Preliminary Results for the Year Ended 31 December 2019

Cannasouth Limited (CBD), ("Cannasouth", the "Group" or the "Company") today reported its preliminary financial result (subject to completion of audit) for the year ended 31 December 2019. The Group recorded a loss before tax of $2.2 million (2018 $0.2 million) and operating revenue of $411,000 (2018 $0). The loss was attributable to the planned establishment of the Group as a key participant in the emerging medicinal cannabis market in New Zealand. Cash on hand at 31 December 2019 for the Group was $10.2 million (2018 $3.1 million). Property, plant and equipment grew to $2.1 million (2018 $0.2 million). The release of the Government's medicinal cannabis regulations in December 2019 was a significant milestone as it provided guidance to the way ahead for the New Zealand medicinal cannabis industry. The announcement removed regulatory uncertainty for Cannasouth in this exciting new industry. During the financial year, Cannasouth made substantial progress on implementing its strategy to be an integrated "seed to sale" medicinal cannabis business. The Group is also focusing on developing good clinical data to support medicinal cannabis products and establishing education programmes for doctors and prescribers. Equipping these professionals with this knowledge will be key to ensuring they have readily available quality information to make informed decisions. During the year Cannasouth made significant progress in developing its business. Highlights include: o Secured funding for research and product development projects from Callaghan Innovation. o Established a joint venture, Cannasouth Cultivation Limited (CCL), to grow and process cannabis. o CCL commenced construction of a new environmentally sustainable and scalable commercial cannabis cultivation and processing facility in the Waikato region. o Recruited top talent to join the business. o Purchased a 60% stake in Midwest Pharmaceutics NZ Limited to provide a GMP manufacturing facility for the Group and some core revenues while the medicinal cannabis market is being developed. Cannasouth's mission is to create the foundations of a well-defined and vertically integrated medicinal cannabis business with a focus on sustainability and profitability. The new regulations set important standards for the manufacture of medicinal cannabis products. GMP (Good Manufacturing Practice) will be the quality standard required for the sale of medicinal cannabis in the New Zealand market and export of finished products to other countries. The Group is building its business to meet those standards. Having high standards for medicinal cannabis products will eliminate the risk of sub-standard products in the New Zealand market, which will give patients and prescribers confidence that the medicines are always consistent in quality and content. 2020 will see a number of milestones to be delivered by Cannasouth, subject to Ministry of Health approvals. These include; o The application for and the issue of a license to cultivate medicinal cannabis crops commercially. o The commissioning of CCL's commercial growing and processing facility and the processing of the first commercial crop to be harvested by CCL. o The release of a range of quality cannabinoid formulated medicinal products. o The development of a sales and marketing team to take products to market. o The installation and commissioning of state-of-the-art plant and equipment at Midwest Pharmaceutics NZ Limited. This will ensure the company is ready to manufacture Cannasouth-branded cannabinoid formulated medicines. o Growing Midwest's core revenues and expand its existing manufacturing capabilities. The Cannasouth Group comprises: Cannasouth Cultivation Limited for raw production of high quality; pharmaceutical grade cannabis, Midwest Pharmaceutics NZ Limited for medicines production; and Cannasouth Plant Research New Zealand Limited for research and product development. The acquisition of a 60% stake in GMP-accredited Midwest Pharmaceutics NZ Limited in October 2019 provides the Group with an existing third-party contract manufacturing revenue stream. For the two-month period post acquisition revenues from Midwest were $358,000. CEO Mark Lucas said "The regulatory environment is ready, and our teams are in place to drive Cannasouth's business plans. It's exciting to see all the components of our corporate strategy now coming together. We are now well placed to develop affordable, next-generation cannabinoid therapeutics to support patients' health outcomes and improve their quality of life." The Company's Board currently has no intention to declare dividends while the business is being established. -ENDS- For further information visit www.cannasouth.co.nz or contact: Mark Lucas CEO, Cannasouth Limited Email: mark.lucas@cannasouth.co.nz Mobile: 021 484 649 Tony Ho Chairman, Cannasouth Limited Email: tony.ho@cannasouth.co.nz Mobile: +61 417 345 839 End CA:00349183 For:CBD Type:FLLYR Time:2020-02-28 13:13:02