Market update regarding prospective merger with Eqalis

As announced to the market on 19 December 2022, Cannasouth Limited (NZX:CBD) has signed a binding term sheet ("Term Sheet") with the Board of Bay of Plenty based Eqalis Group New Zealand Limited (Eqalis) to advance a potential 50:50 merger between the two companies ("Merger"). The Board of CBD wishes to provide an update on the progress of the Merger. Notice of Meeting, IA Report and Share Sale Deed CBD has submitted the Notice of Special Meeting to be held to consider the Merger, together with the Independent Advisors Report prepared in accordance with the Takeovers Code, to the regulators for their review. CBD expects to receive regulatory approval in early March. CBD anticipates that the Share Sale Deed will be executed by CBD and Eqalis shareholders early in March, and prior to the date on which CBD circulates the Notice of Meeting and IA Report to its shareholders. Special Meeting of CBD Shareholders CBD expects to hold the Special Meeting of CBD Shareholders during the course of March. Copies of Materials circulated by Eqalis to its shareholders Eqalis has called a special meeting of its shareholders to discuss the merits of the Merger, and to potentially facilitate the execution of the formal legally binding Share Sale Deed with CBD, which document will be the principal transaction document should it be executed by CBD and the Eqalis shareholders. Given the Share Sale Deed is to be circulated to a wide number of individual Eqalis shareholders, CBD considers it prudent to release a copy of that Share Sale Deed, together with the following additional documents being circulated by Eqalis to its shareholders: o Covering letter from the Eqalis board to the Eqalis shareholders; o An abbreviated version of an Evaluation Report prepared by Armillary Capital, commissioned by the Eqalis Board for the benefit of the Eqalis shareholders. Please note: In respect of the Eqalis materials accompanying this announcement, the CBD Board wishes to confirm: o The Armillary Report has been prepared solely for the benefit of Eqalis shareholders and NOT for CBD shareholders, and should be considered in that context. o CBD will be releasing a Notice of Meeting which contains a comprehensive amount of information on Eqalis and the merger transaction, together with an Independent Advisors Report prepared by an independent advisor commissioned by CBD specifically for the benefit of the CBD shareholders. o CBD shareholders should wait until they receive that aforementioned documentation before concluding any decisions about the merits of the merger with Eqalis. Capital Raising Initiative As previously announced CBD is wishing to raise circa $9 million of new capital in conjunction with the Merger ("Capital Raise"). The Board's of CBD and Eqalis are currently working through the optimal manner in which to structure the Capital Raise. More information regarding the final structure of the Capital Raise will be released to the market once that detail has been finalised. Notwithstanding that CBD and Eqalis are seeking to raise up to $9 million through the Capital Raise, the Merger is conditional upon CBD raising not less than $7 million of new capital on or before 26 May 2023. In the event that this condition is not satisfied, then the Merger and the Capital raise will not proceed. Timetable An indicative timetable for the Merger and the Capital Raise is as follows: * Mail out Notice of Special Meeting to CBD Shareholders - 6 March 2023 * Hold Special Meeting of CBD Shareholders - 21 March 2023 * Launch Capital Raise - 30 March 2023 * Close Capital Raise - 14 April 2023 * Subject to satisfaction of the Merger conditions, complete the Merger - 19 April 2023 The above dates are indicative only and are subject to change at the discretion of CBD. CBD will continue to provide any material updates regarding the progress of the Merger as they come to hand. -ENDS- For further information visit www.cannasouth.co.nz or contact: Mark Lucas CEO / Executive Director Email: mark.lucas@cannasouth.co.nz Mobile: 021 484 649 Colin Foster CFO / Company Secretary Email: colin.foster@cannasouth.co.nz Mobile: 027 577 1498 End CA:00406951 For:CBD Type:TRANSACT Time:2023-02-20 08:31:47