Mr. Brandon Boddy reports

AGRAFLORA TAKES STEPS TO OBTAIN ADDITIONAL EU-GMP QUALITY CANNABIS FOR GERMAN DISTRIBUTION

On June 3, 2020, Agraflora Organics International Inc.'s wholly owned subsidiary, Farmako GmbH, entered into a binding supply term sheet with ZenPharm Ltd., a subsidiary of Zenabis Global Inc. The term sheet serves as the basis to enter into a supply agreement, which is expected to be completed in the coming weeks.

Under the conditions of the term sheet, ZenPharm will supply European Union good manufacturing practices medical cannabis flower cultivated by Zenabis to Farmako for distribution to medical cannabis patients in Germany. The agreement is intended to facilitate the distribution of 1,500 kilograms of cannabis flower by Farmako in Germany over a three-year term, with options for the parties to extend the supply relationship. Farmako will receive the products in Germany and distribute them nationally under its own brand to its roster of German pharmacies and doctors. The products provided by ZenPharm will initially include high-potency tetrahydrocannabinol flower and balanced tetrahydrocannabinol/cannabidiol flower, two product categories that management believes are in highest demand in Germany. Shipments to Farmako are expected to start in the fourth quarter of 2020. The parties have further agreed to work collaboratively on additional product formulations to be added to the contemplated agreement in 2021, including cannabis oils and other novel dosage forms.

Farmako's chief executive officer, Katrin Eckmans, stated: "Having visited Zenabis's Canadian facility at the end of 2019, I was very impressed. We have visited many facilities, and Zenabis's ability to maintain the highest standards of professionalism and quality throughout the organization, even while operating on a massive scale, is commendable. Zenabis's professional approach to growing cannabis, combined with Natrix Sciences' experience with innovative and complex pharmaceutical products in Malta, is a perfect interplay to provide a broad portfolio of high-quality medical cannabis products for patients in Germany and across Europe."

Germany is currently the lion market for medical cannabis in Europe, accounting for a market value of over 170 million euros in a solid regulatory setting, resulting in other European countries further opening up and using the German regulatory framework as a role model. Since the German legalization of medical cannabis in March, 2017, the market has more than doubled every year. In 2019, more than 6,700 kilograms of flower were imported to be dispensed to patients in German pharmacies (3,000 kilograms in 2018), with flower accounting for more than half of the overall German medical cannabis market. By the end of the second year following legalization, Germany saw more than 140,000 cannabis prescriptions issued, with insurance reimbursements having increased nearly 70 per cent in 2019 compared with 2018. The second half of 2020 will show a diversification of available products on the market, and it is expected that market growth rates will continue at a high pace.

Angele Azzopardi, chief executive officer of ZenPharm, said: "Our team is incredibly proud to carry this operation forward. This agreement not only showcases Zenabis's commitment, but also evidences the Zenabis/ZenPharm transatlantic synergy in delivering medicinal cannabis products to Europe. We look forward to developing our relationship with Farmako, especially as more conventional dosage forms of medicinal cannabis products come to the market."

"Zenabis and ZenPharm have presented themselves as professional and reliable partners to Farmako throughout the last year of our common work, with dedication to detail and also looking for a long-term, sustainable co-operation," stated Brandon Boddy, chairman and chief executive officer of Agraflora. "I believe this a great fit for Farmako, and we are very happy and proud about the signing and are looking forward to working with the team in Canada and Malta towards the initial shipment of medical cannabis grown by Zenabis to Frankfurt, serving patients in Germany."

About Agraflora Organics International Inc.

Agraflora Organics International is a leading cannabis company building shareholder value through the development of revenue-generating operating assets in the global cannabis industry.

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