Aleafia Health : Annual Management Discussion and Analysis

ALEAFIA HEALTH INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

For the three and fifteen months ended March 31, 2022

Dated June 27, 2022

TABLE OF CONTENTS

COMPANY OVERVIEW ................................................................................................................................................	4
OUTLOOK ...................................................................................................................................................................	8
PRODUCT PORTFOLIO………………………………………………………………………………………………………………………..……………..………………10
KEY DEVELOPMENTS.................................................................................................................................................	12
OPERATIONAL AND FINANCIAL HIGHLIGHTS…………………………………………………………………………………………..……………………16
LIQUIDITY AND CAPITAL RESOURCES ........................................................................................................................	21
FIRST QUARTER RESULTS ..........................................................................................................................................	26
QUARTERLY HISTORICAL FINANCIAL RESULTS...........................................................................................................	27
SUMMARY OF OUTSTANDING SHARE DATA .............................................................................................................	27
FINANCIAL INSTRUMENTS ........................................................................................................................................	28
CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS ..........................................................................................	30
FUTURE ACCOUNTING PRONOUNCEMENTS .............................................................................................................	33
DISCLOSURE AND INTERNAL CONTROLS ...................................................................................................................	34
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION ..........................................................	36
RISK FACTORS ...........................................................................................................................................................	37

2 ALEAFIA HEALTH INC. Management's Discussion & Analysis

MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE THREE AND FIFTEEN MONTHS ENDED MARCH 31, 2022

This Management's Discussion and Analysis ("MD&A") of Aleafia Health Inc. ("Aleafia", "Aleafia Health" or, collectively with its affiliates and subsidiaries, the "Company") is dated June 27, 2022 and provides an analysis of the financial operating results for the three and fifteen months ended March 31, 2022. The fifteen month period ended March 31, 2022 is referred to as "Fiscal 2022". This MD&A should be read in conjunction with the Company's audited, consolidated financial statements for the three and fifteen months ended March 31, 2022 and notes thereto (the "Financial Statements"), which have been prepared in accordance with International Financial Reporting Standards ("IFRS") for consolidated financial statements.

All amounts are in Canadian dollars unless otherwise specified. The MD&A has been prepared by reference to the MD&A disclosure requirements established under National Instrument 51-102 "Continuous Disclosure Obligations" ("NI 51-102") of the Canadian Securities Administrators. This MD&A, the consolidated financial statements, and press releases have been filed on SEDAR. Additional information is also available on the Company's website at www.AleafiaHealth.com. The common shares of the Company are traded on the Toronto Stock Exchange ("TSX") under the symbol "AH". The Company also has a class of convertible debentures (AH.DB) and three classes of warrants (AH.WT),(AH.WT.A), and (AH.WT.B) which trade on the TSX.

3 ALEAFIA HEALTH INC. Management's Discussion & Analysis

COMPANY OVERVIEW

Aleafia Health (the "Company") is a publicly traded corporation incorporated under the laws of Ontario. Aleafia Health's head and registered office is currently located at 85 Basaltic Road, Concord, Ontario, and its corporate website is www.AleafiaHealth.com.

The Company is a vertically integrated and federally licensed Canadian cannabis company offering cannabis health and wellness services and products in Canada. The Company also sells cannabis products destined for international markets, including Australia and Germany, to third parties. The Company owns and operates a virtual network of medical cannabis clinics staffed by physicians and nurse practitioners.

The Company owns three licensed cannabis production facilities and operates a strategically located distribution centre all in the province of Ontario, including the first large-scale, outdoor cannabis cultivation facility in Canadian history. The Company produces a diverse portfolio of cannabis and cannabis derivative products including oils, capsules, edibles, sublingual strips, topicals and vapes, for sale in Canada in the medical and adult-use markets, and in select international jurisdictions.

The common shares of the Company commenced trading on the Toronto Stock Exchange ("TSX") (symbol "AH"), on May 27, 2020.

Corporate Strategy

The Company sells its products primarily through three core sales channels: adult-use, medical, and international. Following the launch of the Company's Sunday Market house of brands in Q1 2021, adult-use revenue includes cannabis revenue from five new brands, which have seen significant market success.

Historically, the bulk wholesale sales channel has been an important vertical for the Company as it allowed the Company to opportunistically sell cannabis flower, oils, distillate isolate and other cannabis input materials to maximize sales of the cultivation harvest. With the launch of the Company's adult-use Sunday Market House of Brands, and the improved potency and quality of the Company's outdoor harvest, it is now able to utilize that flower feedstock to support its own branded cannabis products. The Company tactically sells through the bulk wholesale sales channel where it has excess product or product not suitable for its other sales channels, to maximize net realizable margin from its three cultivation sites.

Within the branded cannabis products portfolio, the adult-use sales channel has experienced the highest growth in fiscal year 2022, and now accounts for the largest % of total net revenue. It grew from $1.7 million in net revenue in Q1 2021 to $5.5 million in net revenue in Q1 2022, a 34% compounded quarter growth rate over that period. The medical sales channel represents a stable growth, but higher margin revenue stream, driven by the recurring ordering patterns of our active patient base and referrals from third-party clinics. The international sales channel is our most recently added sales channel. It experienced 168% growth in fiscal year 2022 over fiscal year 2020, with sales into Australia and Germany. This sales channel has experienced the highest growth rate and also delivered the highest net realizable margin per gram of flower sold.

The below charts illustrate the percentage of total net revenue represented by each sales channel. Due to an increase in the Company's branded cannabis product portfolio, adult-use net revenue represents a meaningfully larger proportion of net revenue, relative to bulk wholesale net revenue. The branded cannabis product portfolio, which includes adult-use, medical and international sales channels, now accounts for 85% of net revenue in fiscal year 2022 versus 40% in fiscal year 2020.

4 ALEAFIA HEALTH INC. Management's Discussion & Analysis

1. Increasing Market Share Position in Canadian Adult-Use Market

The Company launched its Sunday Market House of Brands in Q1 of 2021, anchored around Divvy, the everyday brand focused on delivering an exceptional value proposition to consumers. Divvy, an everyday consumer value brand, is consistently a top searched brand on OCS.ca. The other four brands under the adult-use portfolio, Nith & Grand, Noon & Night, Kin Slips, and Bogart's Kitchen, are niche brands targeted at specific consumer segments in the market and span from value to premium craft. 12 new product formats were launched in fiscal year 2022, including: Craft Dried Flower, Milled Flower, 1g Distillate Vapes, Live Resin Vapes, Live Resin Diamond Sauce, Salted caramel Pretzel Bites, Cluster Pucks, Hot Sauce, Omega CBD Soft Gels, Bath Bombs, Freshly Minted Roll Ons and Topical Creams.

The adult-use sales channel in Canada is now the Company's largest sales channel based on total net revenue, with distribution agreements and entrenched relationships in four provinces - Ontario, Alberta, British Columbia and Saskatchewan - representing an estimated 65% of the Canadian population. The Company has over 100 provincial listings and 44 SKUs, including a full suite of dried flower, pre-roll, vape and cannabis derivative products. The Company's product portfolio and SKU listings are focused on the largest adult-use categories: flower, pre-roll, and vapes.

The Company markets its products through the use of an internal salesforce and is focused on gaining market share through the continued launch of innovative products in the largest product categories, mainly flower, pre-roll and vapes. The Company's internal sales and marketing team can respond to market trends in a dynamic and rapid fashion to drive sales velocity of its unique cannabis portfolio. The Company is

5 ALEAFIA HEALTH INC. Management's Discussion & Analysis