Mr. Zohar Krivorot reports

CANNARA BIOTECH REPORTS FOURTH QUARTER AND 2023 FISCAL YEAR RESULTS: RECORD GROWTH AND PROFITABILITY CONTINUES

Cannara Biotech Inc. has released its fiscal fourth quarter 2023 financial and operating results for the three-and 12-month periods ended Aug. 31, 2023.

"Cannara Biotech isn't just growing, we're charting a path of sustained, profitable growth that sets a new standard for the industry," stated Zohar Krivorot, president and chief executive officer. "In this dynamic cannabis market, our rapid ascent to having the third-largest market share in Quebec is just the beginning. We're seeing continued growth in Ontario, Alberta and British Columbia, and our achievement of activating nine grow zones well ahead of schedule in the third quarter of this year is a testament to our team's dedication and strategic planning. Our three flagship brands have not only captured market attention but have also played a pivotal role in driving our profitability, with over 70 new SKUs [stock keeping units] delivered this year, achieving yet another record for Cannara. This success is a clear indicator of our ability to balance growth with profitability. Our commitment to bringing high-quality, innovative cannabis products to the market is unyielding, and we anticipate our expanding product catalogue to further solidify our position as a leader in the industry.

"At Cannara, we're not just focused on growing bigger, we're focused on growing smarter. Our approach to expansion is underpinned by a robust operational strategy that ensures sustained profitability at each step. This focus has not only positioned us at the high end of profitability compared to our peers, but also ensures our capacity to invest in future opportunities. We're setting a new benchmark in the industry for how to grow profitably and sustainably," concluded Mr. Krivorot.

"I am excited to share that Cannara has delivered remarkable financial milestones in the fourth quarter and throughout fiscal year 2023," declared Nicholas Sosiak, chief financial officer of Cannara. "Our net revenues soared by over 50 per cent for both the quarter and the year, reflecting our expanding market reach and operational excellence. The 45-per-cent and 91-per-cent growth in our Q4 2023 gross profit and adjusted EBITDA [earnings before interest, taxes, depreciation and amortization], respectively, when compared to Q4 2022 for the quarter, as well as an impressive 141-per-cent increase in 2023 adjusted EBITDA over last year, demonstrates the strength of our financial strategy and operational efficiency. The significant increase in our net income, achieving $4.6-million for the quarter and $7-million for the year, validates our effective expansion strategy.

"Our net income growth -- 81 per cent for the quarter when compared to Q4 2022 and over 200 per cent for the year compared to last year -- signifies more than just numbers. It reflects our strategic vision and the distinct competitive edge we have as a leading Quebec-based producer. Importantly, our fourth quarter showed significant sequential growth over the third quarter of 2023, with higher revenue by 15 per cent, operating income by 36 per cent, adjusted EBITDA by 26 per cent and net income by 58 per cent. Looking to 2024, we expect to see these figures grow even further as we continue to increase our market share across Canada. Our positive cash flow situation not only enables us to pursue expansion organically but also allows us to stay committed to providing high-quality, affordable cannabis products. The loyalty of our customers and the consistent demand for our products underscore the excellence of what we offer.

"Furthermore, our strategic expansion has led to remarkable achievements in key markets. In Ontario, we have increased our market share to rank nineth overall and aim to improve our position further with the increasing popularity of our products. Our progress in Alberta is even more striking, ranking 14th overall in just three months in Alberta since our launch in May, 2023. This remarkable surge underlines our ability to effectively tap into new markets and rapidly gain a foothold. Meanwhile, in Quebec, we continue to uphold our strong leadership position, maintaining our rank as third-largest by market share. These successes across various provinces underscore Cannara's growing influence in the Canadian cannabis industry. As we cement our position as a true player in the market, our trajectory is clearly set towards becoming the leader in this highly competitive landscape," concluded Mr. Sosiak.

Fiscal fourth quarter and FY 2023 financial highlights:

• Q4 2023 net revenues increased by 53 per cent to $18.3-million compared with Q4 2022. For FY 2023, net revenues rose by 60 per cent compared with FY 2022, reaching $57.6-million.
• Q4 2023 gross profit before fair value adjustments was $6.9-million, and $21.1-million in FY 2023, a 45-per-cent and 49-per-cent increase, respectively, compared with the three- and 12-month period in 2022. Gross profit percentage before fair value adjustments was 38 per cent for Q4 2023 and 37 per cent for FY 2023. Gross profit after fair value adjustments was 54 per cent for Q4 2023 and 48 per cent for FY 2023.
• Operating income increased to $5.8-million for Q4 2023 and $11.9-million for FY 2023, compared with operating income $3.8-million of in Q4 2022 and $4.9-million for the 12-month period of 2022, resulting in increases of 55 per cent and 141 per cent, respectively.
• Delivered the company's 10th straight quarter of positive adjusted EBITDA of $4.9-million, and adjusted EBITDA of $13.7-million for FY 2023, a 91-per-cent and 141-per-cent increase, respectively, compared with the three- and 12-month period in 2022.
• Q4 2023 net income of $4.6-million is an over 80-per-cent improvement compared with $2.6-million of net income for Q4 2022. Net income for FY 2023 was $7-million, a 201-per-cent improvement compared with the net income of $2.3-million generated in FY 2022.
• The company increased its earnings per share from three cents per share in FY 2022 to eight cents per share in FY 2023.
• Posted positive operating cash flows of $2.8-million for Q4 2023 compared with negative operating cash flows of $3.2-million in the same period of the prior year. For FY 2023, positive cash flows generated for the year was $5.4-million compared with negative operating cash flows of $6.1-million in FY 2022.
• Free cash flow for Q4 2023 increased to $4.4-million from $2.5-million in Q4 2022, a 77-per-cent increase, and $11.6-million for FY 2023 compared with the $5.4-million earned in the prior year, a 114-per-cent increase.
• The company has $30.5-million in working capital as of Aug. 31, 2023.

Fourth quarter and FY 2023 sales and operational highlights:

• Successfully achieved its 2023 goals in expanding its market share in the Canadian cannabis recreational market:
  • In Quebec, the company ranked in market share as Quebec's third-largest licensed producer, holding approximately 8.5 per cent of the market on Aug. 31, 2023. Subsequent to year-end, Cannara's market share in Quebec increased to 8.8 per cent in October, 2023.
  • In Ontario, the company's market share grew by 11 per cent in Q4 2023 compared with Q3 2023, ranking Cannara ninth with a 3-per-cent market share in Canada's largest cannabis market. In October, 2023, Cannara has further increased its market share to 3.2 per cen.
  • Dramatically increased market share in the Alberta market by 1,100 per cent since its launch in May, 2023. As of Aug. 31, 2023, Cannara accounts for 1.2 per cent of the total market in Alberta, Canada's second-largest cannabis market. In October, 2023, Cannara reached a market share of 2.3 per cent in Alberta, a 92-per-cent increase from August, 2023.
  • Additionally, Cannara's market share in British Columbia increased by 60 per cent in Q4 2023 compared with Q3 2023, and now represents a market share of 0.8 per cent. Market share in British Columbia in October, 2023, has since increased to 0.9 per cent.
• Increased its total product portfolio of cannabis products from 23 SKUs at the end of fiscal 2022, to 97 SKUs at the end of fiscal 2023, representing an increase of over 320 per cent, with over 40 more SKUs accepted by end of calendar year.
• Units sold across three flagship brands increased by 20 per cent quarter-over-quarter, from Q1 2023 to Q3 2023, and by 17 per cent from Q3 2023 to Q4 2023.
• 1,202,000 units sold during Q4 2023 across three flagship brands compared with 730,000 units sold during the same period of the prior year, a 65-per-cent increase.
• 3.7 million units sold across three flagship brands during the year of 2023 compared with two million units sold during the prior year, an 85-per-cent increase.
• Activation of three more growing zones, increasing production capacity by 50 per cent -- one new growing zone was activated per quarter at the Valleyfield facility for the first three quarters of 2023. A total of 225,000 square feet of cultivation area is actively operating at the Valleyfield facility, capable of producing, in conjunction with its Farnham facility, approximately 30,500 kilograms of cannabis per year.
• Increased employee and contracted worker headcount to a total of 461 as of Aug. 31, 2023, to support the growth of the business.

Q4 2023 capital transactions

During the quarter, the company granted a total of 210,000 stock options at an exercise price of $1.80, subject to certain vesting conditions in accordance with the employee share option plan.

Subsequent to year-end, the company granted a total of 625,000 stock options at an exercise price of $1.20, 89,000 stock options at an exercise price of $1.80, and 715,000 restricted share units to employees and board members, which are subject to certain vesting conditions in accordance with the company's employee share option and restricted share unit plan.

Outstanding shares

As at the date of this report, the company had 90,018,592 common shares, 4,542,800 stock options and 1,504,183 RSUs issued and outstanding. For further information, the complete condensed interim consolidated financial statements, and management's discussion and analysis, along with additional information about the company and all of its public filings are available at SEDAR+ and on the company's investor website.

About Cannara Biotech Inc.

Cannara Biotech is a vertically integrated producer of affordable premium-grade cannabis and cannabis-derivative products for the Canadian markets. Cannara owns two mega facilities based in Quebec spanning over 1.65 million square feet, providing the company with 100,000 kilograms of potential annualized cultivation output. Leveraging Quebec's low electricity costs, Cannara's facilities produce premium-grade cannabis products at an affordable price.

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