Cannara Biotech Inc. — Capital/Financing Update 2021

Jun 18, 2021

MATERIAL CHANGE REPORT FORM 51-102F3

Item 1. Name and Address

Cannara Biotech Inc. (“ Cannara ” or the “ Company ”) Suite 2050 - 1055 West Georgia Street Vancouver, BC V6E 3P3

Item 2. Date of Material Change

June 10, 2021

Item 3. News Release

The news release describing the material change was disseminated on June 10, 2021 through PR Newswire and filed via SEDAR.

Item 4. Summary of Material Change

On June 10, 2021, the Company announced that it had entered into a definitive agreement (the " Transaction ") to acquire a one million square foot licensed cultivation and manufacturing facility in Valleyfield, Quebec (" Valleyfield Facility ") from Medican Organic Inc., a wholly-owned subsidiary of The Green Organic Dutchman Holdings Ltd. (" TGOD "), through an all-cash offer of $27 million plus the funding of certain deposit requirements of approximately $5.7 million.

Item 5. Full Description of Material Change

5.1 Full Description of Material Change

The Company announced that it had entered into a definitive agreement (the " Transaction ") to acquire a one million square foot licensed cultivation and manufacturing facility in Valleyfield, Quebec (" Valleyfield Facility ") from Medican Organic Inc., a wholly-owned subsidiary of The Green Organic Dutchman Holdings Ltd. (" TGOD "), through an all-cash offer of $27 million plus the funding of certain deposit requirements of approximately $5.7 million.

Located in Valleyfield, Quebec, the newly built state-of-the-art facility spans over 1,033,506 sq. ft. providing Cannara the ability to reach an annual cultivation capacity of 125,000 kg of premium-grade cannabis.

Subject to customary closing conditions, the transaction is expected to close on June 20, 2021. The property shall remain at the risk of the Vendor until the closing date. BMO Capital Markets acted as exclusive financial advisor to TGOD.

The acquisition will be financed by a non-brokered private placement of up to $35,000,000 of which $25,000,000 has been committed (the " Committed Amount "). Of the Committed Amount, $19.3 million will be in the form of common shares (the " Equity Raise ") and $5.7 million will be in the form of an unsecured convertible debenture (the " Debenture Raise " and, collectively with the Equity Raise, the " Offerings "). The issue price per share for the Equity Raise is $0.18 which would result in an issuance of 107,222,222 new common shares. The sole subscriber to the Equity Raise is Olymbec

Investments Inc. (" Olymbec "), a company partially owned/controlled by Mr. Derek Stern, currently a member of the board of directors of Cannara, making this part of the transaction a related party transaction. The number of shares to be issued to Olymbec through the Equity Raise, combined with Mr. Stern's current holdings, would increase the percentage of Cannara common shares that he owns or controls, post-private placement, to 19%.

A total of $5.7 million will be raised by Cannara through the Debenture Raise via a private placement to Olymbec. The unsecured convertible debenture (the " Debenture ") will bear interest at a rate of 4% per annum, compounded semi-annually and payable along with the principal amount on the third anniversary of their issue. Subject to the approval of the TSX.V, Interest on the Debentures may be payable, at the option of Cannara, by the issuance of common shares at $0.18. The conversion price of the Debenture is per common share and the number of common shares that could be issued to Olymbec upon conversion (excluding any interest paid in kind) would be 31,666,667 common shares potentially increasing the total number of shares to be issued under the Offerings to 138,888,889, which combined with Mr. Stern's current holdings and the common shares acquired through the Equity Raise, would increase the percentage of Cannara common shares that he owns and controls, post-private Offerings to 192,798,361 or 21.89% of Cannara's common shares. Until such time that a disinterested shareholder approval is obtained with respect to the establishment of the new Control Person, the conversion right provided in the Debenture would be suspended. If the amount of the Offerings exceeds $25,000,000, the Debenture will not be issued, and the full amount of the private placement will be issued in the form of common shares at a price of $0.18 per share.

The participation in the Offerings by Olymbec, may be considered a "related party transaction" (the "Related Party") as defined under Multilateral Instrument 61-101, Protection of Minority Security Holders in Special Transactions ("MI 61-101"). Cannara has determined that exemptions from the formal valuation and minority shareholder approval requirements under MI 61-101 are available. In particular, Cannara has determined that the exemptions set out in paragraphs (a) and (b) in section 5.5 of MI 61101 are applicable since the aggregate consideration to be paid by the Related Party does not exceed 25% of the market capitalization of Cannara and Cannara is not listed on the Toronto Stock Exchange, but only on the TSX Venture Exchange. In addition, regarding the minority shareholder approval exemptions, the independent directors have determined that the exemptions set out in paragraphs (1)(a) and (b) in section 5.7 of MI 61-101 are applicable in that the aggregate consideration to be paid by the Related Party does not exceed 25% of the market capitalization of Cannara and Cannara is not listed on the Toronto Stock Exchange, but only on the TSX Venture Exchange.

If only the Committed Amount is raised, the remainder of the funds to complete the acquisition will come from Cannara's working capital and amendments to its current banking facilities. If the maximum amount of $35,000,000 is raised nearly all of it will be used to finance the acquisition and to pay for certain capital expenditures and transition costs.

5.2 Disclosure for Restructuring Transactions

Not applicable.

Item 6. Reliance on subsection 7.1(2) of National Instrument 51-102

Not applicable.

2

Item 7. Omitted Information No information has been omitted in respect of this material change. Item 8. Executive Officer The following executive officer of the Company is knowledgeable about the material change disclosed in this report and may be contacted as follows: Nicholas Sosiak Chief Financial Officer nick@cannara.ca Item 9. Date of Report June 17, 2021

3