Mr. Aras Azadian reports

AVICANNA REPORTS FIRST QUARTER 2020 FINANCIAL RESULTS AND PROVIDES CORPORATE UPDATE

Avicanna Inc. has released results for the first quarter ended March 31, 2020.

Aras Azadian, chief executive officer of Avicanna, commented: "Our management team demonstrated incredible execution ability by first ensuring the safety of our team and, in parallel, reducing costs, all while continuing to advance our commercial activities. We are also pleased to demonstrate the maturity of the company's global vertical integrated commercial infrastructure, which is exhibited through significantly reduced [capital expenditures] and increased efficiencies in our global operations."

First quarter operational highlights:

• Early in 2020, the company reacted immediately to the COVID-19 crisis and initiated several cost-cutting and optimization initiatives to ensure that it directed its resources to its strategic and commercial, revenue-focused activities. These measures resulted in operating expenditures decreasing by approximately 45 per cent from fourth quarter 2019 to first quarter 2020. In addition, the company reduced its head count by approximately 70 persons in the quarter, which represented approximately 30 per cent of the overall global head count. Furthermore, management reduced its pay by approximately 30 per cent in an effort to conserve cash and resources. This, coupled with the completion of capex-heavy projects, significantly reduced the company's cash burn rate. In addition, the minority partners in the company's cultivation subsidiaries, Santa Marta Golden Hemp SAS (SMGH) and Sativa Nativa SAS, contribute their portion of capital on a continuing basis. As such, the company does not carry full cash burden of operations or capital expenditures.
• In parallel with the cost-cutting initiatives, the company's commercial preparations and initiatives continue to progress and saw growth in its revenue by approximately 112 per cent over the fourth quarter of 2019. The company is expecting revenues to continue to increase through fiscal 2020, putting it in the position to generate positive cash flow by the end of 2020.
• The company entered into an exclusive supply agreement with Medical Cannabis by Shoppers Drug Mart Inc., Canada's largest and most trusted pharmacy chain. Under the terms of the agreement, the company's proprietary brands, Rho Phyto and Pura Earth, will be distributed by Shoppers in Canada. Rho Phyto products to be distributed under this agreement have been approved for commercial sale by Health Canada.
• The company entered into an exclusive import and distribution agreement with Cannvalate Pty. Ltd., an Australian-based cannabis company. Under the terms of the agreement, Cannvalate will distribute the Rho Phyto line of products in Australia. The company is expecting initial orders in the final quarter of 2020.
• The company completed all three clinical trials for Pura Earth products that were commenced during the third quarter of 2019. The products involved were Avicanna's formulations targeted at cosmetic factors associated with aging, acne-prone skin and eczema-prone skin. The completed trials involved 156 patients who were tested for both safety and certain derma-cosmetics end points. The results of all three studies were positive with no adverse effects, making Pura Earth one of the only cannabinoid consumer product lines with human safety and efficacy data.
• The company received an amendment by Health Canada to the cannabis research licence to include an additional lab within JLABS at Toronto, Avicanna's research and development headquarters in the MaRS discovery district.
• The company ranked highest amongst global cannabis companies in the SAM corporate sustainability assessment (CSA), a sustainability index that has become the basis for numerous S&P Global ESG indices and showcases the sustainability performance of some of the world's largest companies.

Financial highlights:

• The company recognized revenue of $260,903 from the commencement of sales through various divisions. There were no writedowns or impairments for 2019.
• In January, the company closed a financing round at a premium to the then market price of the company's stock, which added approximately $2.06-million of cash to the company's balance sheet.
• Subsequent to quarter-end, at the height of the COVID-19 pandemic, the company closed a strategic non-brokered private placement for $2.56-million, issuing 3.2 million units at a price of 80 cents per unit. The financing primarily included strategic partners, including Tasly International Capital Ltd., a division of Tasly Holding Group Co. Ltd., a large health care and pharmaceutical group in China.

Recent developments:

• In April, 2020, through its Avesta Genetica genetics and seed division, SMGH completed the first known industrial-scale seed harvest in Colombia, which included approximately 80 million premium and feminized cannabigerol (CBG) dominant seeds. The seeds have been tested for germination and attained feminization rates of 99 per cent, which are deemed premium within the global seed market. The seeds will be utilized for local production, sales and exports.
• In May, 2020, the company was approved for the first ever export of hemp seeds (genetics) from Colombia from its majority-owned subsidiary Santa Marta Golden Hemp in Santa Marta, Colombia. This export was authorized with support from the Colombian ministries of justice and agriculture.
• In May, 2020, the company entered into a strategic manufacturing and intellectual property licensing agreement with MediPharm Labs Inc. involving licensed production, domestic and international distribution, and intellectual property licensing. Under the terms of the agreement, MediPharm uses the specialized contract manufacturing capabilities resident at its state-of-the-art Canadian production facility to produce Avicanna's advanced Rho Phyto medical cannabis products and Pura Earth topicals under licence for commercial sales through Medical Cannabis by Shoppers. The partnership provides Avicanna with a commercial pathway to Canadian and international sales, as well as pharmaceutical manufacturing of its products destined for clinical development with its Canadian clinical partners. Additionally, Avicanna will grant MediPharm a licence to use proprietary Avicanna formulations to develop additional MediPharm Labs and white-label branded products for the domestic and international market. MediPharm has proven expertise in product development and will leverage its in-house sensory testing, processing and packaging capabilities to manufacture finished products using these formulations. MediPharm Labs' pharmaceutical and GMP (good manufacturing practices)-certified capabilities and international supply chain expertise will be deployed to produce and deliver the proprietary finished products to partners worldwide.

                               SUMMARY OF OPERATIONS
  
                                                           Three months ended          
                                                   March 31, 2020         March 31, 2019

Revenues                                                 $260,903                $24,023
Cost of sales                                             100,807                      -
Fair value changes in biological assets                 1,887,452                      -
General and administrative                              3,185,943              2,687,206
Share-based compensation                                  338,193              1,044,639
Depreciation and amortization                             509,143                 56,295
Total expenses                                          4,033,278              3,788,140
Other income (loss)                                      (123,806)              (121,359)
Net (loss) before taxes                                (2,109,536)            (3,885,476)
Future income tax recovery                                      -                      -
Net (loss) after taxes                                 (2,109,536)            (3,885,476)
(Loss) per share -- basic and diluted                       (0.12)                 (0.25)

About Avicanna Inc.

Avicanna, based in Ontario, Canada, is a corporation focused on the development, manufacturing and commercialization of plant-derived cannabinoid-based products through its two main business segments, cultivation and research and development.

Avicanna's two majority-owned subsidiaries, Sativa Nativa and Santa Marta Golden Hemp, both located in Santa Marta, Colombia, are the base for Avicanna's cultivation activities.

Avicanna's research and development business is primarily conducted out of Canada at its headquarters in the Johnson & Johnson Innovation Centre, JLABS at Toronto.

Avicanna's research and development and cultivation activities are focused on the development of key products, including plant-derived cannabinoid pharmaceuticals, phyto-therapeutics, derma-cosmetics and extracts (defined as plant-derived cannabinoid extracts and purified cannabinoids, including distillates and isolates), with a goal of eventually having these products manufactured and distributed through various markets.

We seek Safe Harbor.