Launch of capital raising initiatives in support of merger

On 28 April 2023, Cannasouth Limited (NZX:CBD) shareholders overwhelmingly approved the proposed merger ("Merger") of CBD with Eqalis Group New Zealand Limited (Eqalis). Capital Raising Initiative To complete the Merger, CBD is seeking to raise $9 million of new capital ("Capital Raise"). The principal terms of the Capital Raise will be as follows: o Up to $4,500,000 of the new CBD shares will be offered, at an issue price of $0.29 per share, to existing CBD shareholders on a pro rata basis, pursuant to a non-renounceable rights issue on a 1 (one) new CBD share for every 9.53075 existing CBD shares basis ("CBD Offer") held on the record date of 5 pm, 9 May , 2023. CBD shareholders will be entitled to apply for additional shares in this offer, subject to scaling detailed below. In addition, for every 2 (two) new CBD shares subscribed for under this CBD Offer, an investor will receive 1 (one) Option to acquire an additional share in Cannasouth at an issue price of $0.29 ("Option") - the term of the Option is 36 months from the date of the issue of the Option. o Up to $4,500,000 of the new CBD shares will be offered, at an issue price of $0.29 per share, to existing Eqalis shareholders on a pro rata basis, pursuant to a non-renounceable offer on a 1 (one) new CBD share for every 2.7126 existing Eqalis shares basis ("Eqalis Offer") held on the record date of 5 pm, 13 April 2023. Eqalis shareholders will also be entitled to apply for additional shares in this offer, subject to scaling detailed below. Again, for every 2 (two) new CBD shares subscribed for under this Offer, an investor will receive 1 (one) Option. o There will be an ability to accept up to $2 million of oversubscriptions under the above two offers in aggregate, for a maximum issue size of $11 million in aggregate. o Third party investors, including but not limited to certain CBD shareholders or Eqalis shareholders (together "Firm Investors") have been approached to secure binding commitments to participate in the offer of the new CBD shares, subject to sufficient CBD shares being available for those investors. The Firm Investor's applications will take priority in the allocation of any oversubscriptions under the two offers ahead of CBD and Eqalis shareholders' applications for oversubscriptions. To date firm commitment subscription agreements of $4.2 million have been received by CBD. Priority of Subscriptions o The Applications of CBD Shareholders, Eqalis Shareholders and Firm Investors will be dealt with in the following priority: - CBD Shareholders applying for their pro rata entitlement in the CBD Offer of up to $4.5 million will receive all of the new CBD Shares they apply for on this basis (excluding oversubscription applications); - Eqalis Shareholders applying for their pro rata entitlement in the Eqalis Offer of up to $4.5 million will receive all of the new CBD Shares they apply for on this basis (excluding oversubscription applications); - The Firm Investors (being all investors who sign up under a bespoke firm allocation subscription agreement with CBD ("Agreement") prior to the close of the Eqalis Offer or the CBD Offer - such Agreement does not comprise an application under the Eqalis offer or the CBD Offer) will receive all of the CBD Shares they have applied for, provided their application does not exceed the difference between the CBD Shares issued to CBD Shareholders and Eqalis Shareholders above, and the maximum number of shares on offer under the combined Offer. If the Applications of the Firm Investors exceed this amount, they will be scaled as between themselves; - If there is a shortfall in the up to $9 million of shares offered in the CBD Offer and Eqalis Offer post the issue of the CBD Shares to Firm Investors, then the remaining CBD Shares shall be allotted to those CBD Shareholders and Eqalis Shareholders (that are not also Firm Investors) who have submitted oversubscription applications in excess of their pro rata entitlement, subject to certain restrictions imposed by the Takeovers Code on Eqalis shareholders, which will be delineated in detail in the offer document to be circulated to Eqalis shareholders; - If there is a shortfall post the issue of the CBD Shares to CBD Shareholders (who oversubscribe), Eqalis Shareholders (who oversubscribe), and Firm Investors, then third party investors (being any investors who sign up a subscription agreement after the date of the commencement of the Eqalis Offer or the CBD Offer) shall be issued the remaining CBD Shares, and if there is an over demand (in excess of $11 million), then those applications will be scaled as between themselves; o 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 9June 2023. In the event that this condition is not satisfied, then the Merger and the Capital raise will not proceed. As announced on 28 April 2023, the Company has received $4.2 million of firm commitments for the Capital Raise. Launch of CBD Rights Issue ("Cannasouth Offer") CBD is pleased to announce its intention to launch today a 1 for 9.53075 pro-rata non-renounceable rights issue to Cannasouth shareholders to raise up to circa $4.5 million. The details of the Cannasouth Offer are as follows: Rights Offer size and structure: $4.5 million pro rata non-renounceable rights offer to eligible CBD shareholders at a ratio of 1 new CBD share for every 9.53075 existing CBD shares held as at the record date Rights Offer price: $0.29 per New Share (Offer Price) No Rights trading: The Rights will not be listed on the NZX Main Board, and will not be able to be traded Eligibility: Only CBD shareholders with registered addresses in New Zealand or Australia on the Record Date will be entitled to participate in the Rights Offer Oversubscriptions: Eligible shareholders who elect to take up all of their Rights in full, will have an opportunity to apply for additional shares, subject to the conditions described under the heading "Priority of Subscriptions" above, and the terms of the Cannasouth Offer Document. Ordinary Shares: The new CBD Shares to be issued under the Cannasouth Offer will rank equally in all respects with the existing Shares on issue in CBD. Options Entitlement: For every 2 (two) new CBD Shares subscribed for under this Offer, an investor will receive 1 (one) Option to acquire an additional share in Cannasouth at an issue price of $0.29 ("Option") - the term of the Option is 36 months from the date of the issue of the Option, and otherwise on the terms prescribed in the Offer Document. The Opening Date for the Cannasouth Offer is 10 May 2023. A timetable of key dates is included in the attached announcement. Launch of Offer of new Cannasouth Shares to the shareholders of Eqalis Group New Zealand Limited ("Eqalis Offer") CBD is pleased to announce its intention to launch a 1 for 2.7126 non-renounceable offer to Eqalis shareholders to raise up to circa $4.5 million. The details of the Eqalis Offer are as follows: Offer size and structure: $4.5 million non-renounceable offer to eligible Eqalis shareholders at a ratio of 1 new CBD share for every 2.7126 existing Eqalis Shares held Rights Offer price: $0.29 per New Share (Offer Price) No Rights trading: The Rights will not be listed on the NZX Main Board, and will not be able to be traded Eligibility: Only Eqalis shareholders with registered addresses in New Zealand or Australia on 13 April 2023 ("the EQ Record Date") will be entitled to participate in the Rights Offer Oversubscriptions: Eligible Eqalis shareholders who elect to take up all of their Rights in full, will have an opportunity to apply for additional shares, subject to the conditions described under the heading "Priority of Subscriptions" above, and the terms of the Offer Document. Ordinary Shares: The new CBD Shares to be issued under the Eqalis Offer will rank equally in all respects with the existing Shares on issue in CBD. Options Entitlement: For every 2 (two) New Shares subscribed for under this Offer, an investor will receive 1 (one) Option to acquire an additional share in CBD at an issue price of $0.29 ("Option") - the term of the Option is 36 months from the date of the issue of the Option, and otherwise on the terms prescribed in the Offer Document. The Opening Date for the Eqalis Offer is 10 May 2023. A timetable of key dates is included in the attached announcement. Attached Documents Copies of the following documents accompanying this announcement: o The Corporate Action Notice; o The Cleansing Notice; o The Offer Document for the Cannasouth Offer; o The Offer Document for the Eqalis Offer. -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 Tony Ho Chairman, Cannasouth Limited Email: tony.ho@cannasouth.co.nz Mobile: +61 (0)417 345 839 End CA:00410679 For:CBD Type:OFFER Time:2023-05-01 14:33:24