Cann Global : Quarterly Activities and Cashflow Report

QUARTERLY REPORT

30 September 2020

APPENDIX 4C CASHFLOW STATEMENT & QUARTERLY ACTIVITIES REPORT

Cann Global Limited (ASX:CGB) ("Cann Global" or the "Company") submits the following Activities Report and Quarterly Cash Flow Statement (Appendix 4C) for the quarter ending 30 September 2020 ("Q1 FY2021").

KEY HIGHLIGHTS

• Cash receipts from customers of $448k are up 59% over the prior corresponding period and up 34% over the prior quarter ($333k) continuing to reflect growth in food division sales and revenue from the Company's subsidiary, Cann Global Thailand.
• As at 30 September the Company had a healthy cash balance of $8.9m, an increase over the quarter following completion of the successful rights issue.
• T12 has launched its latest product, chia-soft-gel oil capsules, as planned with a first order received from major retail chain Costco and this will be available in stores in the coming months.
• As announced to the ASX on 26 October 2020, Cann Global has received its import permit to bring the Canntab cannabinoid hard pills to Australia with sales expected to commence in Q3 FY21.
• Cann Global also entered into a Grant Agreement with Applied Cannabis Research to support the Cannabinoid Medicine Observational Study, the largest study ever undertaken in Australia, on hard pill cannabinoid formulations produced by Canntab facilitating early exposure to Australian consumers.
• Cann Global is close to launching the pilot phase of its 100% plant-based skincare product range with branding and go-to-market plans commencing shortly.

FINANCIAL PERFORMANCE OVERVIEW

Cash receipts from customers of $448K were up 59.4% on the prior corresponding period, and 34.5% higher than the prior quarter. This result was driven by increased sales in the food division as well as the first cash receipts from Cann Global Thailand. Accrued revenue has also significantly increased during the period as a result of increased orders for Cann Global's product range and contracted services in Asia.

Product manufacturing and operating costs were similar to last quarter, but are expected to increase next quarter as a result of the purchase order for Canntab products in preparation for release for sale to the Australian market and the need for increased inventory for T12 to meet growing demand.

As anticipated advertising and marketing costs have increased to $70k for the quarter as the Company's FY21 marketing strategy continues to develop go-to-market plans for both the new CannTab therapeutic medical cannabis products, and our 100% plant-based premium skin care ranges.

Administration and corporate costs at $562k have increased as expected due to costs associated with the rights issue. Staff costs have increased, albeit marginally, as additional expertise has been added to the team to support the growth of the business, in particular in the area of sales and marketing.

Whilst cash receipts saw strong growth, net cash used in operating activities was higher this quarter largely reflecting an increase in advertising and marketing costs. Last quarter also benefited from a significant GST refund so excluding this anomaly net cash used was only marginally higher than the last quarter. This operating cash flow trend continues to support managements' efforts to drive the business towards profitability.

At item 6.1 of the appendix 4C the Company reported aggregate amount to related parties totalling $199,600. These payments represent payment to non-executive directors' fees and directors' remuneration.

During the quarter the rights issue was successfully undertaken with net proceeds totalling $2,289k after transaction costs. The shortfall of the rights issue was concluded in the current quarter and will be reflected in the next quarter's cash flow.

Commenting on the placement and conclusion of the offer, Cann Global's Managing Director Sholom Feldman said "We are very pleased with the level of support for the Company which has been demonstrated by our existing shareholders and are also happy to be welcoming new investors to the register.

We are excited about the growth prospects for the Company and pleased with the support we have received from investors who share our vision".

OPERATIONAL PERFORMANCE AND ACTIVITIES

1. Food division

As anticipated, T12 launched its newest product during the quarter - chia soft-gel oil capsules, a nutraceutical sold under the 'Australian Grown Naturals' brand. This range of innovative products has the highest Omega 3 content of any plant-based product on the market and is gaining interest from a number of key trade and industry members.

Existing Australian retail partner CostCo has placed an initial order for the product and this will be available in store in the coming months, as well as replenishment orders for T12 products they stock in their twelve Australian stores.

Marketing efforts this quarter will focus on expanding distribution channels within Australia including to major supermarkets and grocery partners, as well as pharmacy companies, with chia soft-gel oil capsules being the key focus.

Distributor Unique Health Products have recently identified Hemp Seed Oil Capsules as an additional line they will take to their network of retailers in Australia including IGA.

Following receipt of the Australian Government certification to export hemp products to Vietnam hemp food was sent tomajorhigh-endgrocerychainsinVietnam for trialling. The response has been positive and Cann Global are confident of receiving sales orders before year end.

Demand for chia seeds in Vietnam continues to be high, with purchase orders received earlier in the quarter now having been fulfilled and new purchase orders received.

Efforts to establish new markets for sale of food products in Asia is seeing some progress. Chia seed samples have been sent to key industry distributors and suppliers in Singapore and Shanghai and the initial response has been positive.

The competitive advantage in these markets is that Asian consumers are wanting high quality natural Australian products. The next step to leverage the sale of these products throughout Asia istoconsideronlinesaleschannelplatforms.