Canaan Inc. Annual Report 2023

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FY2023 Annual Report · Canaan Inc.

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Growing
a better life

Annual Report 2023

Contents

FY 2023 Highlights

Letter from the Chairman and Chief Executive Officer

Year in Review

Evolution of Cann’s Focus

Director Profiles

Looking Ahead

Directors’ Report

Auditor’s Independence Declaration

Consolidated Statement of Profit or Loss

and Other Comprehensive Income

Consolidated Statement of Financial Position

Consolidated Statement of Changes in Equity

Consolidated Statement of Cash Flows

Notes to the Consolidated Financial Statements

Directors’ Declaration

Independent Auditor’s Report

Corporate Governance Statement

Shareholder Information

Corporate Directory

Cann Group | Annual Report 2023

FY 2023 Highlights

May crop double the size
of previous harvests

As Cann Group approached the
end of the financial year, the team
at the Mildura facility planted
crops equivalent to eight tonnes
on an annualised basis. This is
an important step towards the
Company’s goal of achieving the full
12.5 tonne capacity of the state-
of-the-art flagship facility, which is
expected to be reached in FY 2025.

Cann appoints
Peter Koetsier as new CEO

Cann Group announced the appointment
of Peter Koetsier to the role of Chief
Executive Officer on 10 January 2023.
Mr Koetsier replaced Peter Crock, who
had held the position since April 2016.
Mr Koetsier has brought to Cann more
than 30 years of general management,
marketing and commercial leadership
roles within global pharmaceutical
companies. He had most recently
been Head of Asia Pacific for French
biopharmaceutical company Ipsen,
where he developed and led the
implementation of a successful growth
strategy which included the commercial
launch of new brands.

Sold to SatiVite for

$5.48m

Sale of Southern facility
land and building

Cann completed the settlement of the
land and building component of its
Southern cultivation and manufacturing
facility with SatiVite Pty Ltd on
1 March 2023. Cann previously
announced, on 23 December 2022,
that the Company had agreed to terms
with SatiVite on the sale of the Southern
facility and the associated business
assets for a total consideration of
$5.48 million. SatiVite acquired the land
and building at the Southern facility
for a total consideration of $3.1 million
and also provided Cann with a lease
to continue operating at the site on
behalf of SatiVite.

$13.78m

YTD Sales Revenue

Substantial growth in
sales and production

Year to date sales revenue at 30 June
2023 was $13.78 million, representing
a 115% increase on FY22 sales revenue
($6.41 million). This growth has progressed
steadily from quarter to quarter due to the
fulfillment of repeat orders from large B2B
customers for both oil and flower products,
complemented by the continued growth
in Cann’s consignment brands. Strong
market demand saw revenue from the sale
of dried flower products increase by 503%
on FY22 and is the base for continued
growth as the company scales up
production. In terms of units produced and
distributed, 80,165 oil bottles were sold,
representing a 159% increase on units
sold in FY22 along with a 308% increase
to patient-ready dried flower bottles sold
(81,854 units compared to 19,928 in
FY22). Cann is preparing to double its
current output, following the planting of full
row crops from May 2023. This, combined
with the introduction of several new
cultivars in August, places Cann in a very
strong position to respond to increasing
demand for flowers.

Cann signs significant
variation with key customer

Cann signed a variation agreement with
Levin Health for the supply of medicinal
cannabis products from 1 July 2023 to
31 December 2023. Over the course
of this supply period, Cann expects
to supply oils worth approximately
$880,000, as well as flower products in
line with the customer’s needs, to meet
Levin’s production schedule. Cann and
Levin will meet later this year to determine
order quantities for the second half of the
2024 financial year.

Cann Group | Annual Report 2023Cann successfully raises
$8.18 million via SPP

Cann’s Share Purchase Plan offer (SPP),
which closed on 30 November 2022,
successfully raised $8.18 million. Proceeds
from the SPP have contributed towards
the Company’s strategic investment in
expanding GMP manufacturing capabilities
at its flagship Mildura facility.

$8.18m

Successfully raised

First Cann products
on sale in Germany

Cann Group successfully delivered and
released for supply the Company’s first
shipment of dried flower to Germany
in April 2023. The product, a high
THC flower, was developed by Cann
through an extensive internal research
and development program. The delivery
is part of Cann’s strategy to become
a consistent supplier of high-quality
products to the overseas market.

S3 trial results delay
TGA submission

The results from Cann’s S3 trial were
announced in January 2023. The
trial compared the efficacy of Cann’s
proprietary Satipharm low-dose CBD
capsules to placebo on 257 participants.
Results from the trial did not show a
statistically superior response compared
to placebo. Cann expects the outcome
of the trial will delay submission of the
registration application to the Therapeutic
Goods Administration (TGA) for this
indication. The Company is reviewing
the full trial results before considering
its next steps.

Deputy Chairman
appointed as part
of Board succession

Chairman, Allan McCallum AO, will retire
from the board in the first quarter of the
2024 financial year, with Non-executive
Director, Dr Julian Chick, having been
appointed Deputy Chairman. These
changes are part of a succession and
renewal process to ensure the board-
level skill-set continues to align with
Cann’s evolving transition to a more
commercially focused business operating
in specialised markets in Australia and
overseas. Dr Chick has over 25 years
of experience in the biotechnology,
medical technology and investment
banking sectors and has held leadership
roles and directorships at several
Australian and international life
sciences companies.

Mildura headcount increased
214% to increase production

Cann Group’s staff headcount has
increased by over 250% in the three
years from July 2020 to July 2023, with
a large portion of that growth occurring
in the last 12 months as the staff number
grew by nearly 130% between July 2022
and June 2023. The Company’s
increased production at its flagship
Mildura facility has proved a defining
factor in this growth. Headcount at
the Mildura facility has increased by
214% over the past 12 months. Cann’s
workplace features strong diversity
across its departments, with the
Company continuing to seek ways to
build a suitable and attractive working
environment for people with disabilities,
First Nations people, members of minority
groups as well as those living in rural
and regional Victoria.

Cann Group | Annual Report 2023Letter from the Chairman
and Chief Executive Officer

Dear Shareholders,

The past year has seen Cann Group
make a strong transition into its next
phase of business operations. Our
objective, as we enter this new period
for Cann, is simple: to be the largest
and most innovative cultivator and
manufacturer in Australia. With the
support and capital provided by our
shareholders, our flagship Mildura facility
is now at a stage where we are ready to
rapidly scale-up to maximise production.

Cann’s era of major construction is over.
The time has now arrived to shift the
organisational focus to scaling production
and selling the high-quality products we
are making. This change is exemplified
in our move from capital expenditure
to operational expenditure, with capital
expenditure to drop by around 80% this
year compared to the previous.

Our state-of-the-art Mildura facility is at a
point where we can dramatically increase
annual yield of high quality, consistent
product. We celebrated the one-year

Allan McCallum AO
Chairman

Peter Koetsier
Chief Executive Officer

Sales revenue for the year ended
30 June 2023 was $13.78m,
representing a 115% increase to
the prior corresponding period.

anniversary of our first commercial
harvest at our Mildura facility in early
June this year and this represents a
strong foundation from which we can
build towards our targets of growth
and production.

Since this first commercial crop, our
highly-talented team in Mildura has used
experience, adjustments and innovation
to hit metrics that confirm now is the time
to scale. In May 2023, Cann planted the
largest crop in the Company’s history,
representing a crop area equivalent
to eight tonnes annualised yield.

In the second half of this financial year,
we will move to a 9-tonne annualised
rate. And then, as we begin the next
financial year. We expect to be at an
annualised rate of 12.5 tonne which
we forecast to deliver completely
in the FY25. The entire Cann Group
staff cohort is wholly focused on
achieving this.

The commitment and support of our
investors and commercial partners is
now allowing us to enter what we believe
will be an incredibly exciting time for
Cann Group as we realise the capability
of our Mildura facility, our research and
development work and, importantly,
our people. At such levels mentioned
above, costs per unit are expected
to fall dramatically, allowing us to
deliver on another of our key goals:
EBITDA profitability.

Scaling production to meet customer
demand is fundamental to our strategy,
and we are seeing that customer demand
is experiencing a steep curve in growth.
Data collated by the Penington Institute
via the Therapeutic Goods Administration
(TGA) shows the 2022 medicinal
cannabis prescription market in Australia,
at a retail level, is approximately $200
– $250 million. Importantly, this market
grew 41% between the first half and
the second half of 2022 which is nearly
double at an annualised rate.

Cann Group | Annual Report 2023Sales revenue for the year ended 30 June
2023 was $13.78 million, representing a
115% increase to the prior corresponding
period. This is largely on the back
of strong market demand for dried
flower products, with sales increasing
by approximately 503% in the current
financial year. As the Company continues
to scale-up production, these products
will be the base for our ongoing growth.

This expansion has been driven by the
domestic market, with the strong sales
momentum supported by new clients
entering into supply agreements, and
several existing clients with repeat orders.

We have set ambitious growth targets
moving forward but we believe these
sales growth numbers, in conjunction
with an ever-expanding customer
demand, give us great confidence.

The new TGA standards around
medicinal cannabis came into effect on
July 1 this year, requiring that all overseas
products meet the same high quality
standards that local companies like ours
have been required to meet previously.

Since our inception in 2015, and as
Australia’s first company to be issued
with a medicinal cannabis licence, we
have always recognised the need to meet
high standards and we continue to have
an unwavering commitment to Australian
patients by meeting or exceeding the
TGA standards set out under TGO 93
now and in the future. Our Cann Group
team of Regulatory and Quality staff have
decades of experience and work closely
with our manufacturing and laboratory
teams and partners to ensure the
standards are met every step of the way.
Indeed, we believe this high standard is
a key component of our company values
and reputation.

Cann Group announced the appointment
of Peter Koetsier to the role of Chief
Executive Officer (CEO) in January this
year. Mr Koetsier replaced Peter Crock,
who had held the position since April
2016. Mr Koetsier has brought more
than 30 years of general management,
marketing and commercial leadership

roles within global pharmaceutical
companies. He is leading a new-
look management team that has the
experience and expertise to support
Cann’s evolution into this exciting new
phase of the Company’s development
into a customer-centric cultivator.

Being customer-centric means exceeding
the expectations of our existing customers
and attracting new ones. Cann
successfully delivered its first shipment
of dried flower, a high THC flower
product, to Germany in April. This is part
of the Company’s strategic program to
become a consistent supplier of high-
quality products to the overseas market.

With our sights set on rapid growth
of revenue and scale efficiencies, the
organisational focus for the new financial
year will be:

• significantly scaling our production

at the Mildura facility,

• augmenting and enhancing our

product portfolio, and,

•

improving our value to current
and new customers

Ultimately all of this is for the benefit
of patients in need of quality medicinal
cannabis products.

Finally, we would like to thank the team
at Cann Group for their ongoing work
and commitment to what we are building.
We are also incredibly thankful for our
investors and commercial partners for
their ongoing support and we hope you
all share in our optimism and excitement
for what the next 12 months has in store.

Allan McCallum AO
Chairman

Peter Koetsier
Chief Executive Officer

Cann Group | Annual Report 2023Year in Review

With Cann Group’s flagship Mildura facility
now commercially harvesting for over
12 months, the Company is actively shifting
its organisational focus to scaling production
and selling high-quality products.

Change in leadership to
assist Cann’s next steps
Cann Group has seen considerable
change in its leadership ranks across
the last 12 months, with the experience
and skill of the new personnel aligned
with the needs of the Company in its
current growth phase. Cann’s team
is well-equipped to realise its vision
of becoming the largest and most
innovative medicinal cannabis cultivator
and manufacturer in Australia.

This management team’s key objective
is to now oversee the Company’s
evolution towards a future where Cann
is renowned for driving revenue volumes
as well as being customer-centric and
operationally excellent.

Having been the Chief Financial Officer
since September 2021, Deborah Ambrosini
replaced Geraldine Farrell as Company
Secretary on 25 October 2022.
Deborah has over 20 years’ experience
in leading financial strategies to facilitate
growth plans across a range of
industries including biotechnology,
mining, IT communications and
financial services sectors.

Peter Koetsier commenced in the role of
Chief Executive Officer in January 2023,
replacing Peter Crock. With more than
30 years of general management,
marketing and commercial leadership
roles within global pharmaceutical
companies, Peter boasts an “established
track record of driving strong revenue
growth in complex and changing
environments”, as Cann Chairman,
Allan McCallum AO, said at the time
of his appointment.

Previously, Peter was Head of Asia Pacific
for French biopharmaceutical company,
Ipsen, where he developed and led the
implementation of a successful growth
strategy which included the commercial
launch of new brands.

On 27 June 2023, current Chairman,
Allan McCallum, announced his intention
to retire from the board in the first quarter
of the 2024 financial year. Non-executive
Director, Dr Julian Chick, was appointed
Deputy Chairman of the Company,
effective immediately.

Dr Chick was appointed to the Cann
Board in October 2022. He has over
25 years of experience in the
biotechnology, medical technology
and investment banking sectors and
has held leadership roles and
directorships at several Australian and
international life sciences companies.

Like the changes listed above in the
new management team, this board
succession and renewal process aligns
with the transition of Cann’s business to
a more commercial focus in specialised
and highly regulated pharmaceutical
markets both in Australia and
internationally. This expertise has been
purposefully put in place at management
and board level to support the
Company’s growth strategy.

Shift in focus
With Cann Group’s flagship Mildura
facility now commercially harvesting
for over 12 months, the Company is
actively shifting its organisational focus
to scaling production and selling
high-quality products.

Cann has progressed from concept,
and through its construction and
development phase, with the aim to
now produce consistent, high quality,
GMP manufacturing which will lead to
strong revenue growth and, ultimately,
a clear path to profitability, which will be
discussed shortly.

The Company’s R&D and production
teams have built experience in our
processes and state-of-the-art
automation in the past year, with
promising metrics and production
performance becoming increasingly
consistent.

This transition period was symbolised
in May as the team planted a crop,
spanning over 320 square metres, that
later yielded a harvest twice that of any
previous harvest. This harvest equated
to an annualised production level of eight
tonnes, which is a considerable step
up from the three tonnes produced last
financial year.

In addition to the scale of this harvest,
the inhalable flower portion of the
crop has improved significantly which
highlights to the market Cann Group’s
ability to supply high quality product
on a reliable basis.

The Company’s next progression will be
to reach a 9-tonne annualised rate in the
second half of this financial year, before
setting sights on the ultimate objective of
an annualised rate of 12.5 tonnes which
is forecasted to be delivered in the 2025
financial year.

Cann Group | Annual Report 2023The path to profitability
Cann Group’s revenue growth remained
strong over the course of the 2023
financial year, with the Company
now committed to achieving EBITDA
profitability in the 2025 financial year.

As the Company continues to
dramatically increase annual yield of
high-quality, consistent product,
the cost per product falls significantly.

Consistent with this progression, Cann
is planning to decrease its capital
expenditure by approximately 80% in
financial year 2024 in comparison to
previous years, with a shift to greater
operational expenditure.

The opportunity for Cann Group lies in
the fact that many of the costs within the
state-of-the-art cropping facility in Mildura
are fixed. The majority of the systems
and functions, such as security and IT
systems, base electricity requirements,
laboratory services and regulatory and
administrative functions, exist at the
same level regardless of crop size.

An improved scale and efficiency of
production will drive operating leverage
and margin for the Company.

Cann Group | Annual Report 2023Evolution of Cann’s Focus

From Capex to Opex

Seeking to increase production to reach 12.5 tonnes on an annualised basis

2017-2022

Start up and build

Agri & engineering innovation

• Establish core build of Mildura facility

• Ensure agricultural standards met

• Validate GMP & acquire licences

• Optimise processes and production

• Confirm crop potential & cultivars

• Hire team for construction phase

• First crops

• Opportunistic sales

Cann’s evolving focus

2017-2021

The Vision

Late 2021-
Mid 2022
Laying the foundation

Early 2022-
End 2022
Growing into our facility

• Project management

• Practical completion of site

• First plants transferred to Mildura

and construction to enable
larger yields of cannabis

• Commissioning of equipment

• Obtaining requisite licensing

• Recruiting talent

• Site is operational and systems,
processes and efficiencies are
being developed

Cann Group | Annual Report 2023

Cann’s evolving focus

2023 and beyond

Scale and sell

Commercial leadership

• Operationalise Mildura facility

• Commercial CEO with pharma

experience

• Staff up commercial team

• Long-term partnership deals

• New customers

• Market-leading R&D

• Large-scale quality crops more often

• Export opportunities

First half
2023
Scaling up

• Increasing all areas to
maximise efficiency of
scale for greater yield,
productivity and quality

Second half
2023 & beyond
Continued growth

• Reach full capacity of site

• Profitability / increased revenue

• Employer of choice in the

Sunraysia region

• Benchmark in medicinal

cannabis in AU and globally

Scan this QR code to hear
from Cann Group’s Mildura
Plant Production Manager,
Leslie Higgins, following
Cann’s largest harvest in
its history.

Cann Group | Annual Report 2023Director Profiles

Allan McCallum AO
Chairman

Dr Julian Chick
Non-executive Director

Doug Rathbone AM
Non-executive Director

Jenni Pilcher
Non-executive Director

Allan has broad experience as
a public company director in
agribusiness and healthcare
who has strong ethics, proven
leadership capabilities and
extensive experience in strategy
development and implementation,
and mergers and acquisitions.
Allan is the former Chair of
Tassal Group Ltd (ASX:TGR)
from 7 October 2003 to
28 October 2021, Australia’s
largest producer of Atlantic
salmon and prawns. Allan is
also a member of Rabobank
Australia Limited’s Advisory
Board (wholesale banking).

He has previously been a director
of ASX listed companies Medical
Developments International Ltd
(ASX:MVP) from 27 October 2003
to 17 December 2018, Incitec
Pivot Ltd (ASX:IPL) from
30 January 1998 to
19 December 2013 and
Graincorp Ltd (ASX:GNR)
from 26 February 1998 to
26 August 2005.

Director since 30 January 2015.

Julian has over 25 years of
experience in the biotechnology
and medical technology sectors,
as well as in investment banking.
He has worked with both public
and private companies, bringing
a number of technologies through
from discovery to market, as well
as experience in capital raisings,
company restructuring, licensing,
business development and M&A
transactions. He has a Bachelor of
Science and a PhD in Physiology
from La Trobe University and
Oxford University.

Julian has held senior executive
roles and directorships at several
Australian and international life
science companies, both listed
and private, including Avexa Ltd
(ASX:AVX), Opyl Ltd (ASX:OPL)
and Admedus Ltd (ASX:AHZ).

Director since 26 October 2022.

An experienced public company
director, Doug is the former
Managing Director and CEO
of Nufarm Limited (ASX:NUF)
from 21 August 1987 to
4 February 2015.

He is Chairman of the Rathbone
Wine Group, Director of Cotton
Seed Distributors, Go Resources,
AgBiTech. He is also a Chairman
of Health Food Holdings and
Delta Agribusiness Pty Ltd.

Doug is an Honorary Life
Governor of the Royal Children’s
Hospital. He is President of My
Room Children’s Cancer Charity
Limited and founder of Children’s
Cancer Foundation.

Doug brings to the board
experienced management and
corporate governance skills
together with a passion to
grow the business.

Director since 16 March 2015.

Jenni has senior executive
experience in the medical and
biotechnology sectors and is
currently the Chief Financial
Officer of Whispir Ltd (ASX:WSP).

She was previously CFO and
Company Secretary of Mach7
Technologies Ltd (ASX:M7T).
She has previously held executive
roles with Alchemia Limited
(ASX:ACL) and Mesoblast
Limited (ASX:MSB), as well as
senior finance roles at ASX200
company Spotless Group, and
in finance teams at Cadbury
Schweppes plc, and international
pharmaceutical group Medeva
plc., based in London, UK.

Jenni is a member of Chartered
Accountants Australia & New
Zealand; a Graduate of the
Governance Institute of Australia;
and has a Bachelor of Business
Studies (majoring in accounting)
from Massey University in
New Zealand.

Director since 8 September 2020.

Cann Group | Annual Report 2023Key Management Personnel

Robert Barnes
Non-executive Director

Robert is an experienced
senior executive who has
delivered extensive leadership
and operational outcomes
across a wide variety of
healthcare industries, including
pharmaceutical, nutraceutical,
infant formula, consumer, medical
devices, and diagnostics. He
has an applied science degree
in Medical Science, a MBA, and
is a Graduate of the Australian
Institute of Company Directors.
Having worked both globally and
in Australia in leading commercial
healthcare organisations, he
brings substantial and diverse
commercial and scientific
understanding to the Company.

Robert has held senior executive
roles at several pharmaceutical
and consumer healthcare entities
including Aspen Pharmacare
Australia Pty Ltd, Sanofi Australia,
and Mayne Group. Mr Barnes has
also served on the board of the
peak OTC industry body being
Consumer Healthcare Products
Australia. He has experience in
the medicinal cannabis sector,
being a former member of the
advisory board to Leafcann
Group Pty Ltd.

Director since 20 September 2022.

Peter Koetsier
Chief Executive Officer

B.Sc., Graduate of the
General Management
Program (INSEAD)

Peter brings to Cann more
than 30 years of general
management, marketing and
commercial leadership roles
within global pharmaceutical
companies. He has most
recently been Head of
Asia Pacific for French
biopharmaceutical company,
Ipsen, where he developed
and led the implementation of
a successful growth strategy
which included the commercial
launch of new brands. Previous
roles include General Manager
of Australia/New Zealand
(Ipsen) and senior management
positions with Astra/Zeneca,
UK and Bristol-Myers Squibb
in Europe.

Peter has a bachelor’s degree
in science (pharmacology,
immunology) and a diploma in
education (science, biology)
from Monash University and is a
graduate of the INSEAD CEDEP
General Management Program.

Peter was appointed as a
Director on the Board of
Medicinal Cannabis Industry
Australia (MCIA), Australia’s peak
industry group, in June 2023.

Deborah Ambrosini
Company Secretary and
Chief Financial Officer

BCom (Acc and Business Law),
FCA, GIA (Cert)

Deborah commenced at
Cann as Chief Financial
Officer in September 2021.
She is a Fellow of Chartered
Accountants Australia and
New Zealand with over 20 years’
experience in leading financial
strategies to facilitate growth
plans. Her experience spans
the biotechnology, mining,
IT communications and financial
services sectors. Deborah
possesses extensive experience
in debt and equity capital raising
activities, regulatory compliance,
process improvement, investor
relations, large contract
management and leading
all aspects of accounting,
budgeting, forecasting and
financial analysis. She also has
significant experience both
nationally and internationally in
financial and business planning,
compliance and taxation.
Deborah has held Director
roles in both listed and unlisted
entities. Deborah has been
a state finalist in the Telstra
Business Woman Awards.
She was also named as one
of the Top 40 pre-eminent
business leaders in the highly
prestigious WA Business News
40 under 40 awards.

Cann Group | Annual Report 2023Looking Ahead
Looking ahead

In the 2024 financial year, Cann Group’s
growth strategy will focus on three key areas:
progressing the scale and quality of production,
building greater sustainability in our commercial
operations and continuing our path towards
EBITDA profitability.

Cann Group | Annual Report 2023

The scale of high-quality
flower production at
Cann Group’s flagship
Mildura facility is set to
increase considerably
over the next two years

Cann Group has already begun its
aggressive pursuit of scaling production
towards its goal of delivering an
annualised rate of 12.5 tonnes by the
2025 financial year. In May 2023, the
Company took a major step towards this
objective, with the team at Cann’s flagship
Mildura facility planting the largest crop so
far, twice the area of previous harvests.
With a crop area of 320 square metres,
the harvest equated to an annualised
production level of 8 tonnes. In the second
half of FY24, the Company will move to a
9-tonne annualised rate before achieving
12.5-tonne in the following financial year.

This level of production is the planned
capacity for this state-of-the-art facility,
so the Company is incredibly excited by
the prospect of realising this scale.

During the year the Group has
experienced a number of establishment
expenses as it scaled up the Mildura
facility. Whilst Mildura’s cost per gram
of flower is lower in cost than material
produced from Southern, the full extent of
the efficiencies of scale at Mildura have not
been realised at this time. The Company
has initiated a continuous improvement
process resulting in increased crop yields
which is expected to flow through the
supply chain and as such a progressive
reduction is expected this FY24.

Importantly, the Company is pursuing
this production scale goal whilst also
improving product quality. The May 2023
planted crop, harvested in late July,
is indicative of this, as it delivered very
high-quality “A grade” flower yield.

The Company’s 115% increase in sales
revenue across the 2023 financial year
was largely due to the increased demand
for dried flower products. This is pertinent
to our improving product quality,
as inhalable flower yield percentages
are a strong measure of quality.

The data on the growth of the Australian
medicinal cannabis market also provides
reinforcement to our strategy. Numbers
from the Penington Institute estimate
the 2022 medicinal cannabis prescription
market in Australia, at a retail level,
is approximately $200-$250 million.
Significantly, this market grew 41%
between the first half of 2022 and the
second half – nearly a doubling at an
annualised rate.

The biggest segment of the Australian
market is inhalable flower. To this point,
approximately 80% of brands selling in
Australia are produced overseas largely
due to a lack of consistent supply of
quality, locally grown product. Pertinently,
new TGA standards, which came into
effect 1 July 2023, require that overseas
products meet the same high quality
standards that local companies like Cann
have been required to meet previously.

We expect that these changes will
naturally increase demand for local
product, for which we believe Cann Group
is prepared and equipped to satisfy.

Creating an environment of high-quality
products with consistent supply is a
primary focus for Cann Group in this
upcoming financial year, and this will
also be aided by the Company’s well-
renowned research and development
practices as we continue to formulate
new genetics lines.

With Cann’s strong customer focus,
the Company understands the importance
of creating a greater range of products
and options for the end-user.

A focus on enhancing our commercial
growth and sustainability will also aid
in reaching these production and
quality aspirations.

Cann recognises the significance
of establishing greater commercial
stability by securing longer-term supply
agreements with preferred partners.
In the 2024 financial year, Cann Group
will continue to enhance the Company’s
reliable reputation as a TGO 93 compliant
cultivator and producer, acknowledging
the opportunity of creating a competitive
advantage as one of Australia’s most
trusted and dependable partners in
the medicinal cannabis industry.

In mid-June 2023, Cann signed a variation
agreement with Levin Health for the supply
of medicinal cannabis products, spanning
across the second half of the calendar
year. This is an example of the type of
partnership that Cann wants to continue
to generate in FY24.

The Company’s third focus, its path to
EBITDA profitability, is also inextricably
linked to the other two objectives.

The timeline of the Company’s pursuit
towards an annualised rate of 12.5-tonne
of production aligns with its timeline for
EBITDA profitability, with both set to be
delivered in the 2025 financial year.

The confidence in achieving profitability
comes from the strong revenue growth
across FY2023, coupled with the scaled
increase in annual yield occurring with
many fixed costs within the Mildura facility.

This greater scale and efficiency of
production and high-quality product with
a broader range, will be the basis of the
Company’s ongoing growth. All of this
will allow Cann Group to build better
relationships with existing customers
and establish important new customers.

Cann Group | Annual Report 202314

Cann Group | Annual Report 202315

Cann Group | Annual Report 2023Directors’ Report
30 June 2023

The Directors present their report, together with the financial statements, on the consolidated entity (Group or “Cann”) consisting of
Cann Group Limited (Company or parent entity) and the entities it controlled at the end of, or during, the year ended 30 June 2023.

Information on Directors
The names and details of the Directors in office during the year and until the date of this report are as follows. Directors have been
in office for this entire year unless otherwise stated. Shareholdings are current as at the date of this report.

Name:

Title:

Allan McCallum AO

Non-executive Chairman

Qualifications:

Dip. Ag Science, FAICD

Experience
and expertise:

Allan has broad experience as a public company director in agribusiness and healthcare who has
strong ethics, proven leadership capabilities and extensive experience in strategy development and
implementation, and mergers and acquisitions. Allan is the former Chair of Tassal Group Ltd (ASX:TGR)
from 7 October 2003 to 28 October 2021, Australia’s largest producer of Atlantic salmon and prawns.
Allan is also a member of Rabobank Australia Limited’s Advisory Board (wholesale banking).

He has previously been a director of ASX listed companies Medical Developments International Ltd
(ASX:MVP) from 27 October 2003 to 17 December 2018, Incitec Pivot Ltd (ASX:IPL) from 30 January 1998
to 19 December 2013 and Graincorp Ltd (ASX:GNR) from 26 February 1998 to 26 August 2005.

Director since 30 January 2015.

Other current
directorships:

N/A

Former directorships
(last 3 years):

Special
responsibilities:

Tassal Group Ltd (ASX:TGR) (resigned 28 October 2021)

Member of Audit and Risk Committee and Chairman of the Remuneration and Nomination Committees.

Interests in shares:

8,716,477 fully paid ordinary shares

Interests in options:

871,649 unlisted options exercisable at 22 cents on or before 1 February 2025

Name:

Title:

Experience
and expertise:

Dr Julian Chick

Deputy Chair

Julian has over 25 years of experience in the biotechnology and medical technology sectors, as well
as in investment banking. He has worked with both public and private companies, bringing a number
of technologies through from discovery to market, as well as experience in capital raisings, company
restructuring, licensing, business development and M&A transactions. He has a Bachelor of Science
and a PhD in Physiology from La Trobe University and Oxford University.

Julian has held senior executive roles and directorships at several Australian and international life
science companies, both listed and private, including Avexa Ltd (ASX:AVX), Opyl Ltd (ASX:OPL)
and Admedus Ltd (ASX:AHZ).

Julian has been a director since 26 October 2022.

Other current
directorships:

n/a

Former directorships
(last 3 years):

Opyl Ltd (ASX:OPL) (resigned 13 February 2023)

Special
responsibilities:

Member of Audit and Risk Committee (from 15 December 2022) and Remuneration
and Nomination Committee.

Interests in shares:

Nil

Cann Group | Annual Report 2023Name:

Title:

Douglas John Rathbone AM

Non-executive Director

Qualifications:

FATSE, FI ChemE, ARMIT B Comm, TTC

Experience
and expertise:

An experienced public company director, he is the former Managing Director and CEO of Nufarm Limited
(ASX:NUF) from 21 August 1987 to 4 February 2015.

He is Chairman of the Rathbone Wine Group, Director of Cotton Seed Distributors, Go Resources
and AgBiTech. He is also a Chairman of Health Food Holdings and Delta Agribusiness Pty Ltd.

Doug is an Honorary Life Governor of the Royal Children’s Hospital. He is President of My Room
Children’s Cancer Charity Limited and founder of Children’s Cancer Foundation.

Doug brings to the board experienced management and corporate governance skills together with
a passion to grow the business.

Director since 16 March 2015.

Other current
directorships:

n/a

Former directorships
(last 3 years):

Special
responsibilities:

Leaf Resources Ltd (ASX:LER) (resigned 6 March 2023)

Member of Remuneration and Nomination Committee.

Interests in shares:

3,596,185 fully paid ordinary shares

Interests in options:

82,758 unlisted options exercisable at 22 cents on or before 1 February 2025

Name:

Title:

Jennifer Pilcher

Non-executive Director

Qualifications:

Member of the Chartered Accountants of Australia & New Zealand, BBus (Accounting)

Experience
and expertise:

Jenni has senior executive experience in the medical and biotechnology sectors and is currently
the Chief Financial Officer of Whispir Ltd (ASX:WSP).

She was previously CFO and Company Secretary of Mach7 Technologies Ltd (ASX:M7T). She has
previously held executive roles with Alchemia Limited (ASX:ACL) and Mesoblast Limited (ASX:MSB),
as well as senior finance roles at ASX200 company Spotless Group, and in finance teams at Cadbury
Schweppes plc, and international pharmaceutical group Medeva plc., based in London, UK.

Jenni is a member of Chartered Accountants Australia & New Zealand; a Graduate of the Governance
Institute of Australia; and has a Bachelor of Business Studies (majoring in accounting) from Massey
University in New Zealand.

Director since 8 September 2020.

Other current
directorships:

Former directorships
(last 3 years):

Special
responsibilities:

n/a

Chair of Audit and Risk Committee, Member of Remuneration and Nomination Committee.

Interests in shares:

125,000 fully paid ordinary shares

Cann Group | Annual Report 2023Directors’ Report
(continued)

Name:

Title:

Experience
and expertise:

Robert Barnes

Non-executive director

Robert is an experienced senior executive who has delivered extensive leadership and operational
outcomes across a wide variety of healthcare industries, including pharmaceutical, nutraceutical,
infant formula, consumer, medical devices, and diagnostics. He has an applied science degree
in Medical Science, a MBA, and is a Graduate of the Australian Institute of Company Directors.
Having worked both globally and in Australia in leading commercial healthcare organisations,
he brings substantial and diverse commercial and scientific understanding to the Company.

Robert has held senior executive roles at several pharmaceutical and consumer healthcare entities
including Aspen Pharmacare Australia Pty Ltd, Sanofi Australia, and Mayne Group. Mr Barnes has also
served on the board of the peak OTC industry body being Consumer Healthcare Products Australia.
He has experience in the medicinal cannabis sector, being a former member of the advisory board
to Leafcann Group Pty Ltd.

Director since 20 September 2022.

Other current
directorships:

Former directorships
(last 3 years):

Special
responsibilities:

n/a

Member of Remuneration and Nomination Committee.

Interests in shares:

Nil

John Sharman resigned as a Director on 1 September 2022.

Chief Financial Officer and Company Secretary
Deborah Ambrosini
BCom (Acc and Business Law), FCA, GIA (Cert)
Deborah commenced at Cann as Chief Financial Officer in September 2021. She was appointed to the role of Company Secretary
after Geraldine Farrell resigned as Company Secretary effective 25 October 2022. She is a Fellow of Chartered Accountants Australia
and New Zealand with over 20 years’ experience in leading financial strategies to facilitate growth plans. Her experience spans the
biotechnology, mining, IT communications and financial services sectors. Deborah possesses extensive experience in debt and equity
capital raising activities, regulatory compliance, process improvement, investor relations, large contract management and leading
all aspects of accounting, budgeting, forecasting and financial analysis. She also has significant experience both nationally and
internationally in financial and business planning, compliance and taxation. Deborah has held Director roles in both listed and
unlisted entities. Deborah has been a state finalist in the Telstra Business Woman Awards. She was also named as one of the
Top 40 pre-eminent business leaders in the highly prestigious WA Business News 40 under 40 awards.

Chief Executive Officer
Peter Koetsier
BSc, Dip Ed, MAICD
Peter Koetsier has more than 30 years of general management, marketing and commercial leadership roles within global pharmaceutical
companies, spanning seven countries. Prior to joining Cann, Peter was Head of Asia Pacific at French biopharmaceutical company,
Ipsen, where he developed and led the implementation of a successful growth strategy which included the commercial launch
of new brands. Peter has a strong track record in developing and enhancing strategy, process and culture to capture unrealised
opportunities and to accelerate revenue growth. He is commercially minded with a strong focus on customers and partnerships.

Peter holds a Bachelor of Science (pharmacology, immunology) and a diploma in education (science, biology) from Monash University
and is a graduate of the INSEAD CEDEP General Management Program (France).

Cann Group | Annual Report 2023Dividends
There were no dividends paid, recommended or declared during the current or previous financial year.

Principal activities
The principal activities of the Group during the year consisted of cultivation of medicinal cannabis for both medicinal and research
purposes pursuant to the licences and permits issued to the Group; the development and manufacture (via third party arrangements)
of finished product formulations; and the pursuit and execution of various supply agreements with third parties.

Review of operations
This financial year saw a period of transition, from construction of the Mildura facility, to a focus on selling. Building a platform from
which production could be rapidly scaled and revenue accelerated was a key strategic focus for Cann Group in FY23. With our
state-of-the-art flagship Mildura facility now commercially operational for over a year, Cann’s management team has been intent
on executing on this growth opportunity.

Cann’s competitive advantage is that it is now in a position to immediately scale to large quantities of quality product. This combination
of volume, quality and immediacy is unique to Cann. The Company will continue to enhance its automation capabilities on-site at
its Mildura facility which is showing direct benefits to the efficiency and consistency of the Company’s products. Additionally,
the experience and expertise of Cann’s production staff has also grown exponentially over the past 12 months.

The team has made adjustments and innovated processes to successfully hit metrics which provide Cann with comfort that its growth
decisions and aspirations are realistic and achievable.

The loss for the Group after providing for income tax was $33.79 million for the year ended 30 June 2023 (2022: $26.47 million).

The increase in expenses is in line with expectations as the Company increased its staffing levels and cultivation costs as part of
the scale-up of Mildura. Additional R&D costs associated with the S3 clinical trial were also incurred during the year while interest
increased in line with interest rate rises. Depreciation expense increased significantly with the amortisation of the Mildura facility
commencing from April 2022.

The Group’s basic and diluted loss per share is $0.09 or 9.1 cents (2022: $0.079 or 7.90 cents).

The Weighted Average number of Shares used to calculate the basic and diluted earnings per share is 372,251,723
(2022: 335,091,009).

The net assets of the Group are $59.26 million as at 30 June 2023 (2022: $84.90 million).

Production and sales
Sales revenue increased by an impressive $7.37 million to $13.78 million for the year ended 30 June 2023 (30 June 2022: $6.41 million)
representing a 115% increase to the prior corresponding period.

The improvement in revenue was driven by the domestic market, with the strong sales momentum supported by new clients entering
into supply agreements, and several existing clients with repeat orders. Customer acquisition has been strengthened by Cann’s
ability to supply consistent quality, GMP product from the flagship facility in Mildura, achieved through state-of-the-art cultivation
and manufacturing processes.

FY23 production output at Mildura was 2.2 tonnes. In May 2023, Cann planted the largest crop in the Company’s history which was
harvested in July 23. The latest harvest involved more than 320 square metres of crop, which is twice the area of crop that had been
harvested previously. The harvest was achieved ahead of schedule, with high quality dry flower yield, some 17% ahead of target.
The crop area harvested equates to an annualised production level of 8 tonnes.

Cann Group | Annual Report 2023Directors’ Report
(continued)

Manufacturing facilities
Cann’s flagship Mildura facility has now been commercially harvesting for over a year, with the facility’s latest harvested crop
area equating to an annualised production level of 8 tonnes – double the size of previous harvests. The production rate was
approximately 17% ahead of target, with the ultimate desire to achieve 12.5 tonne annualised by the 2025 financial year.
In addition to this promising volume, the Mildura GMP facility has made an improvement in flower quality, which highlights
the value of the enhancements made in cultivation processes and leading-edge technology.

The research and development that is occurring in the on-site laboratories is also improving the collaboration and overall efficiency
of the facility. This is another important internal capability for the Company that will accelerate supply schedules.

From our revenue growth of over 100% in FY23, sales of inhalable flower increased by approximately 500%. This is significant as
inhalable flower is currently making up over 70% of sales on the Australian cannabis market, which suggests Cann Group is aligned
with the area of the largest growth in volume at a considerably accelerated rate in comparison to its competitors.

But, more specifically pertinent to the Mildura facility, inhalable flower is a strong measure of quality, which therefore evidences the
improvement in flower quality that the Mildura facility is producing. The inhalable flower portion of harvested crops has improved
significantly over the course of the year.

Sale of Southern facility
Cann completed the settlement of the land and building component of its Southern cultivation and manufacturing facility with SatiVite
Pty Ltd on 1 March 2023. As previously announced, on 23 December 2022, the Company had agreed to terms with SatiVite on
the sale of the Southern facility and the associated business assets for a total consideration of $5.48 million. SatiVite acquired the
land and building at the Southern facility for a total consideration of $3.1 million and also allowed Cann to continue operating at the
site on behalf of SatiVite. The plant and equipment and business assets are expected to be settled early in FY24 after SatiVite has
received its ODC licence for the Southern site.

Research and development
Whilst we are seeing large increases in our dried flower production, Cann Group is also seeking to undertake an expansion of the
Company’s portfolio offering to meet more patient needs. A number of new products are currently being developed at our Northern
facility, our centre for research and development.

This enhanced range will include new formulations of the Satipharm platform. Whilst the S3 trial results delayed an over-the-counter
registration, Cann remains in conversation with Haleon as both organisations maintain there is an opportunity for Satipharm in this
part of the market.

Cann is currently developing an extended range of strengths in its product line including those with THC, allowing us to target more
medicinal cannabis indications.

S3 Clinical Trial
The results from Cann’s S3 trial were announced in January 2023. The trial compared the efficacy of Cann’s proprietary Satipharm
low-dose CBD capsules to placebo on 257 participants. Results from the trial did not show a statistically superior response compared
to the placebo. Cann expects the outcome of the trial will delay submission of the registration application to the Therapeutic Goods
Administration (TGA) for this indication. The Company is reviewing the full trial results before considering its next steps regarding
an S3 registration.

Cann Group | Annual Report 2023Funding
On 25 October 2022, the Company announced that it would conduct a Share Purchase Plan (SPP) to raise between $8 million and
$10 million. The SPP offer closed on 30 November 2022 with $8.18 million raised. The proceeds from the capital raising contributed
to the Company’s strategic investment in expanding GMP manufacturing capabilities at Mildura.

On 23 December 2022, Cann Group announced it had reached terms with SatiVite Pty Ltd on the sale of Cann’s Southern cultivation
and manufacturing facility for total consideration of $5.48 million. The divestment of the Southern facility is a significant part of Cann’s
streamlining and efficiency program that will consolidate the majority of Cann’s operations at its new Mildura facility. The parties have
come to terms on the sale of the Southern facility’s land and business assets, the licensing of certain Cann proprietary genetics, and
the provision of services from Cann to SatiVite to assist with the transfer of commercial operations.

SatiVite has acquired the land and building at the Southern facility for a total consideration of $3.1 million and has allowed Cann to
continue operating at the site on behalf of SatiVite. Long-form documentation for the second stage of the transaction is currently
being finalised.

On 15 June 2023, Cann Group announced a Non-Renounceable Rights Issue to raise up to $11.7m before associated costs.
Eligible shareholders were able to subscribe for one new share for every four shares held at 12 cents per share with one free
attaching new option for every two shares subscribed for and issued, with an exercise price of 22 cents per share and an exercise
period of 18 months. The offer closed on 25 July 2023 with an amount of $4.46 million being raised. Cann Group has appointed
PAC Partners Securities Pty Ltd as the Lead Manager on the raise. PAC Partners will be responsible for the Shortfall Placement
to professional and sophisticated investors.

Business risks
Cann Group Limited’s operating and financial results and performance are subject to various risks and uncertainties, some of which
are beyond the Company’s control. Set out below are matters which the Group has assessed as having potential to have material
impact on its operating and/or financial results and performance:

• Agricultural risks: Risks inherent with agricultural businesses apply to Cann’s business, including lower than expected yields,

disease, mould and insects and other pests. Since commissioning, Mildura Cann has focused on continually improving its cultivation
processes to ensure that the Company is able to continually produce high quality flower products to meet the needs of its customers.

• Production risks: Cann’s ability to produce cannabis and manufacture cannabis products, and to increase its production in the

future, may be adversely impacted by a number of production factors, including plant design errors, non-performance by third party
contractors, increases in materials or labour costs and/or limits on availability of materials or labour, production performance falling
below expected levels of output or efficiency, human error, the agricultural factors described above, contractor or operator errors,
breakdowns, aging or failure of equipment or processes, labour disputes, any rise in energy and utilities costs and limits on availability
of such utilities.

• Funding risks: The failure to raise the necessary funding, whether as debt or equity, could result in the delay or indefinite

postponement of Cann’s business expansion. There can be no assurance that additional funding or other types of financing will be
available if needed or that, if available, the terms of such funding will be available on favourable terms. In addition, debt funding may
materially increase Cann’s debt levels and gearing. This may increase Cann’s funding costs, reduce its financial performance and
increase the risk of Cann being in default or being unable to pay its debts when due in the future.

• R&D funding: An important source of funding for Cann is the R&D tax refund it receives each year. There can be no assurance that
the R&D tax refund scheme will remain in place, or that Cann will continue to be entitled to access it in the future. Therefore, if Cann
were to not receive an R&D tax refund, this would negatively impact Cann’s financial performance as well as increase its working
capital requirements, potentially causing it to seek additional funding.

• Operating losses risks: Cann continues to incur operating losses. Cann may not be able to achieve profitability and may continue to
incur significant losses in the future. In addition, Cann will increase its operating expenses as it grows its business. If Cann’s revenues
do not increase to offset these expected increases in expenditures and operating expenses, it will not be profitable. Anticipated or
expected sales may not be achieved, and even if achieved, may not result in Cann being profitable. There is no assurance that Cann
will be successful in achieving a return on shareholders’ investments and the chances of success must be considered in light of the
proposed expansion of its operations.

• Regulatory approvals: Cann’s ability to continue its business is dependent on holding certain authorisations, licences and permits
and adherence to all regulatory requirements related to such activities. Any failure to comply with the conditions of those approvals
and licences, or to renew the approvals and licences after their expiry dates, would have a material adverse impact on the financial
position, financial performance and/or prospects of Cann.

Cann Group | Annual Report 2023Directors’ Report
(continued)

• Compliance with licence conditions: A licence to cultivate, produce and/or manufacture under the Narcotic Drugs Act 1967 (Cth)
is subject to a number of conditions, which if not maintained may result in a suspension or revocation of the licence or permit. Such
conditions include ensuring that all staff engaged are suitable, that directors and officers (and the business itself) are a fit-and-proper
person and that certain security and reporting measures are maintained. Any failure to maintain these licences would have a material
adverse impact on the financial position, financial performance and/or prospects of Cann.

• Third party manufacture risks: Cann is currently reliant on a single source of manufacturing to manufacture certain of Cann’s

products. There are other potential commercial manufacturers that Cann could use to meet its manufacturing requirements. However,
if Cann needed to engage a new manufacturer, the process of transitioning to a new manufacturer would likely take several months,
so there would be a risk that Cann’s manufacturing abilities would be adversely impacted during the transition period, with a negative
associated impact on Cann’s financial performance.

Significant changes in the state of affairs
On 20 July 2022, the Company announced that it has entered into a Master Asset Finance Agreement with the NAB. The facility will
have a revolving leasing limit of $0.75 million which will decrease when goods are purchased but increase when repayments are made.

On 24 October 2022, the Company announced that Mr Peter Crock would resign from his position of CEO. On 10 January 2023
Cann Group announced the appointment of Mr Peter Koetsier as CEO of the Company. Mr Koetsier commenced in the role on
16 January 2023.

On 24 October 2022, the Company received a $4.348m R&D tax incentive rebate for the 2022 financial year.

On 25 October 2022, the Company announced that it would be proceeding with a Share Purchase Plan (SPP) to raise between
$8 million and $10 million. The SPP offer closed on 30 November 2022 after having successfully raised $8.18 million. The proceeds
from the share purchase plan contributed to the Company’s strategic investment in expanding GMP manufacturing capabilities
at Mildura.

On 7 November 2022, Cann Group announced that it had signed a non-binding term sheet with GlaxoSmithKline Consumer
Healthcare Pty Ltd (trading as Haleon) specifying the terms relating to the commercialisation of Cann’s proprietary Satipharm CBD
capsules for over the counter use.

On 23 December 2022, Cann Group announced that it had reached terms with SatiVite Pty Ltd on the sale of Cann’s Southern
cultivation and manufacturing facility for a total consideration of $5.48 million. The divestment of the Southern facility is a significant
part of Cann’s streamlining and efficiency program that will consolidate the majority of Cann’s operations at its new Mildura facility.
The parties have come to terms on the sale of the Southern facility’s land and business assets, the licensing of certain Cann proprietary
genetics, and the provision of services from Cann to SatiVite to assist with the transfer of commercial operations. Subsequently,
on 1 March 2023 Cann Group announced that it had completed the settlement of the land and buildings component for $3.1 million.

On 19 January 2023, Cann Group provided an update on it Phase 3 Clinical Trial which compared the efficacy of low dose
Satipharm® CBD capsules to placebo in treating sleep disturbances. The preliminary view of the analysis of the primary end-points
had not shown a statistically superior response compared to placebo.

On 10 February 2023, Cann Group issued 2,138,422 performance rights to employees under the Company’s Long-term Incentive
Plan. Additionally, 4,500,000 options were issued to Mr Peter Koetsier under the Company’s Employee Share Option Plan as part
of his employment agreement announced 10 January 2023.

On 28 April 2023, Cann Group advised that the first shipment of the Company’s dried flower had been successfully delivered
and released for supply into Germany.

On 15 June 2023, Cann Group announced a one (1) for four (4) Non-Renounceable Rights Issue to raise approximately $11.7m
(before costs). The offer opened on 23 June 2023 and closed on 25 July 2023 after having raised $4.46 million. PAC Partners Pty
Ltd has been appointed by the Company as the Lead Manager and to place the remaining shortfall.

On 15 June 2023, the Company announced that it had received formal notification from Haleon regarding their intention to terminate
the Option and Evaluation Agreement covering the Company’s S3 clinical trial. The termination will take effect on 7 September 2023.
The companies will continue discussions regarding other potential opportunities during the termination period.

Cann Group | Annual Report 2023On 20 June 2023, Cann Group announced it had signed a variation with Levin Health Pty Ltd for the supply of medicinal cannabis
products from 1 July 2023 to 31 December 2023. The agreement will see Cann Group supply Levin with approximately $0.88 million
of oils during this period. Additionally Cann will also supply dried flower products in line with Levin’s need during this period.

On 27 June 2023, Cann Group announced the appointment of Dr Julian Chick to Deputy Chair effective immediately. Current Chair,
Allan McCallum AO, also announced his intention to retire from the board during the first quarter of FY24.

Future developments, prospects and business strategies
Other than matters referred to elsewhere in this report and above, further information as to likely developments in the operations
of the Group and the expected results of operations have not been included in this report as the Directors believe it would be likely
to result in unreasonable prejudice to the Group.

Environmental regulation
The Group’s operations comply with all relevant environmental standards and regulations.

Matters subsequent to the end of the financial year
On 24 July 2023, Cann announced that it had completed its first harvest at double any previous crop area. This is a key step
towards achieving the Company’s target of reaching annualised production volumes of 12.5 tonnes at its Mildura GMP facility.

On 25 July 2023, Cann Group closed its Non-Renounceable Rights Offer after having raised $4.46 million. PAC Partners Pty Ltd
has been appointed by the Company as Lead Manager and to place the remaining shortfall.

On 24 August 2023, Cann Group issued 520,118 fully paid ordinary shares to CSIRO for research and development
services rendered.

No other matter or circumstance has arisen since 30 June 2023 that has significantly affected, or may significantly affect the
Group’s operations, the results of those operations, or the Group’s state of affairs in future financial years.

Meetings of Directors
The number of meetings of the Company’s board of directors (‘the board’) and of each board committee held during the year ended
30 June 2023, and the number of meetings attended by each Director were:

Board Meetings

Remuneration and
Nominaton Committee

Audit and Risk Committee

Held

Attended

Held

Attended

Held

Attended

Allan McCallum AO

Douglas John Rathbone AM

Jenni Pilcher

Julian Chick
(appointed 26 October 2022)

Robert Barnes
(appointed 20 September 2022)

John Sharman
(resigned 1 September 2022)

–

Held: represents the number of meetings held during the time the Director held office or was a member of the relevant committee.

Remuneration committee matters were subsumed within board meetings during FY23.

Cann Group | Annual Report 2023Directors’ Report
(continued)

Remuneration report (audited)
This Remuneration Report outlines the Company’s remuneration strategy for the financial year ended 30 June 2023 and provides
detailed information on the remuneration outcomes for the year for the Directors, the Chief Executive Officer (CEO) and other Key
Management Personnel.

For the purpose of this report, Key Management Personnel are defined as persons having authority and responsibility for planning,
directing and controlling the Group’s activities, directly or indirectly, and include all Directors of the Company.

The Directors of the Company are pleased to present the Remuneration Report (Report) for the Company and its subsidiaries (Group)
for the financial year ended 30 June 2023. This Report forms part of the Directors’ Report and has been prepared and audited in
accordance with the requirements of the Corporations Act 2001.

Key Management Personnel
The following changes are noted to the KMP for the year ended 30 June 2023:

• Mr John Sharman resigned as a Non-executive Director, effective 1 September 2022.

• Mr Robert Barnes was appointed as a Non-executive Director, effective 20 September 2022.

• Dr Julian Chick was appointed as a Non-executive Director, effective 26 October 2022 and subsequently appointed to Deputy Chair

on 27 June 2023.

• Ms Geraldine Farrell resigned as the Company Secretary and was replaced by Ms Deborah Ambrosini, effective 25 October 2022.

• Mr Peter Crock resigned as the Chief Executive Officer on 24 October 2022 and was replaced by Mr Peter Koetsier effective

16 January 2023.

• Mr Shane Duncan resigned as Chief Commercial Officer effective 28 February 2023.

The KMP whose remuneration is disclosed in this year’s report are:

Non‑executive Directors

Name

A McCallum AO

J Chick (appointed 26 October 2022)

D Rathbone AM

J Pilcher

R Barnes (appointed 20 September 2022)

J Sharman (resigned 1 September 2022)

Chief Executive Officer (CEO) and Disclosed Executives

Name

P Crock (resigned 24 October 2022)

P Koetsier (appointed 16 January 2023)

Title

Chairman

Deputy Chair

Non-executive Director

Title

Chief Executive Officer

D Ambrosini (appointed Company Secretary 25 October 2022)

Chief Financial Officer and Company Secretary

To assist with the search for a new CEO and the knowledge transfer to Mr Koetsier, Mr Crock continued in his role of outgoing
CEO until 24 March 2023. Mr Crock continued to consult to the Company in a reduced capacity until 30 June 2023.

Cann Group | Annual Report 2023Principles used to determine the nature and amount of remuneration
Remuneration philosophy
The Remuneration and Nomination Committee is responsible for making recommendations to the board on remuneration policies
and packages applicable to Directors, the CEO and other Key Management Personnel and consists of all members of the board.
The Remuneration and Nomination Committee is subject to the Company’s Remuneration Policy, with that policy having the objectives
to provide a competitive, benchmarked and flexible structure, being tailored to the specific circumstances of the Company and which
reflect the person’s duties and responsibilities so as to attract, motivate and retain people of the appropriate quality.

The Company’s Remuneration Policy is reviewed at least once a year and is subject to amendment to ensure it reflects best
market practice.

Remuneration levels are competitively set to attract appropriately qualified and experienced Directors and executives. The Remuneration
and Nomination Committee obtains market data on remuneration levels. The remuneration packages of the Chief Executive Officer
and Senior Executives may include a short-term incentive component that is based on specific Company goals pertaining to financial
and operational performance. The Chief Executive Officer and Senior Executives may also be invited to participate in the Company’s
Long-term Incentive Plan, the benefits of which are conditional upon the Company achieving certain performance criteria, the details
of which are outlined below.

In accordance with the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations, the structure
of Non-executive Director remuneration is separate from executive remuneration.

Relationship between the Remuneration Policy and Company performance
Currently, the consolidated entity assesses its performance from achievement of operational goals and shareholder value.
The performance measures for both the Company’s Short-term Incentive Plan (STI Plan) and Long-term Incentive Plan (LTI Plan)
will be tailored to align at-risk remuneration and performance hurdle thresholds to the delivery of operational and future financial
objectives and sustained shareholder value growth.

Components of remuneration – Non‑executive Directors
The Constitution of the Company and the ASX Listing Rules require that the aggregate remuneration of Non-executive Directors shall
be determined from time to time by a resolution approved by shareholders at a general meeting. Currently the aggregate remuneration
threshold is set at $500,000 per annum as approved by shareholders at the AGM held on 14 November 2018. Legislated superannuation
conditions made on behalf of Non-executive Directors are included within the aggregate remuneration threshold.

Non-executive Directors receive a cash fee for their service and have no entitlement to any performance-based remuneration
or any participation in any share-based incentive schemes. An additional fee for being a member of a board committee is paid
to Non-executive Directors.

Fees payable to the Non-executive Directors for the 2023 financial year inclusive of superannuation contributions were as follows:

Chairman

Non-executive Directors

Chair of Audit and Risk Committee (in addition to Non-executive Director fee)

Member of Audit and Risk Committee or Remuneration and Nomination Committee

120,000

60,000

15,000

5,000

Cann Group | Annual Report 2023Directors’ Report
(continued)

Components of remuneration – Chief Executive Officer and other senior executives
(a) Structure
The Company aims to reward the Chief Executive Officer and Senior Executives with a level and mix of remuneration commensurate
with their position and responsibilities within the Group, so as to:

• reward them for Company and individual performance against targets set by reference to appropriate benchmarks and key

performance indicators;

• align their interest with those of shareholders; and

• ensure total remuneration is competitive by market standards.

Remuneration consists of both fixed and variable remuneration components. The variable remuneration consists of the STI Plan
and the LTI Plan.

The proportion of fixed and variable remuneration is established for the Chief Executive Officer by the board and for each Senior
Executive by the board following recommendations from the Chief Executive Officer and the Remuneration and Nomination Committee.

The Chief Executive Officer’s and Senior Executives’ remuneration packages are all subject to board approval.

(b) Fixed remuneration
The fixed remuneration component of the Chief Executive Officer and Senior Executives’ total remuneration package is expressed
as a total package consisting of base salary and statutory superannuation contributions.

Fixed remuneration reflects the complexity of the individual’s role and their experience, knowledge and performance. Internal and
external benchmarking is regularly undertaken, and fixed remuneration levels are set with regard to the external market median,
with scope for incremental increase for superior performance.

Fixed remuneration is reviewed annually, taking into account the performance of the individual and the Group. There are no guaranteed
increases to fixed remuneration in any contracts of employment.

The Chief Executive Officer and Senior Executives have the option to receive their fixed annual remuneration in cash and a limited
range of prescribed fringe benefits. The total cost of any remuneration package, including fringe benefits tax, is taken into account
in determining an employee’s fixed annual remuneration.

(c) Variable remuneration – STI Plan
The STI Plan component of an Executive’s total remuneration is an annual cash incentive plan. The STI Plan links a portion of executive
remuneration opportunity to specific financial and non-financial measures.

From a governance perspective, all performance measures under the STI Plan must be clearly defined and measurable. The Remuneration
and Nomination Committee approves the targets and assesses the performance outcome of the Chief Executive Officer. The board
and the Chief Executive Officer set the targets and assess the performance of Senior Executives. The board approves STI Plan
payments for the Chief Executive Officer and Senior Executives. Under the STI Plan, the board has discretion to adjust STI Plan
outcomes based on the achievements which are consistent with the Group’s strategic priorities and, in the opinion of the board,
enhance shareholder value.

One hundred percent (100%) of awarded STI is paid in cash at a time determined by the board, however for future years the timing
will be upon board approval of the audited year-end accounts. In future years the financial performance measures will be assessed
and, for the Executives to qualify for a payment of an STI, a pre-agreed level of Group profit must first be achieved. Once this has
been achieved, the level of payment the Executive receives is determined based on the achievement of their pre-determined financial
and non-financial measures.

For the financial year ended 30 June 2023, required performance achievements for the STI Plan were not obtained and therefore
no STI payments were awarded.

(d) Variable remuneration – LTI Plan
The long term incentive plan (LTI Plan) component of an Executive’s total remuneration is based on performance based rights
over the ordinary shares of the Company. The LTI Plan links a portion of executive remuneration opportunity to specific financial and
non-financial measures. The LTI Plan was approved at the Annual General Meeting on 24 November 2020 and currently incorporates
measures linked to share price performance, completion of business critical operational and strategic objectives whilst also considering
term of service.

Cann Group | Annual Report 2023Chief Executive Officer (CEO) and Disclosed Executives – Current

Name

P. Koetsier

D. Ambrosini

LTI range calculated on fixed annual remuneration

20% – 40%

10% – 20%

(e) Contract for services – Chief Executive Officer
The structure of the Chief Executive Officer’s remuneration is in accordance with his employment agreement. The Chief Executive
Officer’s employment agreement is for an indefinite term. The Company may terminate the agreement by providing four months’
notice and the Chief Executive Officer may terminate the agreement by providing four months’ notice. There are no termination
benefits beyond statutory leave and superannuation entitlements associated with termination in accordance with the above notice
requirements or in circumstances where notice is not required pursuant to the employment agreement.

The Chief Executive Officer is entitled to participate in the Company’s long term incentive (“LTI”) scheme, further details of the
LTI scheme are outlined in section (d) of “Components of remuneration – Chief Executive Officer and other senior executives”.

(f) Contract for services – senior executives
The terms on which the senior executives are engaged provide for termination by the Company on up to four months’ notice,
or the minimum entitlements contained in the National Employment Standards – whichever is greater. Similar notice periods apply
in the event of termination by the senior executives.

The senior executives are entitled to participate in the Company’s LTI Plan, approved at the Annual General Meeting on
24 November 2020. Further details of the LTI Plan are outlined in section (d) of “Components of remuneration – Chief Executive
Officer and other senior executives”.

In accordance with best practice corporate governance, the structure of Non-executive Director and Executive Director remuneration
is separate.

Voting and comments made at the Company’s 2022 Annual General Meeting (‘AGM’)
At the 25 October 2022 AGM, 89.75% of the votes received supported the adoption of the remuneration report for the year ended
30 June 2022. The Company did not receive any specific feedback at the AGM regarding its remuneration practices.

Additional information
The performance of the group for the five years to 30 June 2023 are summarised below:

Sales revenue

Net loss before income tax

Net loss after income tax

Loss per share (cents)

2023
$000

13,777

(33,790)

(9.08)

2022
$000

6,411

(26,468)

(7.90)

2021
$000

4,293

(25,103)

(9.75)

2020
$000

647

(16,939)

(11.91)

2019
$000

2,348

(10,926)

(7.82)

Cann Group | Annual Report 2023Directors’ Report
(continued)

Details of remuneration
Amounts of remuneration
During the course of the year, the Key Management Personnel was defined as the Directors; the Chief Executive Officer;
Chief Operations Officer; and Chief Financial Officer and Company Secretary.

Post-employment benefits

Salary and
Fees
$

Termination
Benefits
$

Super-
annuation
$

Equity
settled
share based
payments
$

Total
$

120,000

65,000

82,591

80,000

77,500

46,385

–

49,808

–

11,932

65,000

–

21,766

–

40,901

373,125

407,758

11,403

10,909

6,176

7,508

7,602

7,045

4,408

–

4,733

–

1,134

5,909

–

1,979

–

3,718

35,456

37,068

–

12,646

90,512

257,966

–

24,785

19,092

37,431

19,092

19,985

8,012

110,497

8,012

308,058

223,719

566,024

223,719

Non-executive directors

A. McCallum

D. Rathbone

J. Pilcher

J. Chick(i)

R. Barnes(i)

J. Sharman(ii)

P. Jacobsen

G. Pearce

Total

2023

2022

2023

2022

2023

2022

2023

2022

2023

2022

2023

2022

2023

2022

2023

2022

2023

2022

108,597

109,091

58,824

75,083

72,398

70,455

41,977

–

45,075

–

10,798

59,091

–

19,787

–

37,183

337,669

370,690

Other Key Management Personnel and Executive Officers

2023

2022

2023

2022

2023

2022

154,808

–

263,288

196,615

418,096

196,615

P. Koetsier(iii)

D. Ambrosini

Total

–

Cann Group | Annual Report 2023Post-employment benefits

Salary and
Fees
$

Termination
Benefits
$

Super-
annuation
$

288,851

310,922

220,286

276,153

–

21,828

25,945

17,954

25,020

–

65,744

101,867

5,892

509,137

652,819

–

101,867

39,782

56,857

Equity
settled
share based
payments
$

–

354,974

–

34,454

–

Total
$

310,679

691,841

238,240

335,627

–

173,503

548,919

389,428

1,200,971

Disclosed Executives – Former

P. Crock(iv)

S. Duncan(v)

G. Bullock

Total

2023

2022

2023

2022

2023

2022

2023

2022

(i) J Chick and R Barnes were appointed to the Board of Cann Group Limited on 26 October 2022 and 20 September 2022 respectively.

(ii) J Sharman resigned from the Board of Cann Group Limited on 1 September 2022.

(iii) P Koetsier was appointed to the role of Chief Executive Officer on 16 January 2023.

(iv) P Crock continued as outgoing CEO until 24 March 2023 to assist with knowledge transfer to P Koetsier.

(v) S Duncan resigned as Chief Commercial Officer, effective 28 February 2023.

The proportion of remuneration linked to performance and the fixed proportion are as follows:

Fixed remuneration

At risk – STI

At risk – LTI

Name

30 June 2023

30 June 2022

30 June 2023

30 June 2022

30 June 2023

30 June 2022

Non-Executive Directors:

A. McCallum

D. Rathbone

J. Pilcher

J. Chick

R. Barnes

J. Sharman

100%

Other Key Management Personnel:

P. Koetsier

D. Ambrosini

P. Crock(i)

S. Duncan(ii)

65%

85%

100%

–

84%

46%

86%

–

35%

15%

–

(i) P. Crock continued as Outgoing CEO until 24 March 2023 to assist with knowledge transfer to P Koetsier.

(ii) S. Duncan resigned as Chief Commercial Officer, effective 28 February 2023.

–

16%

54%

14%

Cann Group | Annual Report 2023Directors’ Report
(continued)

Additional disclosures relating to Key Management Personnel

Equity holdings
The number of shares in the Company held during the financial year by each Director and other members of Key Management
Personnel of the Group, including their personally related parties, is set out below:

Balance
as at
1 July 2022

Balance as
at date of
appointment

Received
as part of
remuneration

Acquisitions,
disposals or
transfers*

Cessation
as director/
KMP

Balance at
30 June 2023

Balance
held
nominally

Non-Executive Directors:

A. McCallum

D. Rathbone

J. Pilcher

J. Chick

R. Barnes

J. Sharman(i)

6,700,455

3,294,307

125,000

–

72,728

Other Key Management Personnel:

D. Ambrosini

P. Crock(ii)

S. Duncan(iii)

19,578

1,646,610

129,995

11,988,673

–

272,726

136,363

–

(72,728)

6,973,181

3,430,670

125,000

–

19,578

3,449

(1,646,610)

(129, 995)

–

409,089

(1,849,333)

10,548,429

3,449

The Directors increased their shareholding in the Company by participating in the Share Purchase Plan completed in December 2022

Performance shares held nominally are subject to vesting conditions.

(i) J Sharman resigned from his role as Non-executive Director on 1 September 2022.

(ii) P Crock continued as Outgoing CEO until 24 March 2023 to assist with knowledge transfer to P Koetsier.

(iii) S Duncan resigned as Chief Commercial Officer, effective 28 February 2023.

Option holding
The number of options over ordinary shares in the Company held during the financial year by each Director and other members
of key management personnel of the Group, including their personally related parties, is set out below:

Balance at the
start of the year

Granted

Exercised

Expired/
forfeited/other

Balance at the
end of the year

–

4,500,000

60,000

4,560,000

–

4,500,000

60,000

4,560,000

Number of
options granted

Grant date

Expiry date Exercise price

1,500,000 9 February 2023 9 February 2028

60,000

4 April 2023

4 April 2028

$0.45

$0.60

$0.75

$0.22

Fair value
per option at
grant date

$0.077

$0.066

$0.060

$0.084

Options over ordinary shares

P. Koetsier

D. Ambrosini

Name

P. Koetsier

D. Ambrosini

Cann Group | Annual Report 2023Performance rights holdings
The number of performance rights over ordinary shares in the Company held during the financial year by each Director and other
members of key management personnel of the Group, including their personally related parties, is set out below:

Performance rights over ordinary shares

P. Koetsier

D. Ambrosini

P. Crock

S. Duncan

Balance at
the start of
the year

Granted

Vested

Expired/
forfeited/
other

Balance at
the end of
the year

–

666,666

141,176

261,904

371,952

165,176

–

678,304

928,570

–

666,666

403,080

(371,952)

(165,176)

–

(537,128)

1,069,746

The terms and conditions of each grant of performance rights over ordinary shares affecting remuneration of directors and other
key management personnel in this financial year or future reporting years are as follows:

Name

Performance Rights 2023 Series

P. Koetsier

D. Ambrosini

Performance Rights 2021 Series

Number
of rights
granted

Grant date

Expiry date

Share price
hurdle for
vesting

Fair value
per right at
grant date

666,666

9 February 2023

9 February 2026

261,904

9 February 2023

9 February 2026

$0.55

$0.18

D. Ambrosini

141,176

21 December 2021

21 December 2024

$0.00

$0.28

The Performance Rights vest upon the achievement of certain performance milestones as set by the board.

The Performance Rights 2023 Series have a share price hurdle for one tranche which requires the share price for the Company
to increase by 100% from the closing price at 30 June 2022.

The Company has a short-term lease for Corporate office space on normal commercial terms with Rathbone Wine Group.
The building is owned by REI Property Sub Trust 2. Rathbone Wine Group is the head tenant. An amount of $0.106 million
(2022: nil) was paid during the year.

This concludes the remuneration report, which has been audited.

Cann Group | Annual Report 2023Directors’ Report
(continued)

Shares under option
There were 6,120,000 unissued ordinary shares of Cann Group Limited under option outstanding at the date of this report.

Unissued ordinary shares of Cann Group Limited under option at the date of this report are as follows:

Grant date

9 February 2023

4 April 2023

Expiry date

9 February 2028

4 April 2028

Exercise price

Number under option

$0.45

$0.60

$0.75

$0.22

1,500,000

1,620,000

6,120,000

* P. Koetsier was issued 4.5 million options in accordance with his employment contract.

No person entitled to exercise the options had or has any right by virtue of the option to participate in any share issue of the Company
or of any other body corporate.

Shares issued on the exercise of options
There were no ordinary shares of Cann Group Limited issued on the exercise of options during the year ended 30 June 2023
and up to the date of this report.

Shares under performance rights
Unissued ordinary shares of Cann Group Limited under performance rights at the date of this report are as follows:

Grant date

Expiry date

21 December 2021

21 December 2024

10 February 2023

10 February 2026

Number under rights

792,436

2,138,422

2,930,858

On 10 February 2023, 2,138,422 Performance Rights were issued to employees of the Company under the Long-term Incentive Plan.
Rights will vest on the achievement of certain conditions as determined by the board.

No person entitled to exercise the performance rights had or has any right by virtue of the performance right to participate in any share
issue of the Company or of any other body corporate.

Shares issued on the exercise of performance rights
There were 100,000 (2022: 1,930,000) Performance shares issued on the exercise of performance rights during the year ended
30 June 2023 and up to the date of this report. LTI plan shares are issued as ordinary shares, but are subject to transfer conditions
for a period of two years from their date of issue or until the employee ceases employment with the Company.

Indemnifying officers and auditors
No indemnities have been given, however, a Directors and Officers insurance premium of $179 thousand has been paid during the
year for any person who is or has been an officer of the Group. No indemnities have been given during or since the end of the year
for any person who has been an auditor of the Group.

Proceedings on behalf of the Group
There were no proceedings entered into by the Company during the year.

Cann Group | Annual Report 2023Rounding of amounts
The Company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and Investments
Commission, relating to ‘rounding-off’. Amounts in this report have been rounded off in accordance with that Corporations Instrument
to the nearest thousand dollars, or in certain cases, the nearest dollar.

Auditor
William Buck Audit (Vic) Pty Ltd continues in office in accordance with section 327 of the Corporations Act 2001.

Non-audit services
The Company’s Audit and Risk Committee (Committee) is responsible for the maintenance of audit independence.
Specifically, the Committee Charter ensures the independence of the auditor is maintained by:

•

limiting the scope and nature of non-audit services that may be provided; and

• requiring that permitted non-audit services must be pre-approved by the Chairman of the Committee.

During the year William Buck, the Group’s auditor, has performed certain other services in addition to the audit and review of the
financial statements. The board has considered the non-audit services provided during the year by the auditor and in accordance
with the advice provided by the Committee, is satisfied that the provision of those non-audit services during the year by the
auditor is compatible with, and did not compromise, the auditor independence requirements of the Corporations Act 2001
for the following reasons:

• All non-audit services were subject to the corporate governance procedures adopted by the Group and have been reviewed

by the Committee to ensure they do not impact the integrity and objectivity of the auditor; and

• The non-audit services provided do not undermine the general principles relating to auditor independence as set out in APES 110
Code of Ethics for Professional Accountants (including Independence Standards) as they did not involve reviewing or auditing
the auditor’s own work, acting in a management or decision-making capacity for the Group, acting as an advocate for the Group
or jointly sharing risks and rewards.

Details of the amounts paid to the auditor of the Group, William Buck, for audit and non-audit services provided during the year
are set out in note 21.

Auditor’s independence declaration
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out immediately
after this Directors’ report.

CEO and CFO declaration
The CEO and CFO have given a declaration to the board concerning the Group’s financial statements under section 295A(2) of the
Corporations Act 2001 and recommendation 4.2 of the ASX Corporate Governance Council Corporate Governance Principles and
Recommendations (4th edition) in regards to the integrity of the financial statements.

This report is made in accordance with a resolution of Directors, pursuant to section 298(2)(a) of the Corporations Act 2001.

On behalf of the Directors

Allan McCallum AO
Chairman

28 August 2023

Cann Group | Annual Report 2023Auditor’s Independence Declaration

AUDITOR’S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE
CORPORATIONS ACT 2001 TO THE DIRECTORS OF CANN GROUP LIMITED

I declare that, to the best of my knowledge and belief, during the year ended 30 June 2032 there have
been:

— no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in

relation to the audit; and

— no contraventions of any applicable code of professional conduct in relation to the audit.

William Buck Audit (Vic) Pty Ltd
ABN 59 116 151 136

A. A. Finnis
Director
Melbourne, 28 August 2023

Level 20, 181 William Street, Melbourne VIC 3000

+61 3 9824 8555

vic.info@williambuck.com
williambuck.com

William Buck is an association of firms, each trading under the name of William Buck
across Australia and New Zealand with affiliated offices worldwide.

Liability limited by a scheme approved under Professional Standards Legislation.

Cann Group | Annual Report 2023

Consolidated Statement of Profit or Loss
and Other Comprehensive Income
For the year ended 30 June 2023

Revenue from customer contracts

Other income

Total revenue and other income

Expenses

Administration and corporate costs

Research and development costs

Depreciation and amortisation expense

Total expenses

Loss before finance costs, investment loss, and income tax expense

Finance costs

Loss on fair value of investment

Loss before income tax expense

Income tax expense

Loss after income tax expense for the year

Other comprehensive income/(loss)

Items that may be reclassified subsequently to profit or loss

Foreign currency translation

Other comprehensive income/(loss) for the year, net of tax

Total comprehensive loss for the year

Basic loss per share

Diluted loss per share

Note

30 June 2023
$’000

30 June 2022
$’000

13,777

7,898

21,675

(34,782)

(4,289)

(11,960)

(51,031)

(29,356)

(3,158)

(1,276)

(33,790)

–

(33,790)

6,411

4,827

11,238

(27,697)

(2,991)

(4,797)

(35,485)

(24,247)

(1,828)

(393)

(26,468)

–

(26,468)

(138)

(33,749)

(26,606)

Cents

(9.08)

Cents

(7.90)

The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes.

Cann Group | Annual Report 2023Consolidated Statement of Financial Position
As at 30 June 2023

ASSETS

Current assets

Cash and cash equivalents

Trade and other receivables

Prepayments

Inventories

Biological assets

Non-current assets classified as held for sale

Total current assets

Non-current assets

Property, plant and equipment

Intangible assets

Trade and other receivables

Financial assets at fair value through profit or loss

Prepayments

Right-of-use assets

Total non-current assets

Total assets

LIABILITIES

Current liabilities

Trade and other payables

Contract liabilities

Lease liability

Employee entitlements

Borrowings

Total current liabilities

Non-current liabilities

Employee entitlements

Borrowings

Total non-current liabilities

Total liabilities

Net assets

EQUITY

Issued capital

Reserves

Accumulated losses

Total equity

Note

30 June 2023
$’000

30 June 2022
$’000

765

5,643

2,105

11,406

790

20,709

493

21,202

107,396

215

514

139

–

1,914

4,158

1,641

10,673

782

19,168

–

19,168

117,929

1,462

–

743

276

108,264

129,466

120,495

139,663

7,853

435

–

817

15,290

24,395

135

45,675

45,810

70,205

59,261

177,368

123

(118,230)

59,261

6,519

162

304

815

3,500

11,300

43,361

43,460

54,760

84,903

169,425

(82)

(84,440)

84,903

The above consolidated statement of financial position should be read in conjunction with the accompanying notes.

Cann Group | Annual Report 2023Consolidated Statement of Changes in Equity
For the year ended 30 June 2023

Balance at 1 July 2021

Loss after income tax expense for the year

Other comprehensive loss for the year, net of tax

Total comprehensive loss for the year

Transactions with owners in their capacity as owners:

Contributions of equity, net of transaction costs (note 17)

18,912

Share-based payments

Employee share gift plan

Conversion of employee performance rights

Transfer – expiry of options

Balance at 30 June 2022

Balance at 1 July 2022

Loss after income tax expense for the year

Other comprehensive income for the year, net of tax

Total comprehensive income/(loss) for the year

Transactions with owners in their capacity as owners:

Contributions of equity, net of transaction costs (note 17)

Share-based payments

Conversion of employee performance rights

Balance at 30 June 2023

Issued
capital
$’000

Share based
payments
reserve
$’000

149,673

3,405

–

762

–

647

–

(762)

(3,192)

Foreign
currency
translation
reserve
$’000

Accumulated
losses
$’000

Total equity
$’000

(42)

–

(138)

(61,164)

91,872

(26,468)

–

(138)

(26,468)

(26,606)

–

3,192

18,912

647

–

169,425

(180)

(84,440)

84,903

Issued
capital
$’000

Share based
payments
reserve
$’000

Foreign
currency
translation
reserve
$’000

Accumulated
losses
$’000

Total equity
$’000

169,425

(180)

(84,440)

84,903

–

7,915

–

177,368

–

192

(28)

262

–

(33,790)

–

(33,790)

(33,749)

–

7,915

192

–

(139)

(118,230)

59,261

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

Cann Group | Annual Report 2023Consolidated Statement of Cash Flows
For the year ended 30 June 2023

Cash flows from operating activities

Receipts from customers

Payments to suppliers and employees

Interest received

Other income received

Net cash used in operating activities

Cash flows from investing activities

Payments for property, plant and equipment

Proceeds from disposal of land and buildings

Net cash used in investing activities

Cash flows from financing activities

Proceeds from issue of shares net of expenses

Proceeds from borrowings

Repayment of borrowings

Repayment of lease liabilities

Net cash from financing activities

Net decrease in cash and cash equivalents

Cash and cash equivalents at the beginning of the financial year

Cash and cash equivalents at the end of the financial year

Note

30 June 2023
$’000

30 June 2022
$’000

13,534

(41,347)

4,977

(22,835)

(3,101)

3,073

(28)

7,915

17,603

(3,500)

(304)

21,714

(1,149)

1,914

765

7,601

(31,028)

2,993

(20,433)

(45,164)

–

(45,164)

17,921

46,861

–

(376)

64,406

(1,191)

3,105

1,914

The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.

Cann Group | Annual Report 2023Notes to the Consolidated Financial Statements
30 June 2023

Note 1. Corporate information
These are the financial statements of Cann Group Limited (Company) and its subsidiaries, including Cannproducts Pty Ltd,
Cannoperations Pty Ltd, Cann IP Pty Ltd, Botanitech Pty Ltd, all incorporated and domiciled in Victoria, Australia and the Satipharm
business, comprising Satipharm Europe, Satipharm Limited, Satipharm AG, Satipharm Australia Pty Ltd, Satipharm Canada Limited
and Phytotech Therapeutics Ltd (together, the Group). Cann Group Limited is an ASX-listed public company incorporated and
domiciled in Victoria, Australia.

These financial statements are for the year ended 30 June 2023. Unless otherwise stated, all amounts are presented in thousands
of $AUD ($’000), which is the functional and presentation currency of all entities in the Group with the exception of the Satipharm
business, whose functional currency is the Euro.

The financial statements were authorised for issue by the Directors on the date of signing the attached Directors’ Declaration.

Note 2. Significant accounting policies
The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been
consistently applied to all the years presented, unless otherwise stated.

New or amended Accounting Standards and Interpretations adopted
The Group has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian Accounting
Standards Board (‘AASB’) that are mandatory for the current reporting period.

Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.

Going concern
The Consolidated Group has incurred losses for the year ended 30 June 2023 of $33.79 million (30 June 2022: $26.47 million) and
had a net cash outflow from operating activities of $22.86 million (30 June 2022 $20.43 million). Additionally, as at 30 June 2023 the
Group had a net working capital deficiency of $3.19 million. These factors indicate a material uncertainty which may cast significant
doubt on the Group’s ability to continue as a going concern.

The Directors believe there are reasonable grounds to expect the Group will realise its assets and extinguish its liabilities in the normal
course of business and at the amounts stated in the financial report, despite a material uncertainty existing as at 30 June 2023.

The key factors underpinning this assessment are as follows:

• Borrowings classified as current liabilities include the NAB working capital facility (with a value of $14 million at 30 June 2023), which
was first reviewed in November 2022. The facility is reviewed annually with the next review scheduled for November 2023. It is the
Directors’ expectations that the facility will be renewed for a further 12 months at this review.

• The Group’s revenue continues to grow at a significant rate with the Group having already billed 115% or 2.2 times the full year

revenue recorded in FY22. Revenue growth has accelerated in FY23 year across Cann’s portfolio, including large repeat orders for oil
and flower products, and the largest single domestic order for an oil product received by the Company so far. This has been enabled
through the continuous improvement of cultivation and manufacturing processes at the Mildura facility. Initiatives are in place for both
operations and business development that aim to further accelerate the trajectory of revenue over the coming year.

• Demand for dried flower products remains very high in Australia. Continuous improvement in flavour profiles, bud aesthetics and

terpenes, along with diversity in cultivars, are increasingly becoming priorities for customers. This represents a significant opportunity
for Cann Group given the strong improvements the Company has made to its flower quality. Cann is also well placed to meet the
growing demands for product exclusivity and consistent supply via its Mildura facility.

•

In June 2023 the Company conducted a Non-Renounceable Rights Offer for existing shareholders to raise up to $11.7 million before
associated costs. The Offer closed on 25 July 2023 after having raised $4.46 million from existing retail shareholders. Shortfall shares
will now be offered to sophisticated and professional investors by the Lead Manager on the raise, PAC Partners Securities Pty Ltd
(ACN 623 653 912) pursuant to a separate offer in accordance with the mandate between the Lead Manager and the Company.

• The Company has in the past, and intends in the future, to utilise the Federal Government research and development tax incentives,
assuming they remain available. The Company received an amount of $4.348 million for the 2022 tax year and intends to lodge a
claim based on eligible expenditure for the 2023 tax year in August 2023. An amount of $3.4 million has been accrued for the 2023
financial year. The Company has established an agreement with Radium Capital to provide early access to a portion of the expected
research and development tax incentive for FY23.

• To maximise the benefits of Mildura, a streamlining of commercial operations which includes centralising key activities at Mildura is
well underway. Consistent with the aim to consolidate activities and achieve cost efficiencies, the Company has agreed terms for

Cann Group | Annual Report 2023the sale of its Southern facility for a total consideration of $5.48 million. On 1 March 2023, Cann Group completed the sale of the
Southern facility land for a total consideration of $3.1 million. The parties are yet to enter into long-form documents regarding the sale
of certain business assets of the Southern facility, however it is expected that the parties will do so in the very near future and that
$1.9 million will be paid by SatiVite once the applicable conditions precedents have been satisfied (which will include SatiVite securing
a licence from the ODC). SatiVite currently operates another ODC-licensed medicinal cannabis cultivation facility which the Company
believes should assist SatiVite in obtaining the ODC licence approval in a timely manner.

• During the first half of FY23 the Group has experienced a number of establishment expenses as it scaled-up the Mildura facility.

Whilst Mildura’s cost per gram of flower is lower in cost than material produced from Southern, the full extent of the efficiencies of
scale at Mildura have not been realised at this time. The Company is scaling to 9 tonnes in the current financial year and has initiated
a continuous improvement process resulting in increased crop yields which is expected to flow through the supply chain resulting in a
progressive reduction in the cost per gram.

• Additionally, the Group has also incurred a number of one-off significant expenses associated with the S3 clinical trial which was

completed in November 2022. It is anticipated that these expenses will be eligible to be included in the Company’s 2023 Research
and Development Tax Incentive registration which may assist in offsetting this expenditure.

• Finally, the Group could potentially look to refinance the Mildura facility, which has the potential to unlock working capital to meet the

needs of the business, subject to approval of the financial institution.

The Directors have prepared cash flow forecasts that indicate that the Consolidated Group will have sufficient cash flows to meet its
commitments for a period of at least 12 months from the date of this report.

Based on the cash flow forecast, which include the monitoring of operational costs, the Directors are satisfied that, the going concern
basis of preparation is appropriate. The financial report has been prepared on a going concern basis, which assumes continuity of normal
business activities and the settlement of liabilities in the ordinary course of business. However if the events noted above did not occur, there
is a risk that the entity will not be able to continue as a going concern.

Basis of preparation
The financial statements are general purpose financial statements that have been prepared in accordance with Australian Accounting
Standards, including Australian Accounting Interpretations, other authoritative announcements of the Australian Accounting Standards
Board (AASB) and the Corporations Act 2001 as appropriate for-profit oriented entities.

Australian Accounting Standards set out accounting policies that the AASB has concluded would result in financial statements
containing relevant and reliable information about transactions, events and conditions. Compliance with Australian Accounting Standards
ensures that the financial statements and notes also comply with International Financial Reporting Standards. Material accounting
policies adopted in the preparation of these financial statements are presented below. They have been consistently applied unless
otherwise stated.

The financial statements have been prepared on an accruals basis and are based on historical costs unless otherwise stated.

Unless otherwise stated, amounts in this report have been rounded to the nearest thousand dollars.

Historical cost convention
The financial statements have been prepared under the historical cost convention.

Critical accounting estimates
The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires management to
exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement
or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 3.

Parent entity information
In accordance with the Corporations Act 2001, these financial statements present the results of the Group only. Supplementary
information about the parent entity is disclosed in note 28.

Notes to the Consolidated Financial Statements(continued)Cann Group | Annual Report 2023Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all the subsidiaries of the Group as at 30 June 2023
and the results of all its subsidiaries for the reporting period.

Subsidiaries refer to entities over which the Group has the power to govern the financial and operating policies, generally accompanying
a shareholding of more than one-half of the voting rights. The existence and effect of the potential voting rights that are currently
exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated
from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

The financial statements of the subsidiaries used in the preparation of the consolidated financial statements are prepared for the same
reporting date as the Group. Consistent accounting policies are applied to like transactions and events in similar circumstances.

Intercompany transactions, balances and unrealised gains on transactions between entities in the consolidated entity are eliminated.
Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting
policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

Subsidiary Name

Date Acquired

Cannproducts Pty Ltd (ACN 600 887 189)

27 February 2015

Cannoperations Pty Ltd (ACN 603 323 226)

27 February 2015

Cann IP Pty Ltd (ACN 169 764 407)

27 February 2015

Botanitech Pty Ltd (ACN 604 834 488)

Satipharm Europe Ltd

Satipharm Limited

Satipharm AG

Satipharm Australia Pty Ltd

Satipharm Canada Limited

Phytotech Therapeutics Ltd

18 March 2015

10 March 2021

Percentage
Shareholding
2023

Percentage
Shareholding
2022

100.00%

Foreign currency translation
The financial statements are presented in Australian dollars, which is Cann Group Limited’s functional and presentation currency.

Foreign currency transactions
Foreign currency transactions are translated into Australian dollars using the exchange rates prevailing at the dates of the transactions.
Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at financial year-end
exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss.

Foreign operations
The assets and liabilities of foreign operations are translated into Australian dollars using the exchange rates at the reporting
date. The revenues and expenses of foreign operations are translated into Australian dollars using the average exchange rates,
which approximate the rates at the dates of the transactions, for the period. All resulting foreign exchange differences are recognised
in other comprehensive income through the foreign currency reserve in equity.

The foreign currency reserve is recognised in profit or loss when the foreign operation or net investment is disposed of.

Cann Group | Annual Report 2023Revenue recognition
The Group recognises revenue as follows:

Revenue from contracts with customers
The Group generates revenue primarily from the sale of medicinal cannabis products as well as from the provision of services.
The Group uses the following five-step contract-based analysis of transactions to determine whether, how much and when revenue
is recognised:

1. Identify the contract with a customer;

2. Identify the performance obligation(s) in the contract;

3. Determine the transaction price;

4. Allocate the transaction price to the performance obligation(s) in the contract; and

5. Recognise revenue when or as the Company satisfies the performance obligation(s).

Revenue from the sale of cannabis is generally recognised when control over the goods has been transferred to the customer.
Payment for medicinal cannabis products is due within a specified time period as permitted by the underlying agreement and the
Group’s credit policy upon the transfer of goods to the customer. The Group satisfies its performance obligation and transfers control
to the customer upon delivery and acceptance by the customer. Revenue is recorded at the estimated amount of consideration to
which the Company expects to be entitled.

Consignment Revenue
The Group also generates revenue through consignment sales each month. Revenue from these sales is recognised only after the goods
are sold by the consignee to a third party.

Service Revenue
The Group generates revenue through the provision of services including cultivation and contract packing. Revenue is recognised
on a monthly basis as the services are completed.

Interest income
Interest income is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised
cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate
that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount
of the financial asset.

Other revenue
Other revenue is recognised when it is received or when the right to receive payment is established.

Government grants
Government grants are recognised when they are received or when the right to receive payment is established.

As the Company can reliably estimate the R&D tax incentive rebate an accrual is recognised in the current year under Australian
Accounting Standards. Revenue with the R&D tax incentive rebate is accrued at 43.5% of the eligible R&D expenditure.

Trade and other receivables
Trade receivables represent amounts owing for the goods purchased from the Group prior to the end of the financial year end and
are unpaid. Due to their short-term nature they are measured and amortised at cost and are not discounted. Trade receivables are
generally due for settlement within 30 days.

Inventory
Inventory is valued depending upon the specific purpose of that inventory class. Costs incurred for inventory held as research
and development expenses are expensed as incurred.

Biomass plant inventory is valued at fair value less costs to sell, and where fair value is not readily available, at cost or net realisable
value, whichever is less.

Notes to the Consolidated Financial Statements(continued)Cann Group | Annual Report 2023Finished goods
Both Oil and Resin inventory is valued at cost or net realisable value, whichever is less.

Oil inventory is valued at cost or net realisable value, whichever is less.

Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the
estimated costs necessary to make the sale.

Non-current assets or disposal groups classified as held for sale
Non-current assets and assets of disposal groups are classified as held for sale if their carrying amount will be recovered principally
through a sale transaction rather than through continued use. They are measured at the lower of their carrying amount and fair value
less costs of disposal. For non-current assets or assets of disposal groups to be classified as held for sale, they must be available
for immediate sale in their present condition and their sale must be highly probable.

An impairment loss is recognised for any initial or subsequent write-down of the non-current assets and assets of disposal groups to
fair value less costs of disposal. A gain is recognised for any subsequent increases in fair value less costs of disposal of a non-current
assets and assets of disposal groups, but not in excess of any cumulative impairment loss previously recognised.

Non-current assets are not depreciated or amortised while they are classified as held for sale. Interest and other expenses attributable
to the liabilities of assets held for sale continue to be recognised.

Non-current assets classified as held for sale and the assets of disposal groups classified as held for sale are presented separately
on the face of the statement of financial position, in current assets. The liabilities of disposal groups classified as held for sale are
presented separately on the face of the statement of financial position, in current liabilities.

Fair value of financial instruments
A financial asset is classified and measured at amortised cost or at fair value. The classification and measurement of financial assets
is based on the Group’s business models for managing its financial assets and whether the contractual cash flows represent solely
payments of principal and interest (SPPI). Financial assets are initially measured at fair value and are subsequently measured at either
(i) amortised cost; (ii) fair value through other comprehensive income (FVTOCI), or (iii) at fair value through profit or loss (FVTPL).

Financial assets that are held for the purpose of collecting contractual cash flows that are SPPI are classified as amortised cost.
Amortised cost financial assets are initially recognised at their fair value and are subsequently measured at amortised cost using the
effective interest rate method. Transaction costs of financial instruments classified as amortised cost are capitalised and amortised in
profit or loss on the same basis as the financial instrument. Cash and cash equivalents comprises cash at bank and on hand. Term
deposits with maturity of less than three months are also classified as cash and cash equivalents.

Equity instruments are measured at fair value with changes in fair value recognised through profit and loss (FVTPL). Dividends received
on these investments are recognised in profit or loss unless the distribution clearly represents a recovery of part of the cost of the
investment (e.g., a return of capital).

Financial liabilities include – a contractual obligation to deliver cash or another financial asset to another entity, or to exchange financial
assets or financial liabilities with another entity under conditions that are potentially unfavourable to the entity; or a contract that will
or may be settled in the entity’s own equity instruments and is:

• a non-derivative for which the entity is or might be obliged to deliver a variable number of the entity’s own equity instruments; or

• a derivative that will or may be settled other than by the exchange of a fixed amount of cash or another financial asset for a fixed number

of the entity’s own equity instruments.

The following table summarizes the classification of the Company’s financial instruments under AASB 9:

Financial assets

Cash and Cash Equivalents

Trade and other receivables excluding GST

Marketable securities

Equity interest in other entities

Classification as per AASB 9

Amortised cost

FVTPL

Cann Group | Annual Report 2023Financial Liabilities

Classification as per AASB 9

Accounts Payable and accrued liabilities

Loans and Borrowings

Convertible Note/Debentures

Lease liabilities

Amortised cost

FVTPL

Amortised cost

Impairment of financial assets
The Group recognises a loss allowance for expected credit losses on financial assets which are either measured at amortised cost
or fair value through other comprehensive income. The measurement of the loss allowance depends upon the consolidated entity’s
assessment at the end of each reporting period as to whether the financial instrument’s credit risk has increased significantly since
initial recognition, based on reasonable and supportable information that is available, without undue cost or effort to obtain.

Where there has not been a significant increase in exposure to credit risk since initial recognition, a 12-month expected credit loss
allowance is estimated. This represents a portion of the asset’s lifetime expected credit losses that is attributable to a default event
that is possible within the next 12 months. Where a financial asset has become credit impaired or where it is determined that credit
risk has increased significantly, the loss allowance is based on the asset’s lifetime expected credit losses. The amount of expected
credit loss recognised is measured on the basis of the probability weighted present value of anticipated cash shortfalls over the life
of the instrument discounted at the original effective interest rate.

Property, plant and equipment
Each class of property, plant and equipment is carried at cost less any accumulated depreciation and impairment losses.

The carrying amount of property, plant and equipment is reviewed annually by Directors to ensure it is not in excess of the recoverable
amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received
from the asset’s employment and subsequent disposal. The expected net cash flows have been discounted to their present values
in determining recoverable amounts.

The cost of property, plant and equipment constructed within the Group includes the cost of materials, direct labour, borrowing costs
and an appropriate proportion of fixed and variable overheads.

The depreciable amount of all property, plant and equipment is depreciated on a straight-line basis over the asset’s useful life to the
Group commencing from the time the asset is held ready for use.

As at 30 June 2023, the Group’s asset classes had effective useful lives as follows:

Cultivation plant and equipment

Manufacturing plant and equipment

Computer and network equipment

Other plant and equipment

Buildings

Land

1-7 years

2-7 years

1-3 years

20 years

N/A

The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting date.

Leasehold improvements are depreciated over the unexpired period of the lease or the estimated useful life of the assets,
whichever is shorter.

An item of property, plant and equipment is derecognised upon disposal or when there is no future economic benefit to the Group.
Gains and losses between the carrying amount and the disposal proceeds are included in the statement of profit of loss and other
comprehensive income.

Notes to the Consolidated Financial Statements(continued)Cann Group | Annual Report 2023Lease liabilities
Lease liabilities are initially measured at the present value of the lease payments discounted using the interest rate implicit in the lease.
If that rate cannot be determined, the Consolidated Group’s incremental borrowing rate is used.

Lease liabilities are subsequently measured by:

•

increase the carrying amount to reflect interest on the lease liabilities;

• reducing the carrying amount to reflect lease payments made; and

• remeasuring the carrying amount to reflect any reassessment or lease modifications.

Interest on the lease liabilities and any variable lease payments not included in the measurement of the lease liabilities are recognised
in the Consolidated Statement of Comprehensive Income in the period in which they relate.

Right‑of‑use assets
Right-of-use assets are measured at cost less depreciation and impairment and adjusted for any remeasurement of the lease liability.

The cost of the asset includes:

• the amount of the initial measurement of the lease liability;

• any lease payments made at or before lease commencement date less any lease incentives received;

• any initial direct costs; and

• restoration costs.

Right-of-use assets are depreciated on a straight-line basis from the commencement date of the lease to the earlier of the end
of the useful life of the right-of-use asset or the end of the lease term.

The Group tests right-of-use assets for impairment where there is an indicator that the asset may be impaired. An asset’s carrying
amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated
recoverable amount.

The Group determines the lease term as the non-cancellable period of a lease together with both:

• the periods covered by an option to extend the lease if it is reasonably certain to exercise that option; and

• periods covered by an option to terminate the lease if the lessee is reasonably certain not to exercise that option.

Management considers all the facts and circumstances that create an economic incentive to exercise an extension option or not
exercise a termination option. This assessment is reviewed if a significant event or a significant change in circumstances occurs which
affects this assessment and that is within the control of the lessee.

Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in
the Consolidated Statement of Profit and Loss and other comprehensive Income. Short-term leases are leases with a lease term of
12 months or less. Low-value assets comprise IT equipment and small items of office furniture.

Biological assets
The Group defines the biological assets as cannabis plants up to the point of harvest. Biological assets are measured at the lower
of their cost and net realisable value at the end of each reporting period.

Impairment of non-financial assets
At each reporting date, the Group’s Directors review the carrying values of the Group’s tangible and intangible assets to determine
whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset,
being the higher of the asset’s fair value less cost to sell and value-in-use, is compared to the assets carrying value. Any excess of the
assets carrying value over its recoverable amount is expensed to the statement of profit or loss and other comprehensive income.

Recoverable amount is the higher of an asset’s fair value less costs of disposal and value-in-use. The value-in-use is the present value
of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or cash-generating unit
to which the asset belongs. Assets that do not have independent cash flows are grouped together to form a cash-generating unit.

Cann Group | Annual Report 2023Trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year and which are
unpaid. Due to their short-term nature, they are measured at amortised cost and are not discounted. The amounts are unsecured
and are usually paid within 30 days of recognition.

Contract liabilities
Contract liabilities represent the Group’s obligation to transfer goods or services to a customer and are recognised when a customer
pays consideration, or when the Group recognises a receivable to reflect its unconditional right to consideration (whichever is earlier)
before the Group has transferred the goods or services to the customer.

Borrowings
Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs. They are
subsequently measured at amortised cost using the effective interest method.

The component of the convertible notes that exhibits characteristics of a liability is recognised as a liability in the statement of financial
position, net of transaction costs.

Finance costs
Finance costs attributable to qualifying assets are capitalised as part of the asset. All other finance costs are expensed in the period
in which they are incurred.

Employee benefits

Short-term employee benefits
Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected to be settled wholly
within 12 months of the reporting date are measured at the amounts expected to be paid when the liabilities are settled.

Other long-term employee benefits
The liability for annual leave and long service leave not expected to be settled within 12 months of the reporting date are measured
at the present value of expected future payments to be made in respect of services provided by employees up to the reporting date
using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee
departures and periods of service. Expected future payments are discounted using market yields at the reporting date on high-quality
corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.

Share‑based payments
Equity-settled and cash-settled share-based compensation benefits are provided to employees.

The Group reflects in its comprehensive income (or loss) and its financial position the effects of share-based payment transactions,
including expenses associated with transactions in which shares are granted to Key Management Personnel and employees.

For share-based payments received by employees and Key Management Personnel of the Group, fair value is measured by reference
to the fair value of the equity instruments granted at their grant date, being the date that both the recipient and the Group have a
shared understanding of the terms and conditions connected to the share-based payment. Any market-based vesting conditions
are incorporated into the valuation of the share-based payment arrangement as at the grant date of the share-based payment.
Share-based payments with non-market-based performance conditions vest according to the pro-rata achievement of those
conditions. Share-based payments with non-performance-based conditions are valued using the Black-Scholes model and
payments with market-based performance conditions are valued using a binomial model which incorporates from both the
performance rights arrangement and market data that existed at grant date.

Notes to the Consolidated Financial Statements(continued)Cann Group | Annual Report 2023Fair value measurement
When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the fair value
is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date; and assumes that the transaction will take place either: in the principal market; or in the absence
of a principal market, in the most advantageous market.

Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming they
act in their economic best interests. For non-financial assets, the fair value measurement is based on its highest and best use.
Valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value
are used, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

Issued capital
Ordinary shares are classified as equity.

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax,
from the proceeds.

Loss per share

Basic loss per share
Basic loss per share is calculated by dividing the loss attributable to the owners of Cann Group Limited, excluding any costs of
servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year,
adjusted for bonus elements in ordinary shares issued during the financial year.

Diluted loss per share
Diluted loss per share adjusts the figures used in the determination of basic loss per share to take into account the after income tax
effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares
assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.

Goods and Services Tax (GST) and other similar taxes
Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable
from the Australian Taxation Office (ATO).

Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from,
or payable to, the ATO is included with other receivables or payables in the statement of financial position.

Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which
are recoverable from, or payable to, the ATO are presented as operating cash flows included in receipts from customers or payments
to suppliers.

Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority.

Commitments
The Group recognises contractual obligations as and when the performance obligations inherent in the execution of an agreement are
achieved. Binding contractual arrangements where the Group is a party to a contractual obligation to exchange economic resources
in the future upon the fulfilment of certain contract terms, are disclosed as contractual commitments to the extent to which they are
not recognised in the financial statements.

Rounding of amounts
The Company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and Investments
Commission, relating to ‘rounding-off’. Amounts in this report have been rounded off in accordance with that Corporations
Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar.

Cann Group | Annual Report 2023Note 3. Critical accounting judgements, estimates and assumptions
The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the
reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets,
liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and assumptions on historical
experience and on other various factors, including expectations of future events, management believes to be reasonable under the
circumstances. The resulting accounting judgements and estimates will seldom equal the related actual results. The judgements,
estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and
liabilities (refer to the respective notes) within the next financial year are discussed below.

Key judgments – non‑recognition of carry‑forward tax losses
The balance of future income tax benefit estimated as $7.29 million (2022: $5.23 million) arising from current year tax losses of
$33.79 million (2022: $26.47 million) and timing differences has not been recognised as an asset because it is not clear when the
losses will be recovered. The cumulative future income tax benefit estimated to be $26.63 million, which has not been recognised
as an asset, will only be obtained if:

(i)

the Group derives future assessable income of a nature and an amount sufficient to enable the benefit to be realised;

(ii) the Group continues to comply with the conditions for deductibility imposed by law; and

(iii) no changes in tax legislation adversely affecting the Company realising the benefit.

Key judgments – valuation of performance rights (refer note 18 for details)
Performance rights issued during the year are measured at the fair value on grant date. These were independently valued using
Black-Scholes option pricing model and the Binomial model. As the Company has not paid a dividend both methods will provide
similar valuations.

Key judgments – recognition of research and development tax incentive benefits
The balance of research and development tax incentive arising from operations of the Group has been recognised as an asset after
a review was conducted by the Company’s independent research and development specialists to 30 June 2023. The research and
development tax incentive, will only be obtained if:

(i)

the Group’s activities fulfil the eligibility criteria of the research and development tax initiative and it is successful in registering
for the research and development tax initiative;

(ii) the Group continues to comply with the conditions for registration of the research and development tax initiative imposed

by law; and

(iii) no changes in tax legislation adversely affecting the Group realising the tax incentive from research and development.

The Company has accrued the expected FY23 R&D tax incentive rebate.

Key judgments – impairment of inventories (refer note 9 for details)
The provision for impairment of inventories assessment requires a degree of estimation and judgement. The level of the
provision is assessed by taking into account the recent sales experience, the ageing of inventories and other factors that affect
inventory obsolescence.

The fair value of assets and liabilities classified as level 3 is determined by the use of valuation models. These include discounted
cash flow analysis or the use of observable inputs that require significant adjustments based on unobservable inputs.

Impairment of property, plant and equipment
The Group assesses impairment of property, plant and equipment at each reporting date by evaluating conditions specific to the
Group and to the particular asset that may lead to impairment. If an impairment trigger exists, the recoverable amount of the asset is
determined. This involves fair value less costs of disposal or value-in-use calculations, which incorporates a number of key estimates
and assumptions.

Employee benefits provision
As discussed in note 2, the liability for employee benefits expected to be settled more than 12 months from the reporting date
is recognised and measured at the present value of the estimated future cash flows to be made in respect of all employees at
the reporting date. In determining the present value of the liability, estimates of attrition rates and pay increases through promotion
and inflation have been taken into account.

Notes to the Consolidated Financial Statements(continued)Cann Group | Annual Report 2023Note 4. Operating segments
Determination and presentation of operating segments
An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur
expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. An operating
segment’s results are regularly reviewed by the CEO to make decisions about resources to be allocated to the segment and assess
its performance, and for which discrete information is available.

Segment results that are reported to the CEO include items directly attributable to a segment as well as those that can be allocated
on a reasonable basis. Unallocated items comprise mainly corporate assets, head office expenses, and income tax assets and liabilities.

Segment capital expenditure is the total cost incurred during the period to acquire property, plant and equipment, and intangible
assets other than goodwill.

The Group operates in one operational sector and has identified only one reportable segment being cultivation of medicinal cannabis
and further processing into manufactured medicinal cannabis products, as well as the corporate office.

Geographical information of total sales and total non-current assets is disclosed as below.

Geographical information

Australia

Europe

Revenues from external
customer contracts

Geographical
non-current assets

30 June 2023
$’000

30 June 2022
$’000

30 June 2023
$’000

30 June 2022
$’000

12,968

809

13,777

5,159

1,252

6,411

108,262

120,490

108,264

120,495

Note 5. Revenue and other income

Revenue from customer contracts

Research and development tax incentives and other government grants

Other income

Gain on sale of Southern facility

Reconciliation of gain on sale of land and buildings

Land and buildings at cost

Accumulated depreciation to 1 March 2023

Proceeds net of commission

30 June 2023
$’000

30 June 2022
$’000

13,777

5,955

902

1,041

21,675

6,411

4,520

307

–

11,238

(2,872)

838

3,075

1,041

Revenue from the sale of cannabis is generally recognised when control over the goods has been transferred to the customer.
Refer to Note 2 for the company’s revenue recognition policy.

An accrual of $3.4m has been raised for the FY23 Research and Development Tax Incentive after a full year review was conducted
by the Company’s R&D consultants.

A gain on sale was recognised after the sale of the Southern facility land buildings to SatiVite Pty Ltd settled on 1 March 2023 for $3.1m.

Cann Group | Annual Report 2023Note 6. Administration and corporate costs

Share based employee remuneration

Employee salaries and wages

Employee superannuation

Cultivation and manufacturing expenses

Other corporate and administration expenses

Insurance expenses

Impairment of goodwill

Legal and consultancy expenses

Allowance for expected credit loss

30 June 2023
$’000

30 June 2022
$’000

192

13,239

1,105

15,095

2,314

1,244

671

922

–

34,782

737

8,876

726

12,551

1,260

981

–

1,718

848

27,697

A write-down to inventory of $1.429 million has been charged to administration and corporate costs during the period to recognise
the cost of unsaleable inventory.

Note 7. Trade and other receivables

Current assets

Trade receivables

Other receivables

Non-current assets

Trade receivables

30 June 2023
$’000

30 June 2022
$’000

1,592

4,051

5,643

514

2,166

1,992

4,158

–

Other receivables in FY23 includes an accrual of $3.4 million for the R&D tax incentive to 30 June 2023.

Not overdue

0 to 3 months overdue

3 to 6 months overdue

Over 6 months overdue

30 June 2023
$’000

30 June 2022
$’000

5,532

514

6,157

2,565

914

–

679

4,158

Management assesses the ability to recover trade and other receivables on a regular basis. Where it is deemed that it is probable
the counterparty will not be able to settle their obligations, management commensurately recognises a provision for expected credit
losses. Due to the low quantum of customers it was not possible to prepare an expected credit loss model and specific provisions
have been raised against specific debtors as required.

Notes to the Consolidated Financial Statements(continued)Cann Group | Annual Report 2023Note 8. Prepayments

Prepaid insurance

Advances for Gelpell royalty

Fibre installation – Mildura

Advances paid – goods

Other prepayments

Note 9. Inventories

Current assets

Cultivation materials & work in progress

Finished goods – biomass

Finished goods – crude extract resin

Finished goods – oil

Other inventories

Finished goods – Gelpell

30 June 2023
$’000

30 June 2022
$’000

779

–

217

731

378

2,105

809

188

–

644

1,641

30 June 2023
$’000

30 June 2022
$’000

953

2,018

3,266

2,008

327

2,834

1,044

3,421

2,640

1,935

136

1,497

11,406

10,673

After review of the inventory balances a write-down to inventory of $1.429 million has been charged to administration and corporate
costs during the period to recognise the cost of unsaleable inventory.

Note 10. Biological assets

Current assets

Biological asset – at cost

Reconciliations
Reconciliations of changes in the carrying amount of biological assets:

Balance at 1 July 2022

Additions due to cultivation

Balance at 30 June 2023

Includes biological assets reclassified as inventory at the point of harvest. Includes physical changes as a result of biological
transformation such as growth. Biological assets are measured at cost.

30 June 2023
$’000

30 June 2022
$’000

790

782

Total
$’000

782

790

Cann Group | Annual Report 2023Note 11. Non-current assets classified as held for sale

Current assets

Plant and equipment

30 June 2023
$’000

30 June 2022
$’000

493

–

On 23 December 2022, Cann Group announced it had reached terms with SatiVite Pty Ltd on the sale of Cann’s Southern
cultivation and manufacturing facility for a total consideration of $5.48 million. The divestment of the Southern facility is a significant
part of Cann’s streamlining and efficiency program that will consolidate the majority of Cann’s operations at its new Mildura facility.
The parties have come to terms on the sale of the Southern facility’s land and business assets, the licensing of certain Cann
proprietary genetics, and the provision of services from Cann to SatiVite to assist with the transfer of commercial operations.
As at 30 June 2023 the relevant assets have been classified as Non-current assets held for sale and are held at their carrying
value in accordance with AASB 5.

Note 12. Property, plant and equipment

30 June 2023
$’000

30 June 2022
$’000

75,991

(4,039)

71,952

429

(287)

142

44,203

(10,031)

34,172

889

(276)

613

567

(289)

278

239

75,746

(1,083)

74,663

1,280

(647)

633

48,592

(7,281)

41,311

867

(148)

719

564

(193)

371

232

107,396

117,929

Non-current assets

Land and buildings – at cost

Less: Accumulated depreciation

Freehold improvements – at cost

Less: Accumulated depreciation

Plant and equipment – at cost

Less: Accumulated depreciation

Fixtures and fittings – at cost

Less: Accumulated depreciation

Computer equipment – at cost

Less: Accumulated depreciation

Capital work in progress

Notes to the Consolidated Financial Statements(continued)Cann Group | Annual Report 2023Reconciliations
Reconciliations of the written-down values at the beginning and end of the current financial year are set out below:

Land and
buildings
$’000

Freehold
improve-
ments
$’000

Plant and
equipment
$’000

Fixtures
and fittings
$’000

Computer
equipment
$’000

Capital
work in
progress
$’000

Total
$’000

Balance at 1 July 2022

74,663

633

41,311

Additions

Classified as held for sale
(note 11)

Disposals

Transfers in/(out)

Depreciation expense

Balance at 30 June 2023

–

(1,652)

2,266

(3,325)

71,952

–

(383)

–

(108)

142

113

(493)

–

602

(7,361)

34,172

719

–

(128)

613

371

–

(154)

278

232

117,929

2,908

3,104

–

(2,901)

–

239

(493)

(2,035)

(33)

(11,076)

107,396

During the period $0.033 million was reclassified from CWIP to intangibles.

Land and
buildings
$’000

Freehold
improve-
ments
$’000

Plant and
equipment
$’000

Fixtures
and fittings
$’000

Computer
equipment
$’000

Balance at 1 July 2021

13,652

Additions

Write off of assets

Transfers in/(out)

Depreciation expense

–

61,893

(882)

Balance at 30 June 2022

74,663

390

–

392

(167)

633

2,872

400

–

40,715

(2,676)

41,311

–

737

(34)

719

–

346

(39)

371

Capital
work in
progress
$’000

58,867

45,797

(349)

(104,083)

Total
$’000

75,789

46,287

(349)

–

232

(3,798)

117,929

On 23 December 2022, Cann Group announced it had reached terms with SatiVite Pty Ltd on the sale of Cann’s Southern cultivation
and manufacturing facility for total consideration of $5.48 million. The parties came to terms on the sale of the Southern Facility’s land
and business assets, the licensing of certain Cann proprietary genetics, and the provision of services from Cann to SatiVite to assist
with the transfer of commercial operations.

On 1 March 2023, Cann Group completed the asset sale for a total consideration of $3.1 million. The payment of $1.9 million for
the business assets of the Southern facility will be transferred to the Company upon SatiVite securing its licence from the ODC.
SatiVite lodged its application with ODC in May 2023 and is now awaiting a response to this application.

Cann Group | Annual Report 2023Note 13. Intangible assets
During the year ended 30 June 2020, the Group entered into a manufacturing agreement with a third party contract manufacturer for
production of GMP-extracted, locally manufactured resin and GMP-formulated locally manufactured oil. The initial cost of development
of the production lines were one-off set-up costs at the third party contract manufacturer’s facilities, and have been recognised as
intangible assets. In the opinion of management, these costs will be recovered over a period of five years.

Software costs were recognised during the year ended 30 June 2021 and in the opinion of management, these costs will be recovered
over a period of three years.

Non-current assets

Intangible assets – at cost

Less: Accumulated amortisation

Balance at 1 July 2021

Additions

Amortisation expense

Foreign exchange translation

Balance at 30 June 2022

Amortisation expense

Transfers

Impairment

Balance at 30 June 2023

30 June 2023
$’000

30 June 2022
$’000

2,018

(1,803)

215

Goodwill
$’000

Other intangible
assets
$’000

Software
$’000

661

–

671

–

(671)

–

543

–

(284)

–

259

(247)

–

(247)

842

(341)

(3)

532

(362)

–

(329)

203

2,656

(1,194)

1,462

Total
$’000

2,046

(625)

1,462

(609)

(671)

(1,247)

215

A review of the goodwill recognised on the purchase of Satipharm was undertaken at year end and it was agreed that the goodwill
was impaired at 30 June 2023 resulting in a charge of $0.67 million to the profit and loss.

Note 14. Trade and other payables

Mildura construction

Contract manufacturing

Cultivation vendors

Accrued expenses

Research and development

Other vendors

Total trade and other payables

30 June 2023
$’000

30 June 2022
$’000

188

1,076

387

1,568

783

3,851

7,853

1,187

446

126

990

320

3,450

6,519

Other payables include premium funding contracts for Cann Group insurance contracts of $726 thousand. Insurance premiums
are paid on a monthly basis allowing Cann to spread these costs out over the life of the policy.

Notes to the Consolidated Financial Statements(continued)Cann Group | Annual Report 2023Note 15. Employee entitlements

Current liabilities

Annual leave

Non-current liabilities

Long service leave

Note 16. Borrowings

Current liabilities

NAB Working Capital facility

Construction facility

Lease liability (chattel mortgages)

Non-current liabilities

NAB Construction facility

Lease liability (chattel mortgages)

30 June 2023
$’000

30 June 2022
$’000

817

135

815

30 June 2023
$’000

30 June 2022
$’000

14,020

1,200

15,290

45,511

164

45,675

3,500

–

3,500

43,361

–

43,361

In April 2022, Cann executed documentation to enter into a $15 million working capital facility with the National Australia Bank.
The working capital facility has been used by Cann to support the scale-up of the business and the next phase of its long-term
growth strategy.

The working capital facility had an initial period with review on 30 November 2022 and thereafter it will be reviewed on rolling 12-month
periods. This facility has a drawn margin rate of 5.97% pa and a facility fee of 0.35% pa and it is a secured facility.

The Working Capital facility is cross-collateralised and co-defaulting with the Construction facility. As at 30 June 2023, the facility
had been drawn down by $14.02 million leaving an undrawn balance of $0.98 million.

The Construction facility was renegotiated in April 2022 after the commissioning of the Mildura facility. Key terms of this facility include a
base interest rate of the BBSY and a total drawn margin rate of 6.27%. A facility fee of 0.35% pa is also applicable. As at 30 June 2023,
the facility had been drawn down by $46.71 million, leaving a balance of $3.29 million for construction purposes.

Amortisation will commence from 31 May 2024 on a quarterly basis for a period of 10 years. An amount of $1.2 million has been
classified as current to recognise the first principal repayment.

Note 17. Issued capital

Ordinary shares – fully paid

388,614,865

351,355,198

177,368

169,425

30 June 2023
Shares

30 June 2022
Shares

30 June 2023
$’000

30 June 2022
$’000

Cann Group | Annual Report 2023Movements in ordinary share capital

Details

Balance

Date

1 July 2021

Issue price

277,911,998

$’000

149,673

Shares issued to CSIRO for payment of research
and development services

Shares issued under placement announced
26 July 2021 net of capital raising expenses

Shares issued to Directors under placement
announced 26 July 2021

Shares issued to Harvest One as part payment
for the Satipharm acquisition

Shares issued to Harvest One as deferred
earn out payments after Satipharm acquisition

27 July 2021

206,895

$0.40

30 July 2021

32,472,724

$0.27

8,154

7 September 2021

3,890,912

$0.27

1,070

13 September 2021

2,725,863

$0.29

804

13 September 2021

24,083

Shares issued the Share Purchase Plan

22 October 2021

31,622,028

Shares issued under the Employee Gift Plan

13 January 2022

Escrow shares issued on performance rights

27 April 2022

269,022

100,000

Shares issued following conversion of
performance rights

Escrow shares issued on conversion of
performance rights

Shares issued to CSIRO for payment of
research and development services

Balance

Details

Balance

22 June 2022

46,986

$0.25

22 June 2022

1,830,000

$0.00

28 June 2022

30 June 2021

Date

1 July 2022

254,687

$0.32

351,355,198

Issue price

351,355,198

–

37,159,667

Transaction costs associated with issuing equity

30 November 2022

Shares issued under the Share Purchase Plan

7 December 2022

Escrow shares issued on conversion of
performance rights

Transaction costs associated with
Non Renounceable Rights Issue

27 February 2023

100,000

–

Balance

30 June 2023

388,614,865

$0.40

$0.27

$0.29

$0.00

$0.22

$0.00

8,696

739

169,425

$’000

169,425

(11)

8,175

(249)

177,368

Ordinary shares
Ordinary shares participate in dividends and the proceeds on winding up of the Group in proportion to the number of shares held.
At shareholders’ meetings each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has one vote
on a show of hands.

Shares in escrow
During the year 100,000 shares (2022:1,930,000 shares) were issued on conversion of performance rights. Shares are unquoted
and will be held in escrow until the earlier of the employee leaving the company or two (2) years after the date of issue.

Notes to the Consolidated Financial Statements(continued)Cann Group | Annual Report 2023Note 18. Reserves

Foreign currency reserve

Share based payments reserve

Transfer – expiry of options

30 June 2023
$’000

30 June 2022
$’000

(137)

260

–

123

(180)

3,290

(3,192)

(82)

For share-based payments received by employees and Key Management Personnel of the Group, fair value is measured by reference
to the fair value of the equity instruments at their grant date, being the date that both the recipient and the Group have a shared
understanding of the terms and conditions connected to the share-based payment. Any market-based vesting conditions are
incorporated into the valuation of the share-based payment arrangement as at the grant date. Share-based payments with
non-market based performance conditions vest according to the pro-rata achievement of those conditions. Share-based payments
with non-performance-based conditions are valued using the Black-Scholes model and payments with market-based performance
conditions are valued using a binomial model which incorporates from both the performance rights arrangement and market data
that existed at grant date.

Employee remuneration costs incurred in respect of performance rights and options for the year ended 30 June 2023 is $0.19 million
(2022: $0.74 million).

Performance rights over ordinary shares
On 10 February 2023 2,138,422 Performance Rights 2023 Series were issued to the CEO and senior employees as part of the
Company’s review process. These rights have a total vesting value of $396 thousand.

The fair value of the performance rights has been calculated on the basis of the Black-Scholes model using the following key assumptions:

Grant of performance rights

Number of
performance
rights

Spot price
on issue
date

Risk free
rate

% Expiry date

Volatility
rate

Fair value
000’s

Performance Rights
2023 Series

Performance Rights
2021 Series

10/02/2023

2,138,422

0.18

3.41%

10/02/2026

71.23%

21/12/2021

792,436

0.28

0.96%

21/12/2024

85.73%

396

501

2,930,858

The weighted average remaining contractual life of performance rights outstanding at 30 June 2023 was two (2) years (2022: 2.0 years).

Given a nil exercise price of the Performance Rights, adopting different volatility assumptions does not have an impact on the
Performance Rights’ valuation.

Movement in Performance Rights during the year

Number of performance rights

Opening balance 1 July 2022

Granted in the year

Exercised during the year

Forfeited during the year

Balance at 30 June 2023

1,786,362

2,138,422

(100,000)

(893,926)

2,930,858

Cann Group | Annual Report 2023Options over ordinary shares
On 9 February 2023, 4,500,000 options over fully paid ordinary shares were issued to Mr Peter Koetsier under the Employee Share
Option Plan. The options will vest over three (3) years in equal tranches of 1.5 million options with the first tranche vesting 12 months
after the issue date. The exercise price for each tranche is as below:

Tranche 1 – 45 cents per share

Tranche 2 – 60 cents per share

Tranche 3 – 75 cents per share

On 5 April 2023, 1,620,000 options over fully paid ordinary shares were issued to employees of the Company. The options will vest
over three (3) years in equal tranches of 20,000 with the tranche vesting 12 months after the issue date. The exercise price for each
tranche is 22 cents per share.

Grant of
options

Tranche 1

Tranche 2

Tranche 3

Tranche 4

Number of
options

1,500,000

1,620,000

6,120,000

Spot price
at grant
of option

Options
exercise
price

Risk free
rate
%

Options
expiry date

Volatility
%

Fair value
$

0.18

0.15

0.45

0.60

0.75

0.22

3.41%

09/02/2028

3.41%

09/02/2028

3.41%

09/02/2028

2.98%

04/04/2028

71.23%

76.00%

0.07

0.06

0.08

Movement in Employee Options during the year

Opening balance at 1 July 2022

Granted during the year

Exercised during the year

Forfeited during the year

Closing balance at 30 June 2023

Forfeited during
the year

–

6,120,000

–

6,120,000

The total expense of share-based payments recognised in the statement of profit or loss and other comprehensive income amounted
to $0.19 million. The remaining fair value will be expensed in subsequent years in accordance with the specific service conditions
of the rights.

During the year nil shares were issued on conversion of options.

Note 19. Loss per share

Loss after income tax

Weighted average number of ordinary shares used in calculating basic loss per share

Weighted average number of ordinary shares used in calculating diluted loss per share

30 June 2023
$’000

30 June 2022
$’000

(33,790)

(26,468)

Number

372,251,723

335,091,009

372,251,723

335,091,009

Notes to the Consolidated Financial Statements(continued)Cann Group | Annual Report 2023Basic loss per share

Diluted loss per share

Cents

(9.08)

Cents

(7.90)

Performance rights and options have not been included in the weighted average number of ordinary shares as the Group presently
has accumulated losses and no certainty of future profits to offset those losses.

The potentially dilutive effects of any contingently issuable ordinary shares have not been considered in the diluted loss per share
calculation because the Group is in a loss-making position and such an effect would be anti-dilutive.

Note 20. Key Management Personnel disclosures
Directors
The following persons were Directors of Cann Group Limited during the financial year:

Mr Allan McCallum AO

Chairman

Dr Julian Chick (appointed 26 October 2022)

Deputy Chairman

Mr Douglas Rathbone AM

Ms Jenni Pilcher

Non-executive Director

Mr Robert Barnes (appointed 20 September 2022)

Non-executive Director

Mr John Sharman (resigned 1 September 2022)

Non-executive Director

Other Key Management Personnel
The following persons also had the authority and responsibility for planning, directing and controlling the major activities of the Group,
directly or indirectly, during the financial year:

Mr Peter Koetsier (appointed 16 January 2023)

Chief Executive Officer

Ms Deborah Ambrosini
(appointed Company Secretary 25 October 2022)

Chief Financial Officer and Company Secretary

Mr Peter Crock

Mr Shane Duncan

Chief Executive Officer (resigned 24 October 2022)

Chief Commercial Officer (resigned 28 February 2023)

Compensation
The aggregate compensation paid to Directors and other members of key management personnel of the Group is set out below:

Short-term employee benefits

Post-employment benefits

Termination benefits

Share-based payments

30 June 2023
$

30 June 2022
$

1,264,902

112,669

–

110,497

1,488,068

1,220,124

113,017

101,867

397,440

1,832,448

Cann Group | Annual Report 2023 Note 21. Remuneration of auditors

(i) Audit and other assurance services – William Buck

Audit and review of financial statements

(ii) Non-assurance services – William Buck

Tax compliance services

Total remuneration

Note 22. Related party transactions
Parent entity
Cann Group Limited is the parent entity.

30 June 2023
$

30 June 2022
$

83,500

78,500

24,729

108,229

9,500

88,000

Key Management Personnel
Disclosures relating to Key Management Personnel are set out in note 20 and the remuneration report included in the Directors’ report.

Transactions with related parties
Transactions between the Group and related parties are on normal commercial terms and conditions, no more favourable than those
available to other parties unless otherwise stated.

The Company has a short-term lease for Corporate office space on normal commercial terms with Rathbone Wine Group. The building
is owned by REI Property Sub Trust 2 Rathbone Wine Group is the head tenant. An amount of $0.106 million (2022: nil) was paid
during the year.

Note 23. Contingent liabilities and commitments
The Group does not have any contingent liabilities at 30 June 2023.

Note 24. Events after the reporting period
On 24 July 2023, Cann announced that it had completed its first harvest at the double production scale. This is a key step towards
achieving the Company’s target of reaching annualised production volumes of 12.5 tonnes at its Mildura GMP facility.

On 25 July 2023, Cann Group closed the Non-Renounceable Rights Offer after having raised $4.46 million. PAC Partners Pty Ltd has
been appointed by the Company has Lead Manager and to place the remaining shortfall.

On 24 August 2023, Cann Group issued 520,118 fully paid ordinary shares to CSIRO for research and development services rendered.

No other matter or circumstance has arisen since 30 June 2023, that has significantly affected, or may significantly affect the Group’s
operations, the results of those operations, or the Group’s state of affairs in future financial years.

Notes to the Consolidated Financial Statements(continued)Cann Group | Annual Report 2023Note 25. Reconciliation of loss after income tax to net cash used in operating activities

Loss after income tax expense for the year

Adjustments for:

Gain on sale of land and buildings

Write-off of property, plant and equipment

Foreign exchange differences

Equity settled trade payables

Vesting of performance rights

Decrease in the value of financial assets

Depreciation, amortisation and loss on sale of assets

Impairment of goodwill

Change in operating assets and liabilities:

Decrease/(increase) in trade and other receivables

Decrease/(increase) in inventories

Decrease/(increase) in prepayments

Increase/(decrease) in trade and other payables

Net cash used in operating activities

30 June 2023
$’000

30 June 2022
$’000

(33,790)

(26,468)

(1,041)

–

192

603

11,962

671

(2,100)

(463)

(740)

1,871

–

2,137

165

736

393

4,797

–

1,440

255

(3,971)

(22,835)

(20,433)

Cann Group | Annual Report 2023Note 26. Financial instruments
Financial risk management objectives
The Group’s material financial instruments consist of deposits with banks and its accounts payable and other liabilities. The board is
responsible for managing the Group’s significant financial risks, which are its liquidity risk, which it does through regularly reviewing
rolling cash flow forecasts and examining its levels of available working capital against such forecasts and its interest rate risk exposure.

Market risk
The Group does not believe it has any material market risk of loss arising from adverse movements of market instruments including
foreign exchange and interest rates.

Interest rate risk
The Group has, as of the reporting date, a minimal direct exposure to interest rate risk, which is the risk that a financial instrument’s
market value will fluctuate as a result of changes in market interest rates. The effective weighted average interest rates on classes of
financial assets and financial liabilities are as follows:

2023

Assets:

Cash and bank balances

Financial assets at fair value

Trade and other receivables

Prepayments

Total financial assets

Liabilities:

Trade and other creditors

Lease liability

Borrowings

Total financial liabilities

Net financial assets (liabilities)

Weighted
average
effective
interest
rate

Floating
interest
rate
$’000

1 year
or less
$’000

1 to 5
years
$’000

over 5
years
$’000

–

3.39

–

6.27

9.66

–

(726)

(69)

–

(164)

(15,220)

(45,511)

(16,015)

(45,675)

(16,015)

(45,675)

–

Non-
interest
bearing
$’000

765

139

6,157

2,413

9,474

Total
$’000

765

139

6,157

2,413

9,474

(7,127)

(7,853)

–

(233)

(60,731)

(7,127)

(68,817)

2,347

(59,343)

Notes to the Consolidated Financial Statements(continued)Cann Group | Annual Report 2023Weighted
average
effective
interest
rate
%

Floating
interest
rate
$’000

1 year
or less
$’000

1 to 5
years
$’000

over 5
years
$’000

–

1.50

–

1.50

–

2.15

3.65

–

(866)

–

(3,500)

(43,361)

(4,366)

(43,361)

(4,281)

(43,361)

–

Non-
interest
bearing
$’000

Total
$’000

1,914

–

743

4,158

1,641

8,456

743

4,158

1,641

8,541

(5,653)

(6,519)

(304)

(1,023)

–

(46,861)

(6,980)

(54,707)

1,476

(46,166)

2022

Assets:

Cash and bank balances

Rental bonds

Financial assets at fair value

Trade and other receivables

Prepayments

Liabilities:

Trade and other creditors

Lease liability

Provisions

Borrowings

Total financial liabilities

Net financial assets (liabilities)

The Company has a $50 million construction facility with the National Australia Bank which has been used to fund the construction
of the new state-of-the-art large-scale manufacturing facility near Mildura. The loan was restructured in April 2022, after the facility
was commissioned. Base interest rate is the Bank Bill Swap Bid Rate. The drawn down margin rate is 2.30% pa and the facility fee
is 0.35% pa. Amortisation of the loan will commence 31 May 2024 on a quarterly basis for a period of 10 years. The facility had been
drawn to an amount of $46.7 million at 30 June 2023 leaving a balance of $3.3 million.

In April 2022 Cann executed documentation to enter into a $15 million working capital facility with the National Australia Bank.
The working capital facility will be used by Cann to support the scale-up of the business and the next phase of its long-term growth
strategy. The facility terms were negotiated for an initial period with the first review held on 30 November 2022. Thereafter it will be
reviewed on a rolling 12-month period. Key terms include a drawn down rate of 2.00% pa and a facility fee of 0.35% per annum.
The Working Capital facility is cross-collateralised and co-defaulting with the Construction facility. As at 30 June 2023, the facility
had been drawn down by $14.02 million leaving a balance of $0.98 million.

For the Group the bank loans outstanding, totalling $60.7 million (2022: $46.8 million), are principal and interest payment loans.
Quarterly cash outlays of approximately $1.0 million (2022: $0.50 million) per quarter are required to service the interest payments.
An official increase/decrease in interest rates of 0.5 percent would have an adverse/favourable effect on loss before tax of
$0.47 million (2022: $0.23 million) per annum. The percentage change is based on the expected volatility of interest rates
using market data and analysts forecasts.

Cann Group | Annual Report 2023Credit risk
The Group does not believe it has any material risk from a counterparty defaulting on its contractual obligations or commitments
resulting in financial loss as such risk is managed by implementing a policy of only dealing with creditworthy counterparties in
accordance with established credit limits for all future transactions with customers. The Group also reviews the overall financial
strength of its customers by monitoring publicly available credit information.

The Directors have assessed that the fair values of the Group’s financial assets and liabilities reasonably approximate their carrying
values, as represented in these financial statements.

Liquidity risk
Liquidity risk arises from the possibility that the Group may encounter difficulty in meeting its obligations for its financial liabilities,
which at 30 June 2023 were primarily accounts payable with due terms of between 0-45 days and working capital facility with the
National Australia Bank. During the reporting period, the Company undertook a capital raising from the market to finance its working
capital and near-term growth requirements.

Foreign currency risk
Subsequent to the acquisition of Satipharm, the Group is exposed to fluctuations in foreign currencies arising from the sale and
purchase of goods and services in currencies other than the Group’s measurement currency. The management managed the foreign
currency transactions on a monthly basis to avoid the fluctuation on the exchange rate, while the Group does not have any material
foreign currency risk exposure. Where exposures do arise, forward foreign exchange contracts will be applied.

Note 27. Capital management
The board of directors is charged with determining the optimal mix of debt and equity which is suitable for the needs of the Group.
For the year ended 30 June 2023, the Group held a $50 million loan facility available for the purpose of funding the construction of
the Mildura Facility. As at 30 June 2023, this was drawn down to the amount of $46.7 million. The board considers it appropriate that
the construction of the Mildura facility be sourced through a mix of equity and long term debt financing.

The Group also had access to a $15 million working capital facility at the end of the financial year which was drawn to $14.02 million.
The working capital facility will be used by Cann to support the scale-up of the business and the next phase of its long term growth strategy.

The Group’s treasury function reports to the board monthly with forecast cash flow information that enables the Company to conduct
its capital raising activities in an orderly fashion at a dilutive cost to existing shareholders that is appropriate and reasonable.

Note 28. Parent entity information
Set out below is the supplementary information about the parent entity.

Statement of profit or loss and other comprehensive income

Parent

30 June 2023
$’000

30 June 2022
$’000

(6,457)

(8,112)

Loss after income tax

Total comprehensive loss

Notes to the Consolidated Financial Statements(continued)Cann Group | Annual Report 2023
Statement of financial position

Total current assets

Total assets

Total current liabilities

Total liabilities

Equity

Issued capital

Share based payments reserve

Transfer – expiry of options

Accumulated losses

Total equity

Parent

30 June 2023
$’000

30 June 2022
$’000

5,357

198,859

16,421

63,199

177,367

260

–

(41,967)

135,660

4,844

183,406

5,963

49,387

169,425

3,290

(3,192)

(35,504)

134,019

The subsidiary companies have expenditure commitments under the premises lease. The parent entity has committed to providing
funds to ensure the subsidiary companies can fulfil these commitments as well as any other operating commitments.

Significant accounting policies
The accounting policies of the parent entity are consistent with those of the Group, as disclosed in note 2, except for the following:

•

Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity.

Investments in associates are accounted for at cost, less any impairment, in the parent entity.

• Dividends received from subsidiaries are recognised as other income by the parent entity and its receipt may be an indicator

of an impairment of the investment.

Cann Group | Annual Report 2023Directors’ Declaration
30 June 2023

In the Directors’ opinion:

• the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, the Corporations

Regulations 2001 and other mandatory professional reporting requirements;

• the attached financial statements and notes comply with International Financial Reporting Standards as issued by the International

Accounting Standards Board as described in note 2 to the financial statements;

• the attached financial statements and notes give a true and fair view of the Group’s financial position as at 30 June 2023 and of its

performance for the financial year ended on that date; and

• there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

The Directors have been given the declarations required by section 295A of the Corporations Act 2001.

Signed in accordance with a resolution of Directors made pursuant to section 295(5)(a) of the Corporations Act 2001.

On behalf of the Directors

Allan McCallum AO
Chairman

28 August 2023

Cann Group | Annual Report 2023Independent Auditor’s Report
To the Members of Cann Group Limited

Cann Group Limited
Independent auditor’s report to members

REPORT ON THE AUDIT OF THE FINANCIAL REPORT

Opinion

We have audited the financial report of Cann Group Limited (the Company and its subsidiaries (the
Group)), which comprises the consolidated statement of financial position as at 30 June 2023, the
consolidated statement of profit or loss and other comprehensive income, the consolidated statement of
changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the
financial statements, including a summary of significant accounting policies and other explanatory
information, and the directors’ declaration.

In our opinion, the accompanying financial report of the Group, is in accordance with the Corporations Act
2001, including:

i. giving a true and fair view of the Group’s financial position as at 30 June 2023 and of its financial

performance for the year ended on that date; and

ii. complying with Australian Accounting Standards and the Corporations Regulations 2001.

Basis for Opinion

We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those
standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section
of our report. We are independent of the Group in accordance with the auditor independence requirements
of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical
Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence
Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled
our other ethical responsibilities in accordance with the Code.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.

Material Uncertainty Related to Going Concern

We draw attention to Note 2 in the financial report, which indicates that the Group incurred a net loss of
$33,790,000 during the year ended 30 June 2023 and, for the period, the Group’s net cash outflows used in
operations was $22,835,000. As stated in Note 2, these events or conditions, along with other matters as
set forth in Note 2, indicate that a material uncertainty exists that may cast significant doubt on the Group’s
ability to continue as a going concern. Our opinion is not modified in respect of this matter.

Level 20, 181 William Street, Melbourne VIC 3000

+61 3 9824 8555

vic.info@williambuck.com
williambuck.com.au

William Buck is an association of firms, each trading under the name of William Buck
across Australia and New Zealand with affiliated offices worldwide.

Liability limited by a scheme approved under Professional Standards Legislation.

Cann Group | Annual Report 2023

Independent Auditor’s Report
(continued)

Key Audit Matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our
audit of the financial report of the current period. These matters were addressed in the context of our audit
of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate
opinion on these matters. In addition to the matter described in the Material Uncertainty Related to Going
Concern section, we have determined the matters described below to be the key audit matters to be
communicated in our report.

INVENTORY

Area of focus
Refer also to notes 2, 3 and 9
The Group’s inventory of $11.4 million; is
significant to the financial report and has increased
by $0.7 million from the prior year.

The Group’s inventory primary consists of biomass
and finished goods. The biomass is valued at fair
value less costs to sell as at the date of harvest
and the finished goods are valued at the lower of
cost or net realisable value.

The valuation of inventory involves judgement by
management in particular when determining the
value per gram of biomass. In addition,
consideration is given to directly attributable costs
which can be capitalised into the cost of inventory.
As such this matter has been determined as a key
area of focus for our audit.

SHARE BASED PAYMENTS

Area of focus
Refer also to notes 2, 3, 18 and the Remuneration Report
In the current year the Group has issued options to
the CEO, CFO and other employees under the
employee share option plan and performance
rights to the CEO, CFO and employees as part of a
long-term incentive plan. The options include a
service condition and the performance rights
include a range of vesting conditions – both market
and non-market.

How our audit addressed it

Our audit procedures included:

— Performing inventory stock verification

procedures in respect of inventory held at the
Mildura and Southern facilities;

— Reviewing inventory confirmations in relation to

inventory held with third parties;

— Evaluating management’s judgments and

assumptions used in calculation cost per gram
of biomass;

— Verifying that the carrying value of inventory has

been calculated appropriately including
verification of third-party manufacturing costs to
supporting documentation; and

— Evaluating management’s judgements and

assumptions used in determining the inventory
write down recorded during the year.

We have also assessed the adequacy of
disclosures in relation to inventory in the financial
report.

How our audit addressed it

Our audit procedures included:

— Evaluating the fair values of share-based

payment arrangements by agreeing
assumptions to third party evidence. In
determining the grant dates, we evaluated what
were the most appropriate dates based on the
terms and conditions of the share-based
payment arrangements;

The options and performance rights issued require
significant judgements and estimations by
management, including the following:

— Evaluating the progress of the vesting of share-
based payments within the service period; and
— For the specific application of the Black Scholes

and Binomial models, we assessed the
experience of the independent expert used to
advise the value of the arrangement

Cann Group | Annual Report 2023

How our audit addressed it

We retested some of the assumptions used in
the model and recalculated those fair values.

We also considered the adequacy of the Group’s
disclosures in the notes to the financial report.

SHARE BASED PAYMENTS (CONTINUED)

Area of focus
Refer also to notes 2, 3, 18 and the Remuneration Report
— Determination of the grant date, and the

evaluation of the fair value of the options and
performance rights at grant date;

— The evaluation of the vesting charge taken to
the profit and loss in-respect of the vesting
conditions attached to the options and
performance rights; and

— The evaluation of key inputs into the Black
Scholes and Binomial model, including the
significant judgement of the forecast volatility of
the options and performance rights over their
exercise periods.

The value of these share-based payment
arrangements has been deemed a key area of
focus for our audit.

Other Information

The directors are responsible for the other information. The other information comprises the information in
the Group’s annual report for the year ended 30 June 2023, but does not include the financial report and
the auditor’s report thereon.

Our opinion on the financial report does not cover the other information and we do not express any form of
assurance conclusion thereon.

In connection with our audit of the financial report, our responsibility is to read the other information and, in
doing so, consider whether the other information is materially inconsistent with the financial report or our
knowledge obtained in the audit or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the Directors for the Financial Report

The directors of the Company are responsible for the preparation of the financial report that gives a true
and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for
such internal control as the directors determine is necessary to enable the preparation of the financial
report that gives a true and fair view and is free from material misstatement, whether due to fraud or error.

In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or has no realistic alternative but to do so.

Cann Group | Annual Report 2023

Independent Auditor’s Report
(continued)

Auditor’s Responsibilities for the Audit of the Financial Report

Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our
opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted
in accordance with the Australian Auditing Standards will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of this financial report.

A further description of our responsibilities for the audit of these financial statements is located at the
Auditing and Assurance Standards Board website at:

https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf

This description forms part of our independent auditor’s report.

Report on the Remuneration Report

Opinion on the Remuneration Report

We have audited the Remuneration Report included in the directors’ report for the year ended 30 June
2023.

In our opinion, the Remuneration Report of Cann Group Limited, for the year ended 30 June 2023,
complies with section 300A of the Corporations Act 2001.

Responsibilities

The directors of the Company are responsible for the preparation and presentation of the Remuneration
Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an
opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing
Standards.

William Buck Audit (Vic) Pty Ltd
ABN 59 116 151 136

A. A. Finnis
Director
Melbourne, 28 August 2023

Cann Group | Annual Report 2023

Corporate Governance Statement
For the year ended 30 June 2023

The Company’s directors and management are committed to conducting the business of the Group in accordance with the Group’s
core values: trust and accountability; leading edge behaviour; and acting in the best interests of our people and community.
This includes conducting ourselves in an ethical manner and in accordance with the highest standards of corporate governance.
The Group has adopted and substantially complies with the ASX Corporate Governance Council’s Corporate Governance Principles
and Recommendations (4th edition) (Recommendations), as is appropriate for the size and nature of the Group’s operations.

For the 2023 financial year, the Group has prepared a corporate governance statement that discloses the extent to which the Group
has followed the Recommendations, identifies any Recommendations that have not been followed, and the reasons for the Group
not doing so (Corporate Governance Statement).

In accordance with ASX Listing Rules 4.7.4 and 4.10.3, the Corporate Governance Statement will be available for review on the
Company’s website (www.canngrouplimited.com), and, together with an Appendix 4G, will be lodged with the ASX at the same
time that this annual report is lodged with the ASX. The Appendix 4G will provide information on each Recommendation that needs
to be reported against by the Company, and provide shareholders with guidance on where the relevant governance disclosures
are located. The Company’s corporate governance documents, including policies and charters, are all available on the Company’s
website www.canngrouplimited.com.

Cann Group | Annual Report 2023Shareholder Information

Equity security holders
As at 16 August 2023, the Company had 425,753,967 ordinary shares on issue. Further details of the Company’s equity securities
are as follows:

16 Aug 2023

11,478,943

7,296,023

5,876,453

5,000,000

4,601,643

4,341,363

3,500,000

3,132,224

3,000,000

2,992,764

2,524,620

2,353,029

2,150,000

2,100,000

2,085,874

1,930,220

1,626,132

1,600,347

1,562,895

1,420,454

%IC

2.70

1.71

1.38

1.17

1.08

1.02

0.82

0.74

0.70

0.59

0.55

0.50

0.49

0.45

0.38

0.37

0.33

74,072,984

351,680,983

425,753,967

17.40

82.60

100.00

Rank

Name

MR PHILIP JACOBSEN & MRS MAXINE JACOBSEN

MULLACAM PTY LTD

FLAG CAPITAL PTY LTD

MR LEENDERT HOEKSEMA

CITICORP NOMINEES PTY LIMITED

SUPERNOVA FUND PTY LTD

MR RYAN PRUE

MR CHRISTOPHER JOHN PAGE

MS SHENGYAN HU & MR XIANGJUN ZHAO

INVIA CUSTODIAN PTY LIMITED

HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED

MR MICHAEL ANDERSON

T R SAMUELS TRANSPORT PTY LIMITED

HARDMAIL PTY LTD

MRS ROBYN DIANNE CHANDLER

SUPERHERO SECURITIES LIMITED

COMMONWEALTH SCIENTIFIC AND INDUSTRIAL RESEARCH ORGANISATION

PACIFIC CUSTODIANS PTY LIMITED

DR AYOMI SOODIN

MR RAYMOND THOMAS HOBSON & MRS RHONDA ELLEN HOBSON

MR ALLAN DONALD MCCALLUM

Total

Balance of register

Grand total

Cann Group | Annual Report 2023Distribution of equity holders
Holdings distribution

Range

100,001 and over

10,001 to 100,000

5,001 to 10,000

1,001 to 5,000

1 to 1,000

Total

% No. of holders

Securities

231,911,847

138,631,897

24,821,954

26,293,164

4,095,105

54.47

32.56

5.83

6.18

0.96

425,753,967

100.00

652

4,543

3,257

10,246

7,522

26,220

Unmarketable parcels
The number of investors holding less than a marketable parcel of 4,167 ($0.12 on 16 August 2023) is 16,505 and they hold
24,399,861 securities.

Unquoted equity securities

The number of unquoted equity securities on issue as at 16 August 2023, are as follows:

Unquoted equity securities

Performance rights – 2021 series

Performance rights - 2023 series

Performance shares

Employee Share options exercisable at 45c on or before 9 February 2028

Employee Share options exercisable at 60c on or before 9 February 2028

Employee Share options exercisable at 75c on or before 9 February 2028

Employee Share options exercisable at 22c on or before 4 April 2028

Unquoted options exercisablle at 22c on or before 1 February 2025

No. of holders

Number
on issue

792,436

2,138,422

470,000

1,500,000

1,560,000

1,834

18,569,840

Voting rights
The voting rights attaching to each ordinary share are that holders of ordinary shares have the right to vote at every general meeting
of the Company. At a general meeting every holder of ordinary shares present in person or by proxy has, on a poll, one vote for each
ordinary share held.

There are no voting rights attached to the performance rights. The performance shares are ordinary, unquoted shares and are
subject to restrictions on transfer. The holders of the performance shares do have voting rights.

Securities exchange
The Company is listed on the Australian Securities Exchange. The home exchange is Melbourne.

Other information
Cann Group Limited, incorporated and domiciled in Australia, is a publicly listed company limited by shares.

Cann Group | Annual Report 2023Corporate Directory

Directors
Allan McCallum AO, Chairman
Dr Julian Chick, Deputy Chair
Doug Rathbone AM, Non-executive Director
Jennifer Pilcher, Non-executive Director
Robert Barnes, Non-executive Director

Auditors
William Buck
Level 20, 181 WIlliam Street
Melbourne, Victoria 3000

Phone: 03 9824 8555

Company Secretary
Deborah Ambrosini

Chief Executive Officer
Peter Koetsier

Registered Office
262–276 Lorimer Street
Port Melbourne, Victoria 3207

Phone: 03 9095 7088
Email:
Website: www.canngrouplimited.com.au

contact@canngrouplimited.com

Share Registry
Link Market Services Limited
Tower 4, 727 Collins Street
Melbourne, Victoria 3000

Phone: 1300 554 474 (within Australia)

+61 2 8280 7100 (from outside Australia)

ASX Listing
(ASX:CAN)

Cann Group | Annual Report 2023