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Disclosures for Atrium Research, Cannara Biotech Inc., March 4, 2026

Analyst Certification Each authoring analyst of Atrium Research on this report certifies that (i) the recommendations and opinions expressed in this research accurately reflect the authoring analyst’s personal, independent and objective views about any and all of the designated securities discussed (ii) no part of the authoring analyst’s compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in the research, (iii) to the best of the authoring analyst’s knowledge, she/he is not in receipt of material non-public information about the issuer, (iv) the analyst does not own common shares, options, or warrants in the company under coverage, (v) the analysts adhere to the CFA Institute guidelines for analyst independence, and (vi) this report belongs to the CFA Institute. Atrium Research Ratings System BUY: The stock is expected to generate returns of over 20% over the next 24 months. 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This report contains "forward-looking" statements. Forward-looking statements regarding the Company and/or stock’s performance inherently involve risks and uncertainties that could cause actual results to differ from such forward-looking statements. Such statements involve a number of risks and uncertainties such as competition, market demand, and the company’s (and management’s) ability to correctly forecast financial estimates. As a result, the actual results, events, performance or achievements of the financial product may be materially different from those expressed or implied in such statements. Please see the Company’s MD&A “Risk Factors” Section for a more complete discussion of company specific risks for the company discussed in this report. Any opinion or estimate constitutes the preparer's best judgment as of the date of preparation, and is subject to change without notice. ARC assumes no obligation to maintain or update this report based on subsequent information and events. ARC is receiving a cash compensation from Cannara Biotech Inc. for 12-months of research coverage. This report was disseminated on behalf of Cannara Biotech Inc. ARC retains full editorial control over its research content. ARC does not have investment banking relationships and does not expect to receive any investment banking driven income. ARC reports are primarily disseminated electronically and, in some cases, printed form. Electronic reports are simultaneously available to all recipients in any form. This report or any portion hereof may not be copied, reprinted, sold, or redistributed or disclosed by the recipient or any third party, by content scraping or extraction, automated processing, or any other form or means, without the prior written consent of ARC. Any unauthorized use is prohibited. Neither ARC nor any of its respective directors, officers or employees is responsible for guaranteeing the financial success of any investment, or accepts any liability whatsoever for any direct, indirect or consequential damages or losses arising from any use of this report or its contents. To receive future reports on covered companies please visit https://www.atriumresearch.ca/research or subscribe on our website. This report has been prepared independently of any issuer of securities mentioned herein and not as agent of any issuer of securities. No ARC personnel have authority whatsoever to make any representations or warranty on behalf of the Company. Any comments or statements made herein are those of ARC. The information contained herein is not, and under no circumstances is to be construed as, an offer to sell securities described herein, or solicitation of an offer to buy securities described herein, in Canada or any province or territory thereof. Any offer or sale of the securities described herein in Canada will be made only under an exemption from the requirements to file a prospectus with the relevant Canadian securities regulators, if applicable, and only by a dealer properly registered under applicable securities laws or, alternatively, pursuant to an exemption from the dealer registration requirement in the relevant province or territory of Canada in which such offer or sale is made. The information contained herein is under no circumstances to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of the recipient. To the extent that the information contained herein references securities of an issuer incorporated, formed or created under the laws of Canada or a province or territory of Canada, any trades in such securities must be conducted through a dealer registered in Canada. No securities commission or similar regulatory authority in Canada has reviewed or in any way passed judgment upon this research report, the information contained herein or the merits of the securities described herein, and any representation to the contrary is an offence. The information contained in this report is intended to be viewed only in jurisdictions where it may be legally viewed and is not intended for use by any person or entity in any jurisdiction where such use would be contrary to local regulations or which would require any registration requirement within such jurisdiction.

Atrium Research is initiating coverage of Cannara Biotech Inc. (LOVE:TSX; LOVFF:OTCQX; BCB0:FSE), with a BUY rating and a CA$3.00 per share target price, implying 63% upside from the current share price of CA$1.84.

The firm's bullish thesis rests on Cannara's combination of industry-leading growth and profitability, a highly capital-efficient expansion path through its underutilized Valleyfield facility, and a compelling valuation that Atrium believes is substantially below fair value given the company's fundamentals.

Leading Growth and Market Share

Cannara is Canada's sixth-largest licensed producer (LP) by sales nationally and the number one LP in Quebec. The company held 4.1% national market share in fiscal Q1/26 (ending November 30, 2025), expanding to 4.4% by December 2025 and 14.7% in Quebec as of the same month. Cannara was the only one of the top ten Canadian LPs to grow revenue quarter-over-quarter in Q1/26, posting 3% growth against an industry-wide decline of 4%. The company has grown revenue at a 111% compound annual growth rate (CAGR) since fiscal year 2020, scaling from CA$2.6M to CA$107.3M in FY25, with more than 20% year-over-year growth in each of the last 21 consecutive quarters.

Across its brand portfolio, Tribal held the number one position in Mass Premium Flower and Premium Live Resin, Nugz ranked first in Hash Rosin and Infused Pre-Rolls in Quebec, and Orchid CBD was the leading CBD Flower brand nationally. Atrium projects revenue growth of 17% in FY26 and 16% in FY27, with the analysts believing the company can sustain greater than 10% growth for at least five years as it activates new cultivation zones and pricing stabilizes across the industry.

Facilities Allow for Cost-Effective Expansion

Cannara owns two mega facilities in Quebec totaling over 1.6 million square feet. Its flagship Valleyfield facility — originally constructed for CA$250M by another operator during the cannabis boom — was acquired by Cannara for just CA$27M plus approximately CA$5.7M in deposit requirements. The facility features 24 independent cultivation zones, of which 12 are now activated, each measuring 25,000 square feet. A recently implemented cultivation strategy has boosted yields by 25%, enabling Cannara to reach its FY26 production targets a full year ahead of schedule at approximately 50,000 kilograms annually (equivalent to roughly CA$150M in revenue).

Full capacity at Valleyfield would reach 100,000 kilograms, representing approximately CA$300M in revenue at CA$3 per gram. Each zone activation requires minimal capital expenditure and is expected to generate CA$10M to CA$13M in incremental annual revenue, with CA$2.5M to CA$3.9M in EBITDA per zone. The company has a CA$30M three-year capital expenditure plan to build out the post-processing infrastructure — trimming, drying, and butane hash oil (BHO) capabilities — required to unlock the remaining zones, with phase one estimated at CA$10M. Atrium believes the company can activate two to three zones annually through FY30.

Best-in-Class Profitability

Cannara has posted 19 consecutive quarters of positive adjusted EBITDA and 13 consecutive quarters of positive operating cash flow. In Q1/26, gross margins reached 45% and adjusted EBITDA margins expanded to 29% — metrics that Atrium describes as best-in-class for the Canadian cannabis industry. This profitability is structurally supported by Quebec's low electricity rates, which at 6.5 cents per kilowatt-hour at the Valleyfield facility, are materially below rates in other provinces. Management has indicated a target gross margin range of 42–45% for FY26 and FY27. Adjusted EBITDA for FY25 was CA$28.1M (26% margin), with Atrium projecting CA$30.2M (24%) in FY26 and CA$37.3M (26%) in FY27. Cannara also reports the highest EBITDA margins among its peer group, at 26% in FY25, compared to an industry average of 9%.

Quebec Vape Launch

The Société québécoise du cannabis (SQDC) launched vape cartridge sales on November 26, 2025 — opening access to a category that represents 15–25% of retail cannabis sales in most other Canadian provinces. Cannara moved quickly to establish a dominant position, capturing 29.7% market share with CA$2.2M in retail sales between launch and December 31, 2025, while its nearest competitor generated CA$1.1M. The company holds 5 of the 25 available SKUs in Quebec, with the province not expected to introduce additional SKUs for at least one year.

Weedcrawler data cited in the report shows Cannara averaging CA$1.2M in monthly vape sales since January 2026, equating to over CA$14M in annualized retail sales. Using the SQDC's CA$742M in annual sales as a base, if vape products reach 20% penetration and Cannara maintains its current market share, the company's vape retail sales opportunity could exceed CA$44.5M annually. Management has noted that vape products carry high economies of scale and favorable margin profiles, which Atrium expects will support continued gross margin improvement.

Recent Financial Results

In its most recent quarter (Q1/26, ending November 30, 2025), Cannara reported record net revenue of CA$30.1M, up 20% year-over-year, with gross profit before fair value adjustments of CA$13.5M (45% margin) and adjusted EBITDA of CA$8.8M (29% margin).

For the full fiscal year 2025, the company delivered net revenue of CA$107.3M (up 31%), adjusted EBITDA of CA$28.1M, and net income of CA$13.1M — its first year of positive retained earnings.

Valuation

Atrium derives its CA$3.00 target price using an EBITDA multiple valuation of 10.0x applied to its FY26E adjusted EBITDA estimate of CA$30.2M, resulting in an enterprise value of CA$301.7M. After adjusting for CA$22.8M in pro forma cash and CA$34.9M in debt, this yields an equity value of CA$289.6M, or approximately CA$3.00 per share on a fully diluted in-the-money basis. This target multiple represents a premium to large/mid-cap LP peers, which trade at 7.4x FY26E EBITDA, and a significant premium to small-cap peers at 4.0x, which Atrium argues is justified by Cannara's superior growth trajectory, best-in-class margins, and low dilution.

In a DCF scenario extending to FY30, Atrium assumes a 12% revenue CAGR from FY26 to FY30, a 16% adjusted EBITDA CAGR over the same period, a 12% weighted average cost of capital (WACC), and an 8.5x exit EBITDA multiple, which independently reaffirms the CA$3.00 target price. The analysts also note that Canopy Growth Corporation's (WEED:TSX) announced acquisition of MTL Cannabis at 11.6x last twelve months EBITDA — a 45% premium to VWAP — provides a relevant comparable transaction. Applying that same multiple to Atrium's FY26E EBITDA for Cannara would imply a CA$3.25 per share target price.

Currently, Cannara trades at 6.5x FY26E and 5.3x FY27E EBITDA. With a sales CAGR of 32% from FY23 to FY26E, the highest in the peer group, and leading EBITDA margins of 26% in FY25 versus a peer group average of 9%, Atrium argues there is a strong case for multiple expansion. Even with no multiple expansion from the current 7.0x, the stock would offer 9% upside on FY26E EBITDA and 36% upside on FY27E EBITDA.

Management & Ownership

Cannara is led by CEO, Chairman, and Founder Zohar Krivorot, who also serves as the company's master grower. Mr. Krivorot previously founded 911ENABLE, which was acquired for US$42.5M in 2014. Through Javaa Private Equity and personal shareholdings, he retains approximately 26% of Cannara's outstanding shares. Olymbec Investments, affiliated with Director Derek Stern, holds approximately 24%. Management and other insiders collectively own 1%, while retail and institutional investors account for approximately 47% of the share base. Following a CA$6.3M non-brokered private placement completed in February 2026 with Phoenician Capital LLC at CA$2.10 per share (a 16% premium to the prior close), Phoenician Capital holds approximately 3%.

Cannara has managed dilution at notably low levels, with shares outstanding growing at a 6% CAGR since 2019, the second-lowest annualized dilution rate in its peer group and well below the group average of 29%. All 8.7M outstanding options are in-the-money and would generate CA$13.0M in cash proceeds if exercised.

Recent Announcements

Several significant milestones have been achieved in the months leading up to this initiation report:

• TSX Uplisting (March 2, 2026): Cannara received final approval and began trading on the Toronto Stock Exchange (TSX) under the ticker symbol LOVE, concurrently delisting from the TSXV.
• Private Placement (February 4, 2026): The company closed a CA$6.3M non-brokered private placement with Phoenician Capital LLC at CA$2.10 per share, proceeds directed toward working capital and Valleyfield expansion.
• Record Q1/26 Results (January 26, 2026): Cannara reported record quarterly revenue of CA$30.1M, gross profit of CA$13.5M (45% margin), and adjusted EBITDA of CA$8.8M (29% margin).
• OTCQX Upgrade (January 14, 2026): The company upgraded from the OTCQB to the OTCQX Best Market under the symbol LOVFF.
• Quebec Vape Market Leadership (January 2, 2026): Cannara announced it achieved the number one retail market share position in Quebec, reaching 14.7% share following the vape launch, with 29.7% of Quebec vape sales in November and December 2025.
• Record FY25 Results (November 24, 2025): Annual revenue of CA$107.3M, adjusted EBITDA of CA$28.1M, and net income of CA$13.1M, marking the company's first year of positive retained earnings.

Risks & Challenges

Atrium identifies four primary risk categories for Cannara, each rated below average to average in severity. Regulatory and policy exposure is rated below average — the company's operations are contingent on Health Canada licensing and ongoing regulatory compliance, and any disruption could materially affect operations. Financial risk is also rated below average, given a net debt to EBITDA ratio of just 0.4x on FY26E estimates, providing ample balance sheet flexibility. Competition risk is rated average, as larger, better-capitalized LPs could erode market share or outpace Cannara on product innovation. Illicit market competition is rated below average, while illegal operators can offer products outside regulated parameters, Cannara's premium quality positioning and Quebec's regulatory framework provide relative insulation.

On dilution, which Atrium notes has drawn investor scrutiny following elevated stock-based compensation in Q1/26 (CA$1.7M versus approximately CA$0.4M historically), the analysts rate this risk below average. The elevated SBC was driven by option cancellations, reissuances, and new grants to senior executives for long-term alignment purposes. Even if annualized dilution were to double from 6% to 12%, Cannara would remain in the bottom decile of its peer group for share count growth. The company also amended its SBC plan at its annual meeting to allow up to 15% of shares outstanding (up from 10%), consistent with TSX-listed company norms.

Analyst Outlook & Key Catalysts

Atrium sees a compelling multi-year value creation opportunity in Cannara, supported by its measured zone-by-zone expansion strategy, growing national presence, and first-mover position in Quebec's newly launched vape category. The analysts project Cannara will open two to three new grow zones annually through FY30, with each activation requiring minimal upfront capital while generating significant incremental revenue and EBITDA. The report notes that with institutional ownership at just 0.2% prior to the recent private placement, there is meaningful potential for re-rating as institutional sentiment toward Canadian cannabis equities improves.

Key near-term catalysts identified by Atrium include ongoing quarterly financial results and the ramp-up of Quebec vape revenue in Q1/26 and beyond.

The current share price of CA$1.84 represents 63% upside to Atrium's CA$3.00 target price.