CANN GROUP LIMITED — Interim / Quarterly Report 2021

Feb 21, 2021

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ASX ANNOUNCEMENT

22 February 2021

Cann Group releases half year results for 6 months to 31 December 2020

22 February 2021 – Cann Group Limited (ASX: CAN) ( Cann or the Company ) today released its financial results for six months to December 31 2020. The Company reported revenue from sales of $1.08 million (1H 2019: $0.57 million) and an operating loss of $9.4 million (1H 2019: $8.4 million).

During the period, Cann Group secured purchase orders for product under supply agreements previously executed with a number of distribution partners. This included an initial order of 19,000 units from Cann’s German distribution partner, iuvo Therapeutics Ltd. The iuvo shipment – and other overseas shipments - were delayed, however, due to COVID-19 impacts on regulatory clearances. While some of those shipments – and the shipment of subsequent orders - are now expected to occur in the second half of the financial year (pending relevant regulatory approvals), the Company has adjusted its full year revenue forecast from $15 million to between $8 million and $10 million. The updated forecast reflects timing issues only, with revenue originally forecast to be recognised this financial year now expected to be recognised in the first half of financial year 2022.

A number of important shipments were completed during the first half, in particular in relation to a shipment of 1,400 units to LYPHE Group in the UK. This product will be used in support of Project Twenty21, Europe’s first and largest national medical cannabis registry. The supply of these products to LYPHE was made under a supply agreement with LYPHE’s subsidiary, Astral Health, entered into in May 2020. The December shipment of 1,400 units was made on a consignment basis and was the first such supply made under the Astral Health supply agreement. The product has commenced being dispensed to patients in the UK and the Company is on schedule to deliver another shipment in April.

Orders for supply to our Australian partners continue to grow and the company will manufacture and deliver over 5000 bottles in the current quarter.

Cann continues to work with our New Zealand partner, Zalm Therapeutics, on the registration of Zalm’s product range, with supply forecasted to commence in the second half of calendar year 2021.

Subsequent to the end of the period, the Company announced that it has committed to a minority investment in iuvo. The strategic CAD 1 million cornerstone investment formed part of a CAD5 million capital raising undertaken by iuvo, resulting in Cann Group holding approximately 2% of iuvo’s issued ordinary shares. Funds raised will be used by iuvo to expand sales and marketing capabilities and assist with construction of a new manufacturing and formulation facility in Malta. Following the investment, Cann Group will be granted exclusive external rights to supply iuvo Therapeutics GmbH, iuvo’s whollyowned subsidiary, (‘iuvo Germany’), with medicinal cannabis extracts until 31 December 2021, with those rights then converting to preferred non-exclusive status.

The Company completed a successful capital raising during the period, securing $40.2m by way of an institutional placement of $14.3m and Share Purchase Plan of $25.9m. The company received very strong support from investors and all shares were issued at a price of $0.40 each. This capital will be used to fund the Group’s share of the capital expense for completion of Stage 1A of the Company’s new production facility at Mildura and for working capital. In November, the Group secured a debt facility of $50m from the National Australia Bank for the construction of the Mildura project.

Cann Group Limited ACN 603 949 739 4 Research Avenue, Bundoora, VIC 3083 Australia Ph: +61 3 9095 7088

Work on the Mildura facility has recommenced and is currently on schedule for commissioning of stage 1A (annual capacity of 12,500 kgs) by the end of the current calendar year. The Company continues to monitor potential COVID-19 impacts on that timeline, especially in relation to the availability of specialist overseas contractors.

During the period, the Company received licences issued under the Narcotics Drug Act for cultivation and manufacturing at the new Mildura facility. The licences relate to the manufacturing, packaging, storage, transport, and disposal of medicinal cannabis in final dose and intermediate forms. This allows Cann to apply for a permit to cultivate once a final inspection of the completed facility has been achieved.

Subsequent to the end of the first half period, Cann announced that it had signed a Share Sale Agreement (SSA) to acquire the Satipharm business (‘Satipharm’) from Canada-based Harvest One Cannabis Inc. (‘Harvest One’) for a total maximum consideration of CAD$4.0 million.

The acquisition will provide Cann Group with rights to the proprietary and differentiated Gelpell® cannabinoid delivery technology and immediate entry into the Cannabidiol (CBD) market in Europe, where Satipharm has existing distribution agreements in place in the UK, Ireland and Eastern Europe. Cann Group will also develop a Gelpell product line and seek regulatory approval for sale of the product in Australia, following the approval by Australian regulatory authorities this month for CBD products to be sold at pharmacies on an OTC basis (subject to a full review and approval by the Therapeutic Goods Administration).

During the first half, Cann progressed several important research and development programs, including projects focussed on increasing the yield and profile of desired cannabinoids and cannabis by improving agronomy with the ARC Medical Agriculture Hub headed by La Trobe University and the study on improving production by CSIRO, whilst Agriculture Victoria has continued the analysis of the Company’s cannabis genetics.

Cann Group CEO Peter Crock commented: “While the Company experienced some frustrating delays that impacted revenues in the first half, we are extremely encouraged by the building demand for our product from both existing and potential distribution customers overseas and here in Australia. We remain confident that Cann’s growing reputation as a producer of high quality GMP standard medicinal cannabis will enable us to expand market access and build our revenue base over coming periods.

“We have announced several important strategic investments and we are making positive progress on the construction of our state-of-the-art production facilities near Mildura.

“There is strong momentum behind the business as we continue to see new markets open up and broader acceptance of the benefits of medicinal cannabis.”

Cyber security incident

Subsequent to the end of the reporting period, Cann experienced a cyber security incident involving an unknown third party. Cann and its overseas contractor are continuing to investigate the incident announced on 8 February 2021. Cann has appointed Deloitte to provide forensic IT expertise and ensure the Company’s systems are secure. The Company is also working closely with the Victoria Police E-Crime Squad which is pursuing investigations on both a domestic and international basis. Cann has confirmed that it does not have specific insurance coverage for the incident and that no funds have been recovered through the Company’s bank. Further updates will be provided as the investigation proceeds.

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Investor webinar reminder

As announced on 19 February 2021, Cann will hold an investor webinar today, Monday 22 February 2021, at 1:30pm AEDT with CEO Peter Crock and COO Shane Duncan to discuss the FY21 Half Year Results.

Investors are invited to send questions prior to the webinar to matt@nwrcommunications.com.au

Register for the investor webinar at the link below:

• https://us02web.zoom.us/webinar/register/WN_6IgpG8uJTJ KV0GazvAoGg

After registering, you will receive a confirmation email containing information about joining the webinar. A recording will be made available shortly after the conclusion of the webinar at the same link.

To join the webinar via telephone, please use one of the following numbers and enter the Webinar

ID: 896 8724 8438

For higher quality, dial a number based on your current location:

+61 8 6119 3900 or +61 8 7150 1149 or +61 2 8015 6011 or +61 3 7018 2005 or +61 7 3185 3730

International numbers available: https://us02web.zoom.us/u/kvsfa5uem

Authorised for release by the Board, Cann Group Limited.

For all media enquiries please contact:

Matthew Wright NWR Communications +61 451 896 420 matt@nwrcommunications.com.au

For all other information please contact:

Peter Crock Clive Fanning CEO Head of Investor Relations Cann Group Limited Cann Group Limited +61 3 9095 7088 +61 3 9095 7088 contact@canngrouplimited.com contact@canngrouplimited.com

About Cann Group

Cann Group Limited (ABN 25 603 949 739) is building a world-class business focused on breeding, cultivating, manufacturing and supplying medicinal cannabis for sale and use within Australia and for approved overseas export markets. The company has established research and cultivation facilities in Melbourne and is developing a state-of-the-art cultivation facility near Mildura, Victoria. Cann Group has executed collaboration agreements that have enabled it to establish a leading position in plant genetics, breeding, extraction, analysis and production techniques required to facilitate the supply of medicinal cannabis for a range of diseases and medical conditions. The Company is commercialising a range of imported and locally sourced and manufactured medicinal cannabis products. Learn more about Cann Group at www.canngrouplimited.com

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