Emerald Health Therapeutics : 2021 Q4

Emerald Health Therapeutics Inc. (CSE : EMH)

Management Discussion & Analysis

For the year ended December 31, 2021

TABLE OF CONTENTS
Overview ........................................................................................................................................................	3
Disclosure of Outstanding Share Data...........................................................................................................	7
Summary of Quarterly Results.......................................................................................................................	8
Results of Operations ....................................................................................................................................	9
Liquidity and Capital Resources...................................................................................................................	15
Operating, Investing and Financing Activities .............................................................................................	16
Financial Risk Management.........................................................................................................................	16
Measurement Uncertainty and Impairment Assessments..........................................................................	17
Transactions with Related Parties ...............................................................................................................	17
Proposed Transactions ................................................................................................................................	18
Critical Accounting Policies and Estimates ..................................................................................................	18
Changes in Accounting Standards not yet Effective....................................................................................	19
Off-Balance Sheet Arrangements ................................................................................................................	19
Risks and Uncertainties................................................................................................................................	19
Non-GAAP Measures ...................................................................................................................................	22
Forward-Looking Statements ......................................................................................................................	22

Management's Discussion and Analysis

The following MD&A is prepared as of June 30, 2022 and is intended to assist the understanding of the results of operations and financial condition of the Company.

This MD&A should be read in conjunction with the audited consolidated financial statements and accompanying notes of the Company for the years ended December 31, 2021 and 2020 (together with this MD&A, the "Annual Filings") which have been prepared in accordance with International Financial Reporting Standards ("IFRS"). This MD&A contains forward-looking statements that are subject to risk factors set out in a cautionary note contained herein. All figures are in Canadian dollars and presented in thousands (000's) unless otherwise noted.

Additional information related to the Company is available on its website at www.emeraldhealth.ca. Other information related to the Company and financial statements referred to herein are available on the Canadian Securities Administrator's website at www.sedar.com.

Overview

The Company was incorporated pursuant to the Business Corporations Act (British Columbia) on July 31, 2007 as Firebird Capital Partners Inc. and changed its name to Firebird Energy Inc. in December 2012. On September 4, 2014, the Company completed the acquisition of all the issued and outstanding common shares of Thunderbird Biomedical Inc. ("Thunderbird") by way of a reverse takeover under the rules of the TSX Venture Exchange (the "TSXV") and concurrently changed its name to T-Bird Pharma, Inc ("T- Bird"). At that time, Thunderbird became a wholly-owned subsidiary of T-Bird. In June 2015, the Company changed its name to Emerald Health Therapeutics, Inc. and Thunderbird changed its name to Emerald Health Botanicals Inc. ("Botanicals"). In February 2018, Botanicals changed its name to Emerald Health Therapeutics Canada Inc. ("EHTC").

The Company is a publicly traded company with headquarters in Victoria, British Columbia, Canada. Common shares of the Company (the "Common Shares") are listed on the Canadian Stock Exchange ("CSE") under the trading symbol "EMH". The Company also trades on the OTCQX® Best Market, operated by OTC Markets Group under the ticker symbol "EMHTF".

Since February 14, 2014, the Company has been primarily engaged in the production and sale of recreational and medical cannabis in Canada. On November 29, 2021, the Company announced that it intended to exit the recreational and medical cannabis business and pivot to a pharmaceutical development focus.

The Company owns:

1. 100% of the shares of EHTC, a British Columbia-based license holder under the Cannabis Act (Canada) (the "Cannabis Act");
2. 100% of the shares of Verdélite Sciences, Inc. ("Verdélite"), a Québec-based license holder under the Cannabis Act; and
3. 100% of the shares of Verdélite Property Holdings, Inc. ("Verdélite Holdings"), a Québec- based holding corporation that owns the Verdélite facility (as defined below).
4. • 3 -

The Company, through EHTC, also holds 100% of the shares of Avalite Sciences Inc. (formerly Northern Vine Canada Inc.) ("Avalite"), a British Columbia-based licensed dealer under the provisions of the Controlled Drugs and Substances Act (Canada) (the "CDSA") and a license holder under the Cannabis Act. Avalite ceased active operations in January 2021.

Licenses

The Company currently indirectly holds several licenses (the "Licenses") from Health Canada under the Cannabis Act to produce and sell cannabis products through its wholly owned direct and indirect subsidiaries, EHTC, Verdélite and Avalite. The Licenses held by EHTC permit it to cultivate cannabis and produce and sell dried cannabis, cannabis oils, cannabis plants and cannabis seeds. The License held by Verdélite permits it to cultivate, extract, manufacture, synthesize, test, and sell cannabis. Verdélite has also obtained a cannabis research license that authorizes sensory and organoleptic testing of cannabis products in accordance with the research protocol and conditions of the license. The License held by Avalite permits it to process cannabis and produce cannabis oil, all in accordance with the terms and conditions specified in the applicable License and the Cannabis Act. Avalite also holds a license to possess psilocybin for sale, provision and transport purposes.

Coronavirus

In December 2019, the novel Coronavirus ("COVID-19") began to spread throughout the world. On March 11, 2020, the World Health Organization declared the outbreak of COVID-19 a global pandemic. In response to this, global reactions have led to significant restrictions on travel, quarantines, temporary business closures and a general reduction in consumer activity.

During the twelve months ended December 31, 2021, government restrictions and protocols as a response to COVID-19 have varied in detail and effect in response to fluctuating case levels and hospitalizations. These restrictions at times have included the limitation on retail cannabis to curbside and delivery options. However, as of the date of this MD&A, these restrictions have generally been lifted.

All of the Company's operating facilities in Canada operated at full capacity throughout 2021 and in compliance with the required protocols and guidelines related to COVID-19 within each region where the Company's facilities are located.

The Company's priority during 2021 was to safeguard the health and safety of its personnel, support and enforce government actions to slow the spread of COVID-19, and continually assess and mitigate the risks to its business operations. The Company took a number of measures to reduce risks and enhance the safety of staff working at all of its facilities. This included working remotely, reorganizing physical layouts, adjusting schedules to improve physical distancing, implementing extra health screening measures for employees, and applying rigorous standards for personal protective equipment.

Development of Business in the year ended December 31, 2021

On January 22, 2021, Avalite ceased active operations. The Company has since been considering other strategic alternatives for Avalite and its facility.

On January 13, 2021, the Company settled all outstanding amounts owing to the original vendors of the Verdélite entities (the "Vendors") in connection with the Company's 2018 acquisition of the Verdélite

- 4 -

entities. The Company paid to the Vendors $9.00 million, fully settling all remaining amounts owing to the Vendors including accrued interest. The Company no longer has any liability to the Vendors with respect to the purchase price for the Verdélite entities.

On February 5, 2021, the Company received from Village Farms International, Inc. ("VF") $19.90 million plus $0.62 million in interest, representing full repayment of the promissory note issued to the Company in connection with the sale of the Company's interest in Pure Sunfarms Corp. to VF in October 2020. This was the final payment due in connection with such sale.

On March 31, 2021, the Company ceased operations at its facility in Metro Vancouver, BC. On July 23, 2021, the Company announced that it had retained BC Farm & Ranch Realty Corp. to assist in the sale of its Metro Vancouver facility. The Company was unable to sell the facility and on April 14, 2022, entered into an agreement with the Landlord to terminate the long-term lease on the facility in exchange for transfer to the landlord of the non-leased equipment owned by the Company at the site. See "Development of the Business After the Reporting Period" and "Transactions with Related Parties", below.

At the close of business on April 26, 2021, the Common Shares were voluntarily de-listed from the TSXV. The Common Shares commenced trading on the CSE as of the open of market on April 27, 2021, under the trading symbol "EMH".

On May 5, 2021, the Company entered into a licence agreement with FlowerPod LLC ("FlowerPod"), pursuant to which it agreed to exclusively license certain patented technology to FlowerPod for the development and sale of cannabis related products. The Company also provided FlowerPod with a promissory note of US$0.35 million that is repayable within two years and bears interest at 5% per annum. The Company was also granted a 18.71% equity ownership position in FlowerPodand the Company was entitled to receive certain monthly licence and research and development payments from FlowerPod.

On December 22nd, 2021, the Company entered into a binding term sheet to sell to FlowerPod the patented technology it had previously licensed to FlowerPod and to terminate its ownership interest in FlowerPod. Pursuant to the term sheet, Emerald is entitled to receive US$1.00 million in cash and a US$0.5 million one-yearinterest-bearing promissory note bearing interest at 10% per annum. Emerald continues to retain the two-yearinterest-bearing promissory note issued by FlowerPod on May 6, 2021, in the amount of US$0.35 million.

On May 10, 2021, Moe Jiwan was appointed as the Chief Operating Officer of the Company.

On August 6, 2021, the Company announced that Avtar Dhillon had resigned from his roles as director and Executive Chair of the Company and its subsidiaries and Jim Heppell was appointed Chair of the Board of Directors of the Company.

On September 10, 2021, the Company announced that Jenn Hepburn, the Company's Chief Financial Officer was stepping down effective October 15, 2021.

On November 3, 2021, the Company and HYTN signed a definitive agreement under which the Company would co-launch, sell and distribute HYTN's proprietary new sparkling cannabis beverages, across Canada.

- 5 -