from loan receivable and investments in associates
1,894 1,828 210 242 844 1,115 4,162 394 
Unrealized (gain) loss on changes in fair value of contingent consideration
(193)(229)(85)36 154 (24)3,392 (182)
Realized fair value on inventories sold and other inventory charges29,793 33,489 24,927 12,718 7,208 8,509 7,286 12,313 
Unrealized gain (loss) on change in fair value of biological assets(33,671)(9,627)(4,778)114 (6,516)(13,685)(11,639)(10,469)
Share-based compensation (per statement of cash flows)2,400 1,937 654 606 1,167 973 1,150 680 
COVID-19 related charges, net of government subsidies— 2,761 (4,452)(1,832)(2,709)(2,714)(892)— 
Legal provisions— — — 730 500 470 1,050 — 
Share issuance costs allocated to derivative warrant liabilities and change in fair value of derivative liabilities— — — 5,475 37,659 (7,305)(6,001)(12,698)
Provisions and impairment of inventories and biological assets and provisions of inventory to net realizable value1,039 22,601 11,099 3,126 13,549 610 2,619 2,312 
Adjusted EBITDA as Previously Reported$(59)$(2,138)$(2,663)$(6,387)$(8,642)$(10,182)$(6,080)$(2,820)
Add:
Research and development expenditures
442 159 343 646 802 938 1,262 933 
Adjusted EBITDA (Revised)$383 $(1,979)$(2,320)$(5,741)$(7,840)$(9,244)$(4,818)$(1,887)
Divided by: net revenue23,221 18,021 20,400 19,331 14,643 20,324 24,865 30,378 
Adjusted EBITDA Margin % (Revised) (Non-IFRS Measure)%(11)%(11)%(30)%(54)%(45)%(19)%(6)%

BALANCE SHEET, LIQUIDITY AND CAPITAL RESOURCES
The following represents selected balance sheet highlights of the Company at the end Q1 Fiscal 2022 and Q1 Fiscal 2021:

NOVEMBER 30, 2021
AUGUST 31, 2021
% CHANGE
Cash & short-term investments$168,035 $183,555 (8)%
Inventories$34,419 $36,696 (6)%
Working capital$217,834 $234,349 (7)%
Total assets$545,365 $554,017 (2)%
Total current and long-term debt$291 $310 (6)%
Non-current financial liabilities$3,074 $4,881 (37)%
Total shareholders' equity$482,685 $479,805 %

On November 30, 2021, the Company had a cash and short-term investments balance of $168,035 compared to $183,555 at August 31, 2021, the decrease of 8%, which is primarily a result of cash used in operating activities of $9,341 and capital expenditures of $7,004.

The sale of inventories as well as provisions for excess and unsaleable inventories recorded during Q1 Fiscal 2022 compared to Q4 Fiscal 2021, resulted in a decrease in the value of inventories.

Management believes its capital position is healthy and that there is sufficient liquidity available for the near to medium term. In the event that the Company is unable to finance any new expansionary capital expenditures or acquisitions from cash on hand or operating cash flows, it could, if necessary and subject to prevailing market conditions, obtain liquidity through the capital markets as the Common Shares are actively traded on both the NASDAQ and TSX and there is broad analyst coverage amongst sell-side brokerages.

The Company's decision in Q4 Fiscal 2021 to complete Phase 4C will, upon completion, significantly increase capacity enabling the Company to better meet the increased consumer demand for its products. The expenditures for this work are
MANAGEMENT’S DISCUSSION AND ANALYSIS | FOR THE THREE MONTHS ENDED NOVEMBER 30, 2021 AND 2020    23


budgeted at $38 million and are expected to be incurred over a period of time commenced during Q4 Fiscal 2021 with the completion targeted during Fiscal 2023. The Company has sufficient cash and short-term investments to support these expenditures, while also supporting the corresponding growth to its working capital assets while maintaining sufficient liquidity and financial flexibility.

The following highlights the Company’s cash flows during the three months ended November 30, 2021 and November 30, 2020:

NOVEMBER 30,
2021
NOVEMBER 30,
2020
Cash provided (used) by:
Operating activities$(9,341)$294 
Financing activities(270)63,193 
Investing activities53,956 15,813 
Cash provided$44,345 $79,300 
Cash position
Beginning of period55,365 24,600 
End of period$99,710 $103,900 
Short-term investments68,325 30,000 
Cash and short-term investments$168,035 $133,900 

Cash used in operating activities was $9,341 for the three months ended November 30, 2021, which was primarily driven by the increase in accounts receivable and the negative adjusted EBITDA10.This compares to cash provided from operating activities of $294 for the prior year comparative period which was primarily driven by the realization of accounts receivable and inventories.

Cash used by financing activities for the three months ended November 30, 2021 was $270, which was mainly driven by the payment of the Company's leases. In comparison, for the three months ended November 30, 2020, cash provided by financing activities was $63,193 which was primarily driven by net proceeds of $64,839 from the Offering of Units on November 12, 2020.

Cash provided by investing activities for the three months ended November 30, 2021 was $53,956, primarily driven by the proceeds from redemption of short-term investments of $60,000, partially offset by the purchase of property, plant and equipment of $7,004. This compares to cash provided in investing activities of $15,813 for the prior year comparative period, which was primarily driven by the proceeds from redemption of short-term investments of $20,072, partly offset by the Company’s additional investment in its associate Hyasynth Biologicals Inc., of $2,537.

OFF BALANCE SHEET ARRANGEMENTS
There were no off-balance sheet arrangements during the three months ended November 30, 2021.

RELATED PARTY TRANSACTIONS
MANAGEMENT AND BOARD COMPENSATION
Key management personnel are those persons having the authority and responsibility for planning, directing, and controlling activities of the Company, directly or indirectly. The key management personnel of the Company are the members of the Company’s executive management team and Board of Directors. The transactions are conducted at arm’s length and in the normal course of operations.

For the three months ended November 30, 2021 and November 30, 2020, the Company’s expenses included the following management and board compensation:

NOVEMBER 30, 2021NOVEMBER 30, 2020
Salaries and consulting fees$969 $516 
Share-based compensation894 482 
Total key management compensation$1,863 $998 
10Adjusted EBITDA is a non-IFRS financial measure. See the cautionary statement regarding non-IFRS financial measures in the “Introduction” section of this MD&A, and the discussion under the heading “Adjusted EBITDA” and the reconciliation to IFRS measures in the "Financial Results and Review of Operations" section of this MD&A.
MANAGEMENT’S DISCUSSION AND ANALYSIS | FOR THE THREE MONTHS ENDED NOVEMBER 30, 2021 AND 2020    24



During the three months ended November 30, 2021, 500,000 stock options (November 30, 2020 – nil) were granted to key management personnel with an aggregate fair value of $898 (November 30, 2020 – $nil). In addition, during the three months ended November 30, 2021, 361,942 RSUs (November 30, 2020 – nil), were granted to key management personnel with an aggregate fair value of $995 (November 30, 2020 – $nil). For the three months ended November 30, 2021, 140,537 PSUs, (November 30, 2020 – nil) were issued to key management personnel with an aggregate fair value of $164 (November 30, 2020 – $nil).

SIGNIFICANT TRANSACTIONS WITH ASSOCIATES AND JOINT OPERATIONS
The Company has transactions with related parties, as defined in IAS 24 Related Party Disclosures, all of which are undertaken in the normal course of business.

For the three months ended November 30, 2021, under the PDC Agreement, BAT incurred $706 for direct expenses and the Company incurred $1,175 of direct expenses and capital expenditures for a total of $1,881 related to the Center of Excellence ("CoE"). The Company recorded $637 of these expenditures in the interim statement of operations and comprehensive loss and $304 of capital expenditures in the interim statement of financial position. The Company’s accounts receivable includes a net balance owing from BAT of $427.

SUBSEQUENT EVENTS
i.Acquisition of Laurentian
On December 21, 2021, the Company acquired all the issued and outstanding shares of Laurentian in a cash and share transaction for aggregate consideration of $36,000, plus earnout share consideration based on Laurentian achieving adjusted EBITDA thresholds as set out in the purchase and sale agreement.

ii.Hyasynth Convertible Debenture
On December 22, 2021, the Company advanced an additional $2,500 to Hyasynth by way of convertible debentures bringing the Company's total investment in Hyasynth to $10,000, which provides the Company with a potential ownership interest of up to 48.9% on a fully diluted basis. The proceeds have been designated to advance Hyasynth's production scalability as well as investment in new cannabinoid technologies, business development and company growth. Additionally, certain terms of the previously issued debentures purchased by the Company have been amended.

FAIR VALUE MEASUREMENTS
(i) Financial Instruments
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly fashion between market participants. The Company records certain financial instruments at fair value. The Company’s financial instruments include cash, short-term investments (including marketable securities), accounts receivable, loan receivable, restricted funds, accounts payable and accrued liabilities, long-term debt, other long-term liabilities and derivative liabilities.

Fair value measurements are categorized into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

Level 1 inputs are quoted prices in active markets for identical assets or liabilities that the entity can access at the measurement date;

Level 2 inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and

Level 3 inputs are unobservable inputs for the asset or liability.

The fair values of cash, short-term investments, accounts receivable, loan receivable, accounts payable and accrued liabilities and restricted funds approximate their carrying amounts due to their short-term nature. The fair value of long-term debt approximates $291.

The fair value of the contingent share consideration is primarily based on Level 3 unobservable inputs. The determination of the fair value of this liability is primarily driven by the Company’s expectations of EIC achieving certain milestones. The expected milestones were assigned probabilities and the expected related cash flows were discounted to derive the fair value of the contingent consideration.

At November 30, 2021, the probability of EIC achieving the remaining two milestones, as discussed in Note 26, was estimated to be, 80%, and 0% respectively, and the discount rate was estimated to be 4%. If the probabilities of achieving the milestones
MANAGEMENT’S DISCUSSION AND ANALYSIS | FOR THE THREE MONTHS ENDED NOVEMBER 30, 2021 AND 2020    25


increased or decreased by 10%, the estimated fair value of the contingent share consideration would increase or decrease by approximately $726 or $(852). If the discount rates increased or decreased by 1%, the estimated fair value of contingent consideration would decrease or increase, respectively, by approximately $55.

The fair value of derivative warrant liabilities is based on Level 1 and 2 inputs utilized in a Black-Scholes option pricing model to estimate the fair value of such Warrants. The key assumption used in the model is the expected future volatility in the price of the Company’s Common Shares.

The fair value of the Top-up Rights is based on Level 3 inputs utilized in a Monte Carlo pricing model to estimate the fair value of such Top-up Rights. The key assumptions used in the model are the expected future price of the Company’s Common Shares, the weighted average expected life of the instruments and the expected future volatility of Common Shares.

During the period, there were no transfers of amounts between Levels 1, 2 and 3.

Derivative Warrant Liabilities
At initial recognition on November 12, 2020, the Company recorded derivative liabilities of $12,894 based on the estimated fair value of the Warrants at that date using the Black-Scholes option pricing model. Share issuance costs of $803 were recognized as costs allocated to derivative liabilities based on a pro-rata allocation of total issuance costs based on the relative fair value of the Warrants and the Common Shares issued as part of the unit offering.

There were no exercises of Warrants during the three months ended November 30, 2021 (November 30, 2020 - nil). As at November 30, 2021, the Company revalued the remaining derivative liabilities at an estimated fair value of $22,967 (August 31, 2021 – $35,019). The Company recorded a decrease in the estimated fair value of the derivative liabilities for the three months ended November 30, 2021 of $12,052 (November 30, 2020 - an increase of $4,672).

The Company’s derivative liabilities included the following balances and changes in the carrying value of Warrants as of November 30, 2021:

NUMBER OF WARRANTSAMOUNT
Balance - August 31, 202116,943,650 $35,019 
Revaluation of Warrants
— (12,052)
Balance - November 30, 202116,943,650 $22,967 

The following inputs were used to estimate the fair value of the Warrants at November 30, 2021 and August 31, 2021:

NOVEMBER 30, 2021AUGUST 31, 2021
Risk free interest rate1.05 %0.45 %
Life of Warrants (years)1.95 2.20 
Market price of Common Shares2.61 3.38 
Expected future volatility of Common Shares97.40 %100.00 %
Fair value per warrant1.36 2.07 

As at November 30, 2021, if the implied volatility increased by 10%, then the change in estimated fair value of the Warrants and net loss would increase by $1,846, or if it is decreased by 10%, the change in estimated fair value of the Warrants and net loss would decrease by $1,936.

Top-up Rights
On March 10, 2021, through the strategic investment from BAT, the Company issued 58,336,392 Common Shares, resulting in BAT's beneficial ownership in the Company at approximately 19.9%.

Pursuant to the IRA between the Company and BAT, the Company granted BAT certain top-up rights (the "Top-up Rights") to subscribe for additional Common Shares in specified circumstances where the pre-emptive rights are not applicable (referred to in the IRA as "Exempt Distributions") and in specified circumstances where pre-emptive rights were not exercised (referred to in the IRA as “bought deal Distributions”).

The price per Common Share to be paid by BAT pursuant to the exercise of its Top-up Rights will equal the price paid by other participants in the Exempt Distribution or bought deal Distribution, subject to certain restrictions (including, if such price is not permitted pursuant to Securities Laws, at the lowest price permitted thereunder).
MANAGEMENT’S DISCUSSION AND ANALYSIS | FOR THE THREE MONTHS ENDED NOVEMBER 30, 2021 AND 2020    26



The Company has classified the Top-up Rights as a derivative liability and pursuant to the exercise of stock options, restricted share units, performance share units and warrants that were outstanding at initial recognition on March 10, 2021 (the date of the IRA), the Company recorded a derivative liability of $2,740 based on the estimated fair value of the Top-up Rights at this date using a Monte Carlo pricing model.

As at November 30, 2021, the Company revalued the Top-up Rights at an estimated fair value of $1,862 (August 31, 2021 – $2,508). The Company recorded a decrease in the estimated fair value change of the Top-up Rights for the three months ended November 30, 2021 of $(646) (November 30, 2020 - $nil).

NUMBER OF TOP-UP RIGHTS
AMOUNT
Balance - August 31, 20216,558,539 $2,508 
Granted
136,467 — 
Revaluation of Top-up Rights
— (646)
Balance - November 30, 20216,695,006 $1,862 

The following inputs were used to estimate the fair value of the Top-up Rights at November 30, 2021, and August 31, 2021:

NOVEMBER 30, 2021
STOCK OPTIONSWARRANTSPSUsRSUs
Average exercise price$0.59 - $9.63$2.50$—$—
Risk free interest rate0.95% - 1.38%1.01%1.48%1.47%
Expected future volatility of Common Shares90.00% - 105.00%105.00%90.00%90.00%
Expected life(1)
1.73 - 4.231.955.355.13
Forfeiture rate10%—%25%—%

AUGUST 31, 2021
STOCK OPTIONSWARRANTSPSUsRSUs
Average exercise price$0.59 - $9.64$2.50
Risk free interest rate0.40% - 0.76%0.46%0.92%0.88%
Expected future volatility of Common Shares90.00% - 110.00%105.00%85.00%90.00%
Expected life(1)
1.85 - 4.162.25.615.18
Forfeiture rate10%—%25%—%
Note 1: Exercise price and expected life for stock options were determined using the range of exercise prices disclosed in Note 14(iv) to the Interim Financial Statements.

(ii) Biological Assets
The Company measures biological assets, which consist of cannabis plants, at fair value less costs to sell up to the point of harvest, which then becomes the basis for the cost of finished goods inventories after harvest. Subsequent expenditures incurred on these finished goods inventories after harvest are capitalized based on IAS 2 Inventories.

The changes in the carrying value of biological assets as of November 30, 2021 are as follows:

CAPITALIZED COST
BIOLOGICAL ASSET FAIR VALUE ADJUSTMENT
AMOUNT
Balance, August 31, 2021
$5,765 $6,357 $12,122 
Unrealized gain on change in fair value of biological assets— 10,469 10,469 
Production costs capitalized11,477 — 11,477 
Transfer to inventory upon harvest(10,606)(11,461)(22,067)
Carrying amount, November 30, 2021
$6,636 $5,365 $12,001 

The fair value less costs to sell of biological assets is determined using a model which estimates the expected harvest yield in grams for plants currently being cultivated, then adjusts that amount for the expected selling price per gram, and for any additional costs to be incurred, such as post-harvest costs. The following unobservable inputs, all of which are classified as
MANAGEMENT’S DISCUSSION AND ANALYSIS | FOR THE THREE MONTHS ENDED NOVEMBER 30, 2021 AND 2020    27


Level 3 within the fair value hierarchy (see Note 19 of the condensed consolidated interim financial statements), are used in determining the fair value of biological assets:

i.average net selling price per gram – calculated as the weighted average current selling price of cannabis sold by the Company, adjusted for expectations about future pricing;

ii.expected yield per plant – represents the number of grams of finished cannabis inventory which is expected to be obtained from each harvested cannabis plant currently under cultivation;

iii.wastage of plants based on their various stages of growth – represents the weighted average percentage of biological assets which are expected to fail to mature into cannabis plants that can be harvested;

iv.post-harvest costs – calculated as the cost per gram of harvested cannabis to complete the sale of cannabis plants post-harvest, consisting of the cost of direct and indirect materials and labour related to drying, labelling, and packaging; and

v.stage of completion in the cultivation process – calculated by taking the weighted average number of weeks in production over a total average grow cycle of approximately 14 weeks.

The Company estimates the harvest yields for the cannabis on plants at various stages of growth, based on expected yield of mature plants. As of November 30, 2021, it is expected that the Company’s biological assets will yield 13,779 kg (August 31, 2021 – 11,368 kg) of cannabis when eventually harvested. The Company’s estimates are, by their nature, subject to change, and differences from the anticipated yield will be reflected in the fair value adjustment to biological assets in future periods. The Company accretes fair value on a straight-line basis according to stage of growth. As a result, a cannabis plant that is 50% through its 14-week growing cycle would be ascribed approximately 50% of its harvest date expected fair value less costs to sell (subject to wastage adjustments).

Management believes the most significant unobservable inputs and their impact on fair value are as follows:

SIGNIFICANT INPUTS &
WEIGHTED AVERAGE INPUT
EFFECT ON FAIR VALUE
ASSUMPTIONSNOVEMBER 30,
2021
AUGUST 31,
2021
SENSITIVITY
NOVEMBER 30,
2021
AUGUST 31,
2021
Average net selling price per gram$2.16 $2.54 Increase or decrease
by $1.00 per gram
$5,509 $4,764 
Average yield per plant139  grams129  gramsIncrease or decrease
by 10 grams
$857 $937 

The average yield per plant at November 30, 2021 primarily reflects the average yield of the flower component of the plant (with the exception being cannabidiol (“CBD”) dominant strains where trim is also harvested for extraction).

OUTSTANDING SHARE DATA
(i) Outstanding Shares, Warrants and Options and Other Securities
The following table sets out the number of Common Shares, options, warrants, top-up rights, restricted share units and performance share units outstanding of the Company as at November 30, 2021 and January 10, 2022:

NOVEMBER 30, 2021
JANUARY 10, 2022
Common shares issued and outstanding299,849,354310,817,649
Options8,106,2758,058,160
Warrants16,943,65016,943,650
Top-up rights6,695,0066,669,726
Restricted share units1,566,0151,563,096
Performance share units332,299281,580
Total fully diluted shares333,492,599344,333,861

(ii) Share-based Compensation
On February 25, 2020 (the “Approval Date”), the Company’s shareholders approved a new omnibus equity incentive plan (the “New Equity Incentive Plan”) that governs grants made on or after the Approval Date. Grants made prior to the Approval Date will continue to be governed under the terms of the plan under which they were granted including the Company’s 2011 stock
MANAGEMENT’S DISCUSSION AND ANALYSIS | FOR THE THREE MONTHS ENDED NOVEMBER 30, 2021 AND 2020    28


option plan and its 2017 equity incentive plan (the “2017 Equity Incentive Plan”), however, no new grants may be made under such plans.

Total share-based compensation charges, including those related to production employees that are charged to biological assets and inventory and amounts amortized from prepaid expenses and deferred charges, for the three months ended November 30, 2021 were $680 (November 30, 2020 – $606).

Stock options
The following table summarizes changes in the Company’s outstanding stock options for the three months ended November 30, 2021:

NUMBERWEIGHTED AVERAGE EXERCISE PRICE
Balance - August 31, 20217,797,273 $3.84 
Granted520,000 $2.85 
Exercised(22,584)$0.75 
Cancelled / Forfeited(188,414)$5.63 
Balance - November 30, 20218,106,275 $3.74 

The following is a summary of the outstanding stock options as at November 30, 2021:

OPTIONS OUTSTANDINGOPTIONS EXERCISABLE
Range of Exercise
Prices
Quantity Outstanding Weighted Average Remaining
Contractual Life (years)
Quantity Exercisable
 $0.30 - $1.10579,183 3.2579,183 
 $1.11 - $2.18881,131 7.7532,065 
$2.19 - $2.441,616,971 6.81,318,338 
$2.45 - $3.611,894,728 7.81,199,795 
$3.62 - $5.081,826,011 7.21,538,210 
$5.09 - $8.02561,251 6.9561,251 
$8.03 - $11.27747,000 7.5734,536 
8,106,275 7.06,463,378 

Options outstanding have exercise prices that range from $0.30 to $11.27 with a weighted average contractual remaining life of 7.0 years. Total share-based compensation charges, including related to production employees that are charged to biological assets and inventory and amounts amortized from prepaid expenses and deferred charges, for the three months ended November 30, 2021 were $569 (November 30, 2020 – $386) related to the Company’s stock option plan. The fair value of options granted during the three months ended November 30, 2021 was $934 (November 30, 2020 - $nil). These options are measured at fair value at the date of grant and are expensed over the option’s vesting period, which typically ranges from two to three year terms with options vesting in annual tranches evenly over this time period. In determining the amount of share-based compensation related to the options, the Company used the Black-Scholes option pricing model to establish the fair value of options granted.

The following is the range of assumptions for the three months ended November 30, 2021 and November 30, 2020:

NOVEMBER 30, 2021NOVEMBER 30, 2020
Risk free interest rate1.18% - 1.24%no issuances
Expected life of options5.0 - 6.0 yearsno issuances
Expected annualized volatility87% - 89%no issuances
Expected dividend yield-no issuances
Forfeiture rate11.4%no issuances

Expected volatility was estimated by using the weighted average historical volatility of the Company. The expected life in years represents the period of time that options granted are expected to be outstanding. The risk-free rate is based on Government of Canada bonds with a remaining term equal to the expected life of the options. The forfeiture rate is calculated based on historical experience.

MANAGEMENT’S DISCUSSION AND ANALYSIS | FOR THE THREE MONTHS ENDED NOVEMBER 30, 2021 AND 2020    29


Equity incentive plan
As of November 30, 2021, the Company has granted both RSUs and PSUs under the 2017 Equity Incentive Plan and under the New Equity Incentive Plan. The grant price of any RSU or PSU was determined based on market price calculated in accordance with TSX rules at the time of grant and with respect to PSUs, adjusted for any non-market and market performance vesting conditions in accordance with IFRS 2.

The following table summarizes the movements in the Company’s outstanding RSUs:

NUMBER
Balance - August 31, 20211,186,172 
Granted391,248 
Exercised(1,483)
Cancelled / Forfeited(9,922)
Balance - November 30, 20211,566,015 

The estimated fair value of the equity settled RSUs granted during the three months ended November 30, 2021 was $1,066 (November 30, 2020 - $nil), which was based on the Company’s share price at the grant date and will be recognized as an expense over the vesting period of the RSUs, which is over a period of one and three years for most grants. For the three months ended November 30, 2021, $334 (November 30, 2020 - $392) has been recognized as share-based compensation expense.

The following table summarizes the movements in the Company’s outstanding PSUs:

NUMBER
Balance - August 31, 2021471,847 
Granted169,843 
Exercised(978)
Cancelled / Forfeited(308,413)
Balance - November 30, 2021332,299 

The estimated fair value of the equity settled PSUs granted during the three months ended November 30, 2021 was $194 (November 30, 2020 - $nil), which was based on the Company’s share price at the grant date, adjusted for an estimate of likelihood of forfeiture, and will be recognized as an expense over the vesting period of the PSUs, which is during the year granted August 31, 2021. For the three months ended November 30, 2021, $(223) (November 30, 2020 - $(4)) has been recognized as share-based compensation expense.

CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS
Future changes to accounting standards
Amendments to IAS 12: Deferred Tax related to Assets and Liabilities arising from a Single Transaction
The amendments narrowed the scope of certain recognition exemptions so that it no longer applies to transactions that, on initial recognition, give rise to equal taxable and deductible temporary differences. The Company applies the amendments to transactions that occur on or after the beginning of the earliest comparative period presented. It also, at the beginning of the earliest comparative period presented, recognizes deferred tax for all temporary differences related to leases and decommissioning obligations and recognizes the cumulative effect of initially applying the amendments as an adjustment to the opening balance of retained earnings (or other component of equity, as appropriate) at that date. The amendments will be effective for the annual period beginning on or after January 1, 2023 and the Company has chosen not to early adopt the amendments. The Company is currently evaluating the potential impact of these amendments on the condensed consolidated interim financial statements.

Amendments to IAS 37: Onerous Contracts and the Cost of Fulfilling a Contract
The amendments specifies that the ‘cost of fulfilling’ a contract comprises the ‘costs that relate directly to the contract’. Costs that relate directly to a contract can either be incremental costs of fulfilling that contract or an allocation of other costs that relate directly to fulfilling contracts. The amendments apply retrospectively for annual reporting period beginning on or after January 1, 2022 and the Company has chosen not to early adopt. The Company is currently evaluating the potential impact of these amendments on the condensed consolidated interim financial statements.

Amendments to IAS 16: Property Plant and Equipment: Proceeds before intended use
The amendments clarify the accounting for the net proceeds from selling any items produced while bringing an item of property plant and equipment into use. The amendments prohibit a company from deducting from the cost of property plant and equipment proceeds from selling items produced while the company is preparing that assets for its intended use. The
MANAGEMENT’S DISCUSSION AND ANALYSIS | FOR THE THREE MONTHS ENDED NOVEMBER 30, 2021 AND 2020    30


company will recognize such sales proceeds and related costs in profit and loss. The amendments apply retrospectively for annual reporting period beginning on or after January 1, 2022 and the Company has chosen not to early adopt. The Company is currently evaluating the potential impact of these amendments on the condensed consolidated interim financial statements.

Amendments to IFRS 9: Financial Instruments
As part of its 2018-2020 annual improvements to IFRS standards process, the IASB issued amendments to IFRS 9. The amendments clarify the fees that an entity includes when assessing whether the terms of a new or modified financial liability are substantially different from the terms of the original financial liability. These fees include only those paid or received between the borrower and the lender, including fees paid or received by either the borrower or lender on the other’s behalf. The Company applies the amendments to financial liabilities that are modified or exchanged on or after the beginning of the annual reporting period in which the entity first applies the amendments. The amendments are effective for annual reporting periods beginning on or after January 1, 2022 with earlier adoption permitted. The Company is currently evaluating the potential impact of these amendments on the condensed consolidated interim financial statements.

Amendments to IAS 41: Agriculture
As part of its 2018-2020 annual improvements to IFRS standards process, the IASB issued amendments to IAS 41. The amendments remove the requirement in paragraph 22 of IAS 41 for entities to exclude taxation cash flow when measuring the fair value of a biological asset using a present value technique. This will ensure consistency with the requirements in IFRS 13. The amendment is effective for annual reporting periods beginning on or after January 1, 2022. The Company is currently evaluating the potential impact of these amendments on the condensed consolidated interim financial statements.

PRODUCT DEVELOPMENT COLLABORATION
On March 10, 2021, in conjunction with the strategic investment received as described herein, the Company and BAT entered into the PDC Agreement pursuant to which the CoE was established to focus on developing the next generation of cannabis products with an initial focus on CBD. The CoE is located at the Company’s indoor Moncton Campus, which holds the Health Canada licenses required to conduct research and product development activities with cannabis products. Both companies are contributing scientists, researchers, and product developers to the CoE and it is governed and supervised by a steering committee consisting of an equal number of senior members from both companies. Under the terms of the PDC Agreement, both Organigram and BAT have access to certain of each other’s IP and, subject to certain limitations, have the right to independently, globally commercialize the products, technologies and IP created by the CoE pursuant to the PDC Agreement.

Pursuant to the terms of the PDC Agreement, $31,109 of the Investment Proceeds was reserved as restricted funds in order to satisfy certain of the Company’s future obligations under the PDC Agreement, including the Company’s portion of its funding obligations under a mutually agreed initial budget for the CoE. Costs relating to the CoE are funded equally by the Company and BAT. Balances are transferred from restricted funds to the Company's general operating account as CoE related expenditures are periodically reconciled and approved. The balance in restricted funds at November 30, 2021 is $30,422 (August 31, 2021 - $31,109).

The CoE is accounted for as a joint operation, in which the Company and BAT contribute 50%. The Company recognized its share of the expenses incurred by the CoE in the statement of operations and comprehensive loss. For the three months ended November 30, 2021, $675 of expenses has been recorded in the statement of operations and comprehensive loss. The Company’s accounts receivable include $427 (August 31, 2021 - $192) from BAT, inclusive of capital expenditures.

ACQUISITION OF THE EDIBLES AND INFUSION CORPORATION
On April 6, 2021, the Company acquired 100% of the shares and voting interests of EIC, including intermediate holding companies SUHM Investments Inc. and Quality Confections Corporation who collectively owned 100% of EIC, for $22,000 of share consideration at the acquisition date. The Company has agreed to provide the seller additional share consideration of $13,000 if EIC achieves various milestones. On August 26, 2021, SUHM Investments Inc, Quality Confections Corporation and EIC amalgamated with the continuing entity being EIC. The fair value of the Common Shares issued was based on the listed share price of the Company on closing of April 5, 2021 of $4.36 per share. The Company incurred acquisition-related costs of $620 on legal fees and due diligence costs. Of these costs $555 had been included in the statement of operations and comprehensive loss and $65 were been capitalized to share issuance costs

The Company elected not to apply the optional concentration test and, as such, carried out a detailed analysis of inputs, outputs and substantive processes. Included in the identifiable assets acquired and liabilities assumed at the date of acquisition of EIC are inputs (production equipment, manufacturing facility and a standard research and processing license), production processes and an organized workforce. The Company has determined that together the acquired inputs and processes significantly contribute to the ability to create revenue. The Company has concluded that the acquired set is a business.

MANAGEMENT’S DISCUSSION AND ANALYSIS | FOR THE THREE MONTHS ENDED NOVEMBER 30, 2021 AND 2020    31


Contingent share consideration
The acquisition includes contingent share consideration based on various milestones as follows:

a) $3,500 to be paid in Common Shares upon the first listing of EIC or Organigram branded product (which was manufactured at the EIC facility) prior to December 31, 2021 in either the Ontario or Alberta recreational market. This was achieved prior to August 31, 2021 and settled subsequently on September 8, 2021;
b) $7,000 to be paid in Common Shares on the generation of $15 million in net revenue during the 12 months ended December 31, 2022; and
c) $2,500 to be paid in Common Shares on the generation of $7 million in adjusted EBITDA for the 12 months ended December 31, 2022.

Milestone payments paid in Common Shares shall be priced based on the five-day volume-weighted average price of the Company’s Common Shares on the TSX as of the day prior to settlement.

As at the acquisition date, the fair value of the contingent consideration was estimated to be $5,249. At August 31, 2021, the contingent consideration was adjusted to $9,038 to reflect changes in estimates, of which $3,500 was included in accounts payable and accrued liabilities on EIC's achievement of the first milestone. On September 8, 2021, the Company issued 1,039,192 Common Shares as consideration for the first milestone earnout, which the fair value of the Common Shares issued was based on the 5-day volume-weighted average listed share price of the Company of $3.37 per share. As at November 30, 2021, the remaining contingent consideration was adjusted to $5,356 to reflect changes in estimates and recorded in the statement of operations and comprehensive loss is a gain of $182.

Assets acquired and liabilities assumed
The Company has not yet finalized the purchase accounting including determination of any final working capital adjustment. The following table summarizes management's preliminary recognition of assets acquired and liabilities assumed at the date of acquisition:

FAIR VALUE ON ACQUISITION
Assets
Property, plant and equipment$12,470 
Intangibles$2,685 
Deposits on equipment$2,157 
Other assets$28 
Total assets$17,340 
Liabilities
Accounts payable and accrued liabilities$2,047 
Lease liability$2,153 
Total liabilities$4,200 
Total identifiable net assets at fair value$13,140 
Consideration transferred
Equity instruments (5,045,873 common shares)$22,000 
Contingent consideration$5,249 
Working capital adjustment$(19)
$27,230 
Goodwill arising on acquisition$14,090 

Lease liability
The Company measured the acquired lease liabilities using the present value of the remaining lease payments at the date of acquisition. The right-of-use asset was measured at an amount equal to the lease liabilities.

Goodwill
The goodwill is attributable to the skills and technical talent of EIC's work force and the synergies expected to be achieved from integrating EIC into the Company’s existing business. None of the goodwill recognized is expected to be deductible for tax purposes.

CONTINGENT LIABILITIES
The Company recognizes loss contingency provisions for probable losses when management can reasonably estimate the loss. When the estimated loss lies within a range, the Company records a loss contingency provision based on its best
MANAGEMENT’S DISCUSSION AND ANALYSIS | FOR THE THREE MONTHS ENDED NOVEMBER 30, 2021 AND 2020    32


estimate of the probable loss. If no particular amount within that range is a better estimate than any other amount, the mid-point of the range is used. As information becomes known a loss contingency provision is recorded when a reasonable estimate can be made. The estimates are reviewed at each reporting date and the estimates are changed when expectations are revised. An outcome that deviates from the Company’s estimate may result in an additional expense or release in a future accounting period.

On March 3, 2017, a claim in connection with a proposed class-action lawsuit (the “Claim”) was filed with the Supreme Court of Nova Scotia (the “Court”) seeking to represent a class who purchased medical marijuana that was the subject of the Company’s product recalls in December 2016 and January 2017 as it may have contained trace elements of the pesticides myclobutanil and bifenazate which are not approved for use by licensed producers. The Claim identifies several causes of action including, among others: (i) negligent design, development and testing, (ii) negligent manufacturing, (iii) negligent distribution, marketing and sale, (iv) breach of contract, and (v) breach of the Competition Act, the Consumer Protection Act, and the Sale of Goods Act, and is seeking remedy in the form of, among other things, the disgorgement of profits accrued to the Company for the sale of contaminated products, exemplary or punitive damages and certain costs.

The Claim was amended on November 16, 2017, to include a claim for alleged adverse health consequences caused as a result of using the recalled product. As at the date hereof, the Company has not received any medical information demonstrating adverse health effects caused as a result of using the recalled product.

The amended Claim also contained a request for an order certifying the proceeding as a class proceeding.

During late June 2018, certification hearings were heard before the Court. On January 18, 2019, the Court issued its decision granting certification. On March 4, 2019, the Company filed a notice for leave to appeal the certification of the class action brought against it. Leave to appeal was granted and the appeal was heard on October 15, 2019 and the decision was reserved. On April 30, 2020, the Nova Scotia Court of Appeal ruled that the plaintiff failed to present any evidence that the cannabis purchased by medical customers in 2016 could cause any particular adverse health effects. As a result, class members would not be able to bring claims for damages for adverse health effects in the class proceeding. On June 26, 2020, the plaintiff filed an application for leave to appeal the Nova Scotia Court of Appeal’s decision with the Supreme Court of Canada. On November 5, 2020, the application for leave to appeal was dismissed by the Supreme Court of Canada.

The Company is working to settle what remains of the litigation. The Company reported the Claim to its insurance provider which appointed counsel to defend the Claim. Insurance may be available to cover a portion of the fees or damages which may be associated with the Claim although the Company’s coverage may be subject to varying limits and exclusions. The litigation process will continue into the foreseeable future unless settled out of court.

On June 16, 2020, a claim in connection with a proposed national consumer protection class-action lawsuit was filed with the Court of Queen’s Bench in Alberta (the “Alberta Claim”) seeking damages against several Canadian cannabis companies including the Company.  The Alberta Claim does not particularize all of the claims against the companies; however, it makes allegations with respect to the content of THC and CBD in the companies’ products. In order to proceed as a class action, the Court must certify the action as a class action. A certification hearing has not yet been scheduled. The Company has reported the Alberta Claim to its insurers.

At November 30, 2021, an amount of $2,338 in regards to claims and other contingencies was included in the condensed consolidated interim statement of financial position under provisions. For the three months ended November 30, 2021, payments of $412 were made and no additional provisions (November 30, 2020 - $730) have been recorded in the condensed consolidated interim statements of operations and comprehensive loss.

DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROL OVER FINANCIAL REPORTING
In accordance with National Instrument 52-109 - Certification of Disclosure in Issuers’ Annual and Interim Filings (“NI 52-109”) and Rule 13a-15 under the United States Securities Exchange Act of 1934, as amended (the “Exchange Act”), the establishment and maintenance of Disclosure Controls and Procedures (“DCP”) and Internal Control Over Financial Reporting (“ICFR”) is the responsibility of management.

Management has determined that the Company became a “large accelerated filer”, as defined in Rule 12b–2 under the Exchange Act, effective August 31, 2021 (being the last day of the Company’s most recently completed fiscal year). Accordingly, the Company ceased to be an “emerging growth company” as defined in Exchange Act Rule 12b-2, and the Company’s “ICFR” as of August 31, 2021, became subject to audit by KPMG LLP, the Company’s independent registered public accounting firm. The Company engaged KPMG LLP to perform an “integrated audit” which encompassed an opinion on the fairness of presentation of the Company’s audited annual consolidated financial statements for the financial year then
MANAGEMENT’S DISCUSSION AND ANALYSIS | FOR THE THREE MONTHS ENDED NOVEMBER 30, 2021 AND 2020    33


ended, as well as an opinion on the effectiveness of the Company’s ICFR. KPMG LLP‘s attestation report on the Company’s ICFR is incorporated by reference into the Company’s annual report on Form 40-F under the Exchange Act for the year ended August 31, 2021.

DISCLOSURE CONTROLS AND PROCEDURES
The Company maintains a set of DCP designed to provide reasonable assurance that information required to be publicly disclosed is recorded, processed, summarized and reported on a timely basis. As required by NI 52-109 and Exchange Act Rule 13a-15(b), an evaluation of the design and operation of our DCP was completed as of November 30, 2021 under the supervision and with the participation of management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) using the criteria set forth in Internal Control - Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO 2013 Framework”). Based upon this evaluation, our CEO and CFO concluded that because of the material weaknesses in our ICFR described below, our DCP were not effective as at such date.

INTERNAL CONTROL OVER FINANCIAL REPORTING
NI 52-109 requires the CEO and CFO to certify that they are responsible for establishing and maintaining ICFR for the Company and that those internal controls have been designed and are effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with IFRS. Similarly, Exchange Act Rule 13a-15(c) requires the Company's management, with the participation of the CEO and CFO, to evaluate ICFR as at the end of the fiscal year. The CEO and CFO are also responsible for disclosing any changes to the Company’s internal controls during the most recent period that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

MATERIAL CHANGES TO THE CONTROL ENVIRONMENT
There have been no changes to the Company’s ICFR during the three months ended November 30, 2021 that have materially affected, or are likely to materially affect, the Company’s ICFR.

LIMITATIONS ON SCOPE OF DESIGN
The Company has limited the scope of its evaluation of DCP and ICFR to exclude controls, policies and procedures over entities that were acquired by the Company not more than 365 days before the end of the financial period. The only entity controlled by the Company but that was scoped out of the evaluation of DCP and ICFR was EIC (acquired on April 6, 2021). Subsequent to November 30, 2021 the Company acquired its interest in Laurentian.

Excluding goodwill and intangible assets, EIC constitutes approximately 1% of the Company’s current assets, 3% of total assets, 4% of current liabilities and 4% of total liabilities, as well as 5% of net revenue and 51% of net loss as at and for the three months ended November 30, 2021.

MANAGEMENT’S DISCUSSION AND ANALYSIS | FOR THE THREE MONTHS ENDED NOVEMBER 30, 2021 AND 2020    34


MANAGEMENT’S EVALUATION OF INTERNAL CONTROL OVER FINANCIAL REPORTING
The Company’s management, under the supervision and with the participation of its CEO and CFO, conducted an evaluation of the effectiveness of the Company’s ICFR as of August 31, 2021, using the criteria set forth by the COSO 2013 Framework. Based on this evaluation, management concluded that internal control over financial reporting was not effective as of August 31, 2021, due to material weaknesses in internal control over financial reporting.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. Management has identified the following material weaknesses:

An ineffective control environment resulting from an insufficient number of trained financial reporting and accounting, information technology (IT) and operational personnel with the appropriate skills and knowledge and with assigned responsibility and accountability related to the design, implementation and operation of internal control over financial reporting.
The insufficient number of personnel described above contributed to an ineffective risk assessment process necessary to identify all relevant risks of material misstatement and to evaluate the implications of relevant risks on its internal control over financial reporting.
An ineffective information and communication process resulting from: (i) insufficient communication of internal control information, including objectives and responsibilities, such as delegation of authority; and (ii) ineffective general IT controls, ineffective controls related to complex spreadsheets, and ineffective controls over information from service organizations, resulting in insufficient controls to ensure the relevance, timeliness and quality of information used in control activities.
As a consequence of the above, the Company had ineffective control activities related to the design, implementation and operations of process level and financial statement close controls which had a pervasive impact on the Company's internal control over financial reporting.

REMEDIATION
The Company continued during the quarter to consider the full extent of the procedures to implement in order to remediate the material weaknesses described above, however the current remediation plan includes:

Identifying key positions necessary to support the Company’s initiatives related to internal controls over financial reporting, and expanding its hiring efforts accordingly.
Hiring consultants to assist with process improvements and control remediation efforts in targeted accounting, IT and operations processes.
Formalizing its entity-wide risk assessment process, and documenting internal ownership of risk monitoring and mitigation efforts, with improved risk monitoring activities and regular reporting to those charged with governance at an appropriate frequency.
Finalize a delegation of authority matrix to enforce desired limits of authority for key transactions, events, and commitments, and communicating these limits of authority to relevant personnel throughout the Company.
Further simplify and streamline its complex spreadsheet models to reduce the risk of errors in mathematical formulas and improve the ability to verify the logic of complex spreadsheets.
Hiring a consultant to assist management with process improvements and control remediation for general IT controls.
Continuing to perform scoping exercises and planning for an ERP implementation to streamline the number of applications used for financial reporting activities.


MANAGEMENT’S DISCUSSION AND ANALYSIS | FOR THE THREE MONTHS ENDED NOVEMBER 30, 2021 AND 2020    35


RISK FACTORS
The Company’s business is subject to risks inherent in a high growth, heavily regulated enterprise, and the Company has identified certain risks pertinent to its business that may have affected or may affect its business, financial conditions, results of operations and cash flows, as further described throughout this MD&A and under “Risk Factors” in the AIF. For additional risk factors, readers are directed to the Company’s most recent AIF, which is (a) available under the Company’s issuer profile on SEDAR at www.sedar.com, and (b) incorporated into and forms part of the Company's annual report on Form-40F filed on EDGAR at www.sec.gov. As a general matter, management of the Company attempts to assess and mitigate any risks and uncertainties by retaining experienced professional staff and assuring that the Board of Directors and senior management of the Company are monitoring the risks impacting or likely to impact the business on a continuous basis.

(i) Credit Risk
Credit risk arises from deposits with banks, short-term investments (excluding investments in equity securities), outstanding trade and loan receivables, and restricted investments. For trade receivables, the Company does not hold any collateral as security but mitigates this risk by dealing only with what management believes to be financially sound counterparties and, accordingly, does not anticipate significant loss for non-performance. For other receivables, out of the normal course of business such as the loan receivable, management generally obtains guarantees and general security agreements. The maximum exposure to credit risk of cash, short-term investments, accounts receivable, loan receivable, and restricted funds on the statement of financial position at November 30, 2021 approximates $224,568 (August 31, 2021 - $235,949).

As of November 30, 2021, the Company’s aging of trade receivables was as follows:

NOVEMBER 30, 2021AUGUST 31, 2021
0-60 days$25,604 $20,029 
61-120 days72 886 
Gross trade receivables$25,676 $20,915 
Less: Expected credit losses and reserve for product returns and price adjustments(1,180)(710)
$24,496 $20,205 

(ii) Liquidity Risk
The Company’s liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company manages its liquidity risk by reviewing on an ongoing basis its capital requirements. At November 30, 2021, the Company had $99,710 (August 31, 2021 – $55,365) of cash and working capital of $217,834 (August 31, 2021 - $234,349). Further, the Company may potentially access equity capital through the capital markets if required.

The Company is obligated to the following contractual maturities relating to their undiscounted cash flows as at November 30, 2021:

Carrying AmountContractual Cash FlowsLess than
1 year
1 to 3 years3 to 5 yearsMore than
5 years
Accounts payable and accrued liabilities$27,003 $27,003 $27,003 $— $— $— 
Long-term debt291 309 80 215 14 — 
$27,294 $27,312 $27,083 $215 $14 $— 

The contractual maturities noted above are based on contractual due dates of the respective financial liabilities.

In connection with the Company’s Moncton Campus, the Company is contractually committed to approximately $4,095 of capital expenditures.

(iii) Market Risk
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk for the Company is comprised of interest rate risk, which is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Towards the end of fiscal 2021, the Company no longer had any exposure as the significant portion of debt was repaid, as a result a 1% change in benchmark interest rates will have no impact on the Company's interest expense.

(iv) Concentration risk
The Company’s accounts receivable are primarily due from provincial government agencies (three of which, individually, represented more than 10% of the Company’s revenues during the three months ended November 30, 2021), corporations
MANAGEMENT’S DISCUSSION AND ANALYSIS | FOR THE THREE MONTHS ENDED NOVEMBER 30, 2021 AND 2020    36


(none of which represented more than 10% of the Company’s revenues during the period), and legal trusts and, thus, the Company believes that the accounts receivable balance is collectible.

COVID-19 CORPORATE ACTION PLAN

In March 2020, the World Health Organization declared the outbreak of a novel strain of coronavirus (“COVID-19”) a global pandemic. Government measures to limit the spread of COVID-19, including the closure of non-essential businesses for periods of time, continued to disrupt the Company’s operations during the three-month period ended August 31, 2021, which disruption remains ongoing.

The production and sale of cannabis have been recognized as essential services across Canada and non-essential businesses have had periods of reopening, however COVID-19 pandemic related challenges persist. Due to the ongoing developments and uncertainty, it is not possible to predict the continuing impact that COVID-19 will have on the Company, its financial position, its operating results and/or its cash flows. In addition, it is possible that estimates in the Company’s financial statements will change in the near-term as a result of COVID-19 and the effect of any such changes could be material, which could result in, among other things, an impairment of long-lived assets, including intangible assets. The Company continues to closely monitor the impact of COVID-19 on all aspects of its business.

On April 6, 2020, the Company announced the temporary layoff of approximately 45% of its workforce primarily in an effort to help contain COVID-19. The Company offered voluntary layoffs to certain staff and those who accepted made up the majority of the layoffs. In some cases, due to the impacts of COVID-19, some administrative, support and other functions were deemed non-essential to the short-term needs of the business and those employees were temporarily laid off. The temporary layoffs were initiated on March 24, 2020. Lump-sum payments (equating to approximately two weeks of work) were paid to the affected employees to help bridge the gap to available government programs. In addition, the Company absorbed the employee paid portion of health, dental and short-term disability premiums for all employees during this difficult time. The impact of these temporary layoffs resulted in a charge of approximately $0.7 million during the month of April 2020, which is primarily associated with the lump sum payments provided to these employees. The Company also put in place a number of health and safety measures during Q3 and Q4 2020, which continue to be in place, including, but not limited to, the following:

An emergency response team was established to monitor pandemic updates, review safety protocols, assess public health risk and develop action plans;
Moved to a work from home environment for any functions not required onsite;
Implemented travel restrictions for work related travel, restricted visitor access to the Company’s facilities and imposed self-isolation for any employees who may have had symptoms of COVID-19 and/or returned from international travel as of March 13, 2020;
Increased focus on sanitation and social distancing, with additional hand sanitizing stations throughout the Moncton Campus and Winnipeg Facility, cleaning and sanitizing of high touch surfaces, and additional cleaning in common areas;
Imposed restrictions on large meetings and gatherings, opting for web-based meetings and teleconferencing;
Mandatory reporting of any hourly employee absence to an attendance phone line including specific reporting of any COVID-19 symptoms; and
Reminders of measures to reduce risk of infection and prevent spread including washing hands and avoiding contact with faces.

Effective May 13, 2020, the Company began to implement a staggered return-to-work plan.

During Q2 Fiscal 2021, the Company initiated two temporary shutdowns at its Moncton Campus facility in response to positive COVID-19 test results. During these temporary shutdowns, deep cleaning of the Moncton Campus was undertaken consistent with the Company’s COVID response plan and in cooperation with New Brunswick Public Health prior to the Moncton Campus being inspected and cleared to reopen. Each temporary shutdown lasted between two to three days. These temporary shutdowns were coordinated with New Brunswick Public Health and in conjunction with the mobilization of the Company’s COVID response team. Contact tracing was also conducted, which resulted in a significant number of employees off work and isolating at home. With the newly emerged Omicron variant, the Company has continued to implement its COVID response plan including testing protocols on site. The Company expects there may be temporary disruptions in staffing from time to time as a result of self-isolation requirements. As of the date of this MD&A, the Company has approximately 811 active employees, with 660 working out of the Moncton Campus. As announced on June 3, 2021, the Company has been and continues to add to its Moncton workforce as it increases cultivation levels and fills administrative positions.

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TABLE OF CONTENTS
Condensed Consolidated Interim Statements of Financial Position
1
Condensed Consolidated Interim Statements of Operations and Comprehensive Loss
2
Condensed Consolidated Interim Statements of Changes in Equity
3
Condensed Consolidated Interim Statements of Cash Flows
4
Notes to the Condensed Consolidated Interim Financial Statements
526

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ORGANIGRAM HOLDINGS INC.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION
As at November 30, 2021 and August 31, 2021
(Unaudited - expressed in CDN $000’s except share and per share amounts)

NOVEMBER 30, 2021AUGUST 31,
2021
ASSETS
Current assets
Cash$99,710 $55,365 
Short-term investments (Note 4)
68,325 128,190 
Accounts receivable (Note 5)
26,111 21,035 
Loan receivable (Note 6)
— 250 
Biological assets (Note 7)
12,001 12,122 
Inventories (Note 8)
34,419 36,696 
Prepaid expenses and deposits6,689 6,957 
247,255 260,615 
Restricted funds (Note 25)
30,422 31,109 
Property, plant and equipment (Note 9)
239,537 235,939 
Intangible assets and goodwill (Note 10)
16,664 17,046 
Deferred charges and deposits (Note 9)
5,592 3,195 
Investments in associates (Note 16)
4,884 5,028 
Net investment in sublease (Note 5 and Note 15(ii))
1,011 1,085 
$545,365 $554,017 
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities$27,003 $23,436 
    Provisions (Note 11)
2,338 2,750 
Current portion of long-term debt (Note 12)
80 80 
29,421 26,266 
Long-term debt (Note 12)
211 230 
Derivative liabilities (Note 13)
24,829 37,527 
Other long-term liabilities (Note 15)
8,219 10,189 
62,680 74,212 
SHAREHOLDERS' EQUITY
Share capital (Note 14)
734,331 730,803 
Equity reserves (Note 14)
25,381 24,724 
Accumulated other comprehensive loss
(78)(78)
Accumulated deficit
(276,949)(275,644)
482,685 479,805 
$545,365 $554,017 

Subsequent events (Note 28)

On behalf of the Board:
/s/Beena Goldenberg, Director
/s/Peter Amirault, Director

The accompanying notes are an integral part of these Condensed Consolidated Interim Financial Statements.
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) | FOR THE THREE MONTHS ENDED NOVEMBER 30, 2021 AND 2020    1


ORGANIGRAM HOLDINGS INC.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
For the three months ended November 30, 2021 and 2020
(Unaudited - expressed in CDN $000’s except share and per share amounts)

NOVEMBER 30, 2021NOVEMBER 30, 2020
REVENUE
Gross revenue (Note 20)
$44,345 $25,280 
Excise taxes(13,967)(5,949)
Net revenue30,378 19,331 
Cost of sales (Note 8 and Note 21)
27,924 23,173 
Gross margin before fair value adjustments (Note 8)
2,454 (3,842)
Realized fair value on inventories sold and other inventory charges(12,313)(12,718)
Unrealized gain (loss) on changes in fair value of biological assets (Note 7)
10,469 (114)
Gross margin610 (16,674)
OPERATING EXPENSES
General and administrative (Note 23)
7,984 6,802 
Sales and marketing4,660 3,672 
Research and development1,015 646 
Share-based compensation (Note 14(iv))
674 419 
Total operating expenses14,333 11,539 
LOSS FROM OPERATIONS
(13,723)(28,213)
Financing costs83 1,588 
Investment income
(326)(116)
Government subsidies (Note 24)
— (1,832)
Share of loss from investments in associates (Note 16)
144 242 
Impairment of loan receivable (Note 6)
250 — 
Loss on disposal of property, plant and equipment311 — 
Change in fair value of contingent consideration (Note 15(i))
(182)36 
Share issue costs allocated to derivative liabilities (Note 13)
— 803 
Change in fair value of derivative liabilities (Note 13)
(12,698)4,672 
Legal provision (Note 22)
— 730 
Loss before tax
(1,305)(34,336)
Income tax expense
Deferred, net
— — 
NET LOSS
$(1,305)$(34,336)
Other comprehensive (loss) income
Foreign currency translation gain, net of tax
— 71 
COMPREHENSIVE LOSS
$(1,305)$(34,265)
Net loss per common share, basic (Note 14 (v))
$(0.004)$(0.170)
Net loss per common share, diluted (Note 14 (v))
$(0.004)$(0.170)
        


The accompanying notes are an integral part of these Condensed Consolidated Interim Financial Statements.
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) | FOR THE THREE MONTHS ENDED NOVEMBER 30, 2021 AND 2020    2


ORGANIGRAM HOLDINGS INC.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY
For the three months ended November 30, 2021 and 2020
(Unaudited - expressed in CDN $000’s except share and per share amounts)
NUMBER OF SHARESSHARE CAPITALEQUITY RESERVESACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)ACCUMULATED DEFICITSHAREHOLDERS' EQUITY
Balance - September 1, 2020
194,511,061 $420,673 $23,744 $50 $(144,940)$299,527 
Unit financing net of issue costs of $3,502
37,375,000 52,747 — — — 52,747 
Share-based compensation (Note 14 (iv))
— — 536 — — 536 
Exercise of stock options (Note 14 (iii))
181,500 188 (80)— — 108 
Exercise of restricted share units (Note 14 (iii))
20,658 100 (100)— — — 
Foreign currency translation gain, net of tax
— — — 71 — 71 
Net loss
— — — — (34,336)(34,336)
Balance - November 30, 2020
232,088,219 $473,708 $24,100 $121 $(179,276)$318,653 
Balance - September 1, 2021
298,786,023 $730,803 $24,724 $(78)$(275,644)$479,805 
Shares issued to EIC milestones, net of issue costs of $12 (Note 14 (iii) and Note 26)
1,039,192 3,488 — — — 3,488 
Share-based compensation (Note 14 (iv))
— — 680 — — 680 
Exercise of stock options (Note 14 (iii))
22,584 31 (14)— — 17 
Exercise of restricted share units (Note 14 (iii))
937 (5)— — — 
Exercise of performance share units (Note 14 (iii))
618 (4)— — — 
Net loss
— — — — (1,305)(1,305)
Balance - November 30, 2021
299,849,354 $734,331 $25,381 $(78)$(276,949)$482,685 

The accompanying notes are an integral part of these Condensed Consolidated Interim Financial Statements.
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) | FOR THE THREE MONTHS ENDED NOVEMBER 30, 2021 AND 2020    3


ORGANIGRAM HOLDINGS INC.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
For the three months ended November 30, 2021 and 2020
(Unaudited - expressed in CDN $000’s except share and per share amounts)
NOVEMBER 30, 2021
NOVEMBER 30, 2020
(Note 29)
CASH PROVIDED (USED)
OPERATING ACTIVITIES
Net loss
$(1,305)$(34,336)
Items not affecting operating cash:
Share-based compensation (Note 14 (iv))
680 606 
Depreciation and amortization (Note 9 and Note 10)
6,067 5,269 
Loss (gain) on disposal of property, plant and equipment
311 (7)
    Impairment loss (Note 6)
250 — 
Realized fair value on inventories sold and other inventory charges12,313 12,718 
Unrealized changes in fair value of biological assets (Note 7)
(10,469)114 
Financing costs83 1,588 
Investment income
(326)(116)
Share of loss from investments in associates (Note 16)
144 242 
Change in fair value of contingent consideration (Note 15(i))
(182)36 
    Change in fair value of derivative liabilities (Note 13)
(12,698)4,672 
    Share issue costs allocated to derivative warrants (Note 13)
— 803 
Changes in non-cash working capital:
Net change in accounts receivable(5,170)2,230 
Net change in biological assets(871)(211)
Net change in inventories1,425 5,217 
Net change in accounts payable and accrued liabilities582 (322)
Net change in provisions(412)730 
Net change in prepaid expenses and deferred charges237 1,061 
Net cash (used in) provided by operating activities
(9,341)294 
FINANCING ACTIVITIES
Proceeds from unit financing, net of issue costs (Note 13)
— 64,839 
Share issue costs (Note 14(iii))
(12)— 
Payment of lease liabilities, net of sublease receipts (Note 15(ii))
(254)(317)
Payment of long-term debt (Note 12)
(21)(5)
Stock options and warrants exercised (Note 14(iii))
17 108 
Interest and fees paid on long-term debt— (1,432)
Net cash (used in) provided by financing activities
(270)63,193 
INVESTING ACTIVITIES
Proceeds from short-term investments 60,000 20,072 
Investment income289 101 
Investments in associates— (2,537)
Restricted funds687 — 
Proceeds on sale of property, plant and equipment— 14 
Purchase of property, plant and equipment (Note 9)
(7,004)(1,813)
Purchase of intangible assets (Note 10)
(16)(24)
Net cash provided by investing activities
53,956 15,813 
INCREASE IN CASH
$44,345 $79,300 
CASH POSITION 
Beginning of period $55,365 $24,600 
End of period $99,710 $103,900 

The accompanying notes are an integral part of these Condensed Consolidated Interim Financial Statements.
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) | FOR THE THREE MONTHS ENDED NOVEMBER 30, 2021 AND 2020    4


ORGANIGRAM HOLDINGS INC.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three months ended November 30, 2021 and 2020
(Unaudited - expressed in CDN $000’s except share and per share amounts)

1.    NATURE OF OPERATIONS
Organigram Holdings Inc. (the “Company”) is a publicly traded corporation with its common shares (the “Common Shares”) trading on the Toronto Stock Exchange (“TSX”) and on the Nasdaq Global Select Market (“NASDAQ”) under the symbol “OGI”. The head office and the registered address of the Company is 35 English Drive, Moncton, New Brunswick, Canada, E1E 3X3.

The Company’s major wholly-owned subsidiaries are: (i) Organigram Inc., a licensed producer (“LP” or “Licensed Producer”) of cannabis and cannabis-deri