Cannara Biotech : Annual MD&A 2021

Q u e b e c G r o w n

P r e m i u m G r a d e C a n n a b i s

For the year ended

August 31, 2021

December 7, 2021

C A N N A R A B I O T E C H I N C .

TSXV: LOVE.V OTCQB: LOVFF FRA: 8CB

CANNARA BIOTECH INC.

Management Discussion & Analysis

For the year ended August 31, 2021

This Management Discussion and Analysis ("MD&A") of Cannara Biotech Inc. ("Cannara" or the "Company") has been prepared by management as of December 7, 2021 and should be read in conjunction with the consolidated financial statements and related notes thereto of the Company for the years ended August 31, 2021 and 2020. The consolidated financial statements were prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") and International Financial Reporting Interpretations Committee ("IFRIC").

All dollar amounts referred to in this MD&A are expressed in Canadian dollars unless indicated otherwise.

All references in this MD&A to "Q4 2021" and "fourth quarter of 2021" are to Cannara's fiscal quarter ended August 31, 2021. "Q4 2020" and "fourth quarter of 2020" are to Cannara's fiscal quarter ended August 31, 2020. All references in this MD&A to "YTD 2021" and "YTD 2020" are to Cannara's twelve-month periods ended August 31, 2021 and 2020, respectively.

Additional information filed by us with the Canadian Securities Administrators, including quarterly reports, annual reports and other material contracts can be found on-line at www.sedar.com.

FORWARD-LOOKING STATEMENTS

This MD&A may contain "forward-looking information" within the meaning of Canadian securities legislation ("forward- looking statements"). These forward-looking statements are made as of the date of this MD&A and the Company does not intend, and does not assume any obligation, to update these forward-looking statements, except as required under applicable securities legislation. Forward-looking statements relate to future events or future performance and reflect Company management's expectations or beliefs regarding future events and include, but are not limited to, the Company and its operations, its projections or estimates about its future business operations, its planned expansion activities, the adequacy of its financial resources, future economic performance and the Company's ability to become a leader in the field of cannabis cultivation, production and sales.

In certain cases, forward-looking statements can be identified by the use of words such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved" or the negative of these terms or comparable terminology. In this document, certain forward-looking statements are identified by words including "may", "future", "expected", "intends" and "estimates". By their very nature, forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

Such factors include, but are not limited to, the factors discussed in the section "Risk Factors" as well as those factors detailed from time to time in the Company's interim and annual financial statements and the related MD&A of those statements. Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended.

The Company provides no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. Historical results of operations and trends that may be inferred from the following discussions and analysis may not necessarily indicate future results from operations.

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CANNARA BIOTECH INC.

Management Discussion & Analysis

For the year ended August 31, 2021

NON-GAAP MEASURES

Management has included certain financial performance measures that are not recognized or defined under IFRS ("non-GAAP measures"). There are no standardized methods of calculating these non-GAAP measures, management's methods may differ from those used by others, and accordingly, these measures may not be directly comparable to similarly titled measures used by others. Accordingly, these non-IFRS measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. Although Adjusted EBITDA is frequently used by securities analysts, lenders and others in their evaluation of companies, it has limitations as an analytical tool, and should not be considered in isolation, or as a substitute for analysis of the Company's results as reported under IFRS.

Management employs these measures internally to measure operating and financial performance. Management believes these non-IFRS financial measures, in addition to conventional measures prepared in accordance with IFRS, enable investors to evaluate the Company's operating results, underlying performance and future prospects in a manner similar to management.

The Company has identified Adjusted Earnings (Loss) before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA") as a relevant industry performance indicator. Management defines Adjusted EBITDA as net income (loss) before net finance expense, tax, depreciation, amortization, impairment, share-based compensation, changes in fair value of inventory sold, unrealized gain on changes in fair value of biological assets, gain on sublease on initial recognition and loss on disposal of property, plant and equipment. The exclusion of net finance expense eliminates the impact on earnings derived from non- operational activities. The exclusion of depreciation, amortization, impairment, share-based compensation, changes in fair value of inventory sold, unrealized gain on changes in fair value of biological assets, gain on sublease in initial recognition and loss on disposal of property, plant an equipment eliminates the non-cash impact of these items. Adjusted EBITDA should not be considered either as discretionary cash available to invest in the growth of the business or as a measure of cash that will be available to meet the Company's obligations. From time to time, the Company may exclude additional items if it believes doing so would result in a more effective analysis of underlying operating performance. The exclusion of certain items does not imply that they are non-recurring.

CANNARA BIOTECH INC.

Cannara was incorporated under the laws of British Columbia on October 19, 2017 and is currently listed and publicly traded on the TSX Venture Exchange ("TSXV") under the symbol "LOVE.V", the OTCQB under the symbol "LOVFF" and the Frankfurt Stock Exchange under the symbol "8CB". The Company's headquarters are located in Montreal, Quebec.

Cannara Biotech Inc. is a vertically integrated producer of premium‐grade cannabis and cannabis‐derivative products for the Quebec and Canadian markets. The Company's main focus is to deliver craft-quality "AAAA" products at disruptive retail pricing, continuous rotation of rare genetics, community responsiveness and transparency to collectively add to its value proposition. Leveraging the provinces low electricity and labor rates, Cannara owns and operates two Quebec‐based mega cultivation facilities spanning over 1,650,000 square feet. Cannara's first purpose-built, modern indoor cultivation facility is located in Farnham, Quebec and measures 625,000 square feet, comprising 170,000 square feet of operational licensed cultivation area and 455,000 square feet of leased warehouse space ("Farnham Facility"). The second facility, acquired in June 2021 from The Green Organic Dutchman Holdings Ltd. ("TGOD") through an all-cash offer of $27 million plus the funding of certain deposit requirements of approximately $5.7 million by a letter of credit, is a hybrid greenhouse facility that has been redesigned to replicate the indoor cultivation environment, including growing without utilizing the sun. The facility is comprised of 24 independent growing zones totaling 600,000 square feet, a 200,000 square feet cannabis 2.0 processing center and a 200,000 square feet rooftop greenhouse located in Valleyfield, Quebec ("Valleyfield Facility"). Cannara operates through its wholly-owned subsidiaries, Cannara Biotech (Quebec) Inc. and Cannara Biotech (Valleyfield) Inc., both holding active licenses issued by Health Canada under the Cannabis Act. In the U.S. market, the Company, through ShopCBD.com Inc., operates an online e-commerce platform in the U.S. hemp-based CBD market by offering a curated selection of top tier products in a fast, secure and reliable transaction.

Additional information about Cannara may be found at www.cannara.caand www.shopcbd.com. Investor information may be found at www.investors.cannara.ca.

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CANNARA BIOTECH INC.

Management Discussion & Analysis

For the year ended August 31, 2021

CANNARA FACILITIES

FACILITY	SIZE	CAPACITY	TYPE	ELECTRICITY	FACILITY HIGHLIGHTS

FARNHAM,	Licensed grow area:	15 000 kg	Indoor	Power rate of
QUEBEC	170 000 sf	phase 1 capacity		approx.
	Site: 625 000 sf			$0.065/kw
	Land: 1 430 000 sf

VALLEYFIELD,	Licensed grow area:	110 000 kg	Hybrid	Preferential
QUEBEC	600 000 sf	at full capacity	Greenhouse	contracted power
	Site: 1 030 000 sf			rate of approx.
Acquired	Land: 3 130 000 sf	Cultivation		$0.035/kw
June 2021		activities started in
		November 2021,
		and will scale up
		alongside market
		penetration and
		profitability

• Phase 1 completed in 2019
• State-of-the-artbiomonitoring
• 18 independent grow rooms
• Automated irrigation, nutrient delivery, lighting, dehumidification, and heating systems
• Automated packaging lines
• Built in 2020
• Onsite Hydro Quebec substation
• Fully outfitted and automated
• 24 independent grow rooms
• Blackout & shading systems
• Tempered "smart" glass
• Greenhouse converted to indoor facility to replicate Farnham Facility conditions

CANNARA BRAND PORTFOLIO

Our portfolio consists of three flagship brands with distinctive identity and purpose, each filling a white space in Canada's current cannabis market. All three brands offer handcrafted premium-grade cannabis, hang-dried, slow cured and hand- trimmed to preserve the flower's natural properties. Our brand portfolio includes:

BRAND	STORY	PRODUCT MIX	MARKETS

Tribal delivers uncompromised premium-grade cannabis to consumers who have a deep relationship with cannabis. From pheno-hunting rare genetics to unfolding each strain's lineage and flavor profiles, Tribal offers a continuous rotation of "AAAA" genetic strains at entry level pricing.

• Dried Flower	Quebec
• Pre-Rolls	Ontario
	Saskatchewan

Nugz is a cult-worthy movement committed to abundance, quality and value. Nugz offers an exceptional product at disruptive retail prices specifically designed for long-time cannabis enthusiasts who have a sharp sense for quality but are looking for a price break that aligns with consuming habits.

• Dried Flower	Quebec
• Pre-Rolls	Ontario
• Hash	Saskatchewan

Orchid CBD is a wellness brand dedicated to providing premium CBD-dominant cannabis. Orchid CBD offers award winning strains of terpene-rich, trichome covered, oversized dried flowers that deliver softer blissful experiences with no compromise on quality and flavours.

• Dried Flower	Quebec
• Pre-Rolls	Ontario
	Saskatchewan

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CANNARA BIOTECH INC.

Management Discussion & Analysis

For the year ended August 31, 2021

CANNARA GENETIC PORTFOLIO

Cannara has established an extensive bank of genetics which includes some of the rarest strains available in Canada. By undergoing pheno-hunting selection methods, Cannara has the ability to further broaden the product mix for each one of its brands by providing users with dedicated cannabis experiences from carefully selected cultivars for years to come. Our current genetics in the retail market include:

GENETIC	LAUNCH DATE	THC - CBD	TYPE	AROMAS & FLAVORS
GELATO MINT	Feb 2021	THC 24%	Indica	Gelato Mint is best known for its overwhelming fresh
Pheno #5		CBD	1%		flavors and aromas. As its name suggests, Gelato Mint
					smells like a fresh mint dessert with pepper and earthy
					pine undertones.
CRITICAL MASS CBD	Feb 2021	THC	4%	Indica	Critical Mass CBD's aromas are sweet and floral
Pheno #1		CBD	8%		offering a soothing and relaxing sensation, however its
					unique bubblegum-like taste.
EARLY LEMON BERRY	Mar 2021	THC 24%	Sativa	True to its name, Early Lemon Berry features
Pheno #92		CBD	1%		overwhelming lemon flavors thanks to its higher
					percentage of limonene and myrcene terpenes. It
					smells like a mix of sweet lemons.
CUBAN LINX	June 2021	THC	25%	Hybrid -	Cuban Linx packs a rich lemony aroma accentuated by
Pheno #1		CBD	1%	Sativa	hints of gassy diesel and a touch of spice.
DO-SI-DOS	June 2021	THC	26%	Hybrid -	Do-Si-Dos delivers floral flavors followed by earthy and
Pheno #2		CBD	1%	Indica	woody notes. The diversity and richness of this strain's
					terpene profile will result in diverse fragrances and
					flavors.
CBD RUNTZ	June 2021	THC	10%	Hybrid -	CBD Runtz is an award-winning CBD strain that offers
Pheno #7		CBD	18%	Sativa	an abundance of terpenes, a fruity and sweet aroma
					that delivers a candy-like flavor. A rare combination
					for a 1:2 CBD flower.

COMPANY & MARKET INSIGHT

Cannara's market launch has demonstrated positive consumer response to its brand strategy, pricing strategy, product offering, and genetic mix across retail outlets in Quebec, Ontario, and Saskatchewan. The Company's "AAAA" quality cannabis and disruptive pricing have resulted in demand levels that have exceeded current capacity. Additionally, Cannara's attention to detail, transparency, unique packaging, and community responsiveness have collectively added to its value proposition, which in turn have had a compounded effect on customer demand and market penetration and satisfaction.

Cannara's approach to the cannabis market has been driven by its pursuit for customer satisfaction and a commitment to delivering value to the market as a whole, from new entrants to experienced consumer segments. Over the course of the last six months, the Company has exemplified thought leadership in bringing disruption and innovation to the Canadian cannabis market. Notable examples include:

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