PEI Cannabis 2023 Annual Report

FOR THE YEAR ENDED MARCH 31, 2023 2023 ANNUAL REPORT PEI CANNABIS MANAGEMENT CORPORATION

PEICMC WHAT GUIDES US

CORPORATE VISION To be the preferred source of adult use cannabis.

MISSION STATEMENT To provide customers with a retail experience that exceeds their expectations, foster an internal culture of engagement and wellness, and create value for all stakeholders.

PEICMC STRATEGIC PILLARS Business Results: To become a key contributor to PEI’s general revenue through business excellence and the continuous improvement in operational effectiveness and efficiency. Customer Experience: To achieve and maintain high levels of customer satisfaction through sales channel accessibility, technical innovation, merchandising value, and high responsiveness to customer preferences. Corporate Social Responsibility: To be an excellent corporate citizen with high brand equity achieved through the promotion of responsible cannabis consumption, ongoing stakeholder engagement, and internal Corporate Social Responsibility campaigns. People & Culture: To foster a high-performing, customer-focused culture of engaged employees through open communication, learning & development, safe work environments, and overall wellness.

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CORPORATE VALUES Teamwork

Always succeeding together.

Passion

Having fun going the extra mile.

Accountability

Reliably delivering on our commitments.

Education

Continuously learning.

Empathy

Everyone is important.

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PEICMC 2022-2023 Annual Report

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PEICMC 2022-2023 Annual Report

TABLE OF CONTENTS

PEICMC - What Guides Us

3 5 6 6 7 8 9 9 9 9 9

Table of Contents

Message from the Minister Message from the Chair Message from the CEO Corporate Governance

Mandate of the PEI Cannabis Management Corporation Board

Accountability to Government and Public Appointment of Board Members Responsibilities of Board Members

Audit Committee Organizational Chart Executive Summary

10 12 13 14 14 18 20 22 23 25 27 28 28

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Sommaire

Operational Overview

Strategic Target • Business Results Strategic Target • Customer Experience

Strategic Target • Corporate Social Responsibility

Strategic Target • People & Culture

PEI Cannabis Outlets

Featured Producer - Remidose

Management’s Report

Appendix

Auditor’s Report and Audited Financial Statements

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PEICMC 2022-2023 Annual Report

MESSAGE FROM THE MINISTER

The Honourable Antoinette Perry Lieutenant Governor of Prince Edward Island 1 Terry Fox Drive Charlottetown, PE C1A 0E8

May It Please Your Honour:

Pursuant to the PEI Cannabis Management Corporation Act and as Minister designate, it is my privilege to submit the 5th Annual Report of the Prince Edward Island Cannabis Management Corporation.

Respectfully submitted,

Honourable Jill Burridge Minister of Finance

* For the reporting period, Honourable D. Mark V. McLane served as Minister of Finance

MESSAGE FROM THE CHAIR

The Honourable Jill Burridge Minister of Finance 95 Rochford Street, Charlottetown, PE C1A 3T5

Minister:

In compliance with Section 15 of the PEI Cannabis Management Corporation Act , it is my honour to submit this 5th Annual Report of the Prince Edward Island Cannabis Management Corporation covering the period of April 1, 2022, to March 31, 2023.

Respectfully submitted,

John Abbott Chair

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PEICMC 2022-2023 Annual Report

MESSAGE FROM THE CEO

Mr. John Abbott, Chair PEI Cannabis Management Corporation 3 Garfield Street Charlottetown, PE C1A 6A4 Dear Mr. Abbott,

It is my privilege to introduce the annual report of the Prince Edward Island Cannabis Management Corporation (PEICMC) for the fiscal year 2023. As we look back on the past year, I am filled with deep pride and gratitude, reflecting on the incredible journey our organization has embarked upon.

Upon reviewing the financial performance of the Prince Edward Island Cannabis Management Corporation for the period of April 1, 2022, to March 31, 2023, I am pleased to report total sales exceeding $22.5 million. This represents a significant increase of over $600,000 from the previous fiscal year, with a recorded net income of $2.9 million. Additionally, we contributed $3.4 million in excise tax revenue to the province. One of the key highlights of the past year was the announcement of our fifth retail location, which will be our second centrally located PEI Cannabis store within the province. Notably, our Charlottetown store has earned the reputation of being one of the busiest cannabis stores in Canada. This expansion into Stratford is crucial to meet the growing demand and to remain competitive with the illicit market. In addition to expanding our physical presence, we have focused on various other aspects of our business. We successfully launched a click-and-collect service, enhancing our customer experience. Furthermore, we are proud to have established new socially responsible partnerships in the fiscal year 2023 with MADD Canada, the Kari Ride Share Program, and the new Multi-Purpose Dome Field in Summerside. Our industry continues to navigate through many challenges, which include a struggling economy, and ongoing competition with a robust illicit market. As we navigate beyond the hurdles, our licensed producers are also grappling with industry challenges of their own, like mergers, acquisitions, and insolvencies. We remain strong in our commitment to collaborating with local producers, and our goal is to assist them in establishing a strong presence in the highly competitive recreational retail market. There are many people to thank for their work including our stakeholders, governing bodies, and our esteemed Board Members for their invaluable guidance throughout the year. I am particularly thrilled to welcome you, John as our new Chair. Your wealth of experience from various roles within the PEI Liquor Control Commission (PEILCC) will be an asset. While we look forward to continued collaboration, we must also pay tribute to the exceptional dedication of our outgoing Chair, Quentin Bevan, who has exemplified true commitment in serving us in leadership roles at both the PEILCC and PEICMC. Our devoted team, since inception including our senior management team, our staff in stores, and at head office, and the warehouse has consistently showcased unwavering dedication to both the PEICMC and the residents of Prince Edward Island. In the face of persisting challenges presented by COVID-19 and the disruptions stemming from Hurricane Fiona, our team has consistently risen to meet these challenges. It is essential to underscore that the foundation of our success lies within every single member of our organization. I wish to once more express my deep appreciation to not only our team members, but also to customers, partners, and the communities we serve. I have full confidence that the PEICMC will not only fulfill but surpass its continued dedication to supporting the province and its residents. We have a strong emphasis on the upcoming year and eagerly anticipate ongoing success across all aspects of our operations. It is my honour to introduce the Annual Report for the fiscal year 2023 on behalf of the Prince Edward Island Cannabis Management Corporation.

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Respectfully submitted,

Daniel MacDonald Chief Executive Officer

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PEICMC 2022-2023 Annual Report

CORPORATE GOVERNANCE Corporate governance is the cumulative set of mechanisms, processes and relationships by which the Corporation is controlled and operated. It defines the distribution of rights and responsibilities among different Corporation stakeholders (e.g. government shareholder, CMC Board Members, Senior Managers, auditors, regulators, etc.) and details the decision making framework related to the pursuit of corporate and policy objectives.

PEI CANNABIS MANAGEMENT CORPORATION BOARD Standing: Perry Gotell - Member, Kate Shreenan - Recording Secretary, Susan Milligan - Member, Murray Murphy - Corporation Solicitor Seated: Daniel MacDonald - Chief Executive Officer, John Abbott - Chair, Kim Griffin - Member, Vice-Chair, Nicole DesRoche - Member (absent from photo)

EXECUTIVE MANAGEMENT TEAM Standing: Shawn Alexander - Director, Human Resources and Employee Wellness, Gerald O’Halloran - Acting Director, Supply Chain and Property Management, Heather Rossiter - Director, Corporate Affairs and Regulatory Services Seated: Matt McMillan – Acting Chief Financial Officer, Daniel MacDonald – Chief Executive Officer, Paul Crabbe - Director, Retail Operations and Strategic Development

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PEICMC 2022-2023 Annual Report

MANDATE OF THE PEI CANNABIS MANAGEMENT CORPORATION BOARD The duties of the PEICMC Board are to:

• Remain highly-engaged in PEICMC business affairs and evolving industry factors; • Make well-informed decisions in good faith and in a way that is impartial, fair, and ethical; • Manage or supervise the management of the PEICMC’s affairs including guiding policy decisions; • Approve the PEICMC’s budget, business plan, annual report, and financial statements; • Make, amend, or repeal bylaws; and • Exercise any additional responsibilities as defined within the regulations. ACCOUNTABILITY TO GOVERNMENT AND PUBLIC The PEICMC is held accountable to government and the general public through a range of measures including, but not limited to: • The PEICMC Annual Report which is tabled in the legislature and available to the public that includes comprehensive details on the PEICMC’s affairs and financial outcomes during the preceding year; • Annual audited statements by the auditor general or a qualified auditor appointed by the Board to be included in the annual report; • Public access to records under the Freedom of Information and Privacy Protection Act ; and • Publicly-appointed Board Members. APPOINTMENT OF BOARD MEMBERS The Lieutenant Governor in Council, through an Order-in-Council, appoints the members of the PEICMC board, establishes the honorariums, and designates the Chair. The board collectively designates the Vice Chair from among its members. RESPONSIBILITIES OF BOARD MEMBERS Each Board member has individual responsibility for corporate governance including: • Acting honestly and in good faith in making decisions with a view to the best interests of the PEICMC and all its stakeholders; • Overseeing the management of the business affairs of the PEICMC; • Avoiding conflicts of interest; • Having adequate knowledge of the PEICMC’s business, how it is organized and how it functions; • Attending Board meetings and seeking professional advice where necessary; and • Providing guidance on policy development. AUDIT COMMITTEE The Audit Committee is elected annually and consists of three Board Members in addition to the Chair and the CEO as ex-officio. The Committee ensures the reliability and accuracy of the PEICMC’s financial statements, helps co-ordinate and improve internal control functions, and ensures the PEICMC adheres to sound corporate governance principles.

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PEICMC 2022-2023 Annual Report

ORGANIZATIONAL CHART * Shared-services agreement with the PEI Liquor Control Commission (PEILCC). ** For the reporting period, Honourable D. Mark V. McLane served as Minister of Finance.

**

HON. JILL BURRIDGE

Minister of Finance

JOHN ABBOTT

Chair

PERRY GOTELL

KIM GRIFFIN

Member Vice - Chair

Member

SUSAN MILLIGAN

NICOLE DESROCHE

Member

Member

*

*

DANIEL MACDONALD

KATE SHREENAN

Chief Executive Officer

Executive Assistant

*

*

Director, Corporate Affairs and Regulatory Services

HEATHER ROSSITER

MATTHEW MCMILLAN

Acting Chief Financial Officer

*

*

Director, Human Resources and Employee Wellness

Acting Director, Supply Chain and Property Management

SHAWN ALEXANDER

GERALD O’HALLORAN

PAUL CRABBE

Director, Operations and Strategic Development

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PEICMC 2022-2023 Annual Report

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PEICMC 2022-2023 Annual Report

EXECUTIVE SUMMARY The Prince Edward Island Cannabis Management Corporation (PEICMC) is a crown corporation responsible for the administration of the PEI Cannabis Management Corporation Act and Regulations. The PEICMC operates under the branded name PEI Cannabis.

A five-member Board appointed by the Lieutenant Governor in Council is responsible for the Corporation’s activities, and the Chair reports to the Minister responsible for PEI Cannabis.

The mandate under the Cannabis Management Corporation Act has two primary purposes:

• to establish the necessary framework for socially responsible management of the distribution and sale of cannabis and related products; and • to facilitate and promote the responsible consumption of cannabis and related products in Prince Edward Island. PEI Cannabis expects to become a major force in the provincial economy over the medium-to-long term, and during its fifth fiscal year it generated over $22M in total net receipts, thus continuing to make gains and disrupting the illicit market. A three-year strategic plan, complemented by an annual business plan, is the key mechanism to ensure PEI Cannabis is meeting its strategic objectives, and aligning itself with the key public policy priorities surrounding cannabis legalization.

PEI Cannabis focuses on the following four (4) strategic areas to measure performance:

1. Business Results 2. Customer Experience 3. Corporate Social Responsibility 4. People & Culture

These strategic pillars, and the tactical initiatives developed within them, serve as a blueprint for incorporating the Vision and Mission Statements into day- to-day operations, the outcomes of which are explained in further detail in this report.

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PEICMC 2022-2023 Annual Report

SOMMAIRE La Société de gestion du cannabis de l’Île-du-Prince-Édouard (SGCIPE) est une société de la Couronne responsable de l’administration de la Cannabis Management Corporation Act (loi sur la Société de gestion du cannabis) de l’Île-du-Prince-Édouard et de son règlement d’application. La SGCIPE est exploitée sous le nom de marque Cannabis Î.-P.-É. Un conseil de cinq membres désignés par le lieutenant-gouverneur en conseil est responsable des activités de la Société. La présidence relève du ministre responsable de Cannabis Î.-P.-É. Le mandat conféré à l’organisme par la Cannabis Management Corporation Act a deux objectifs principaux : • Établir le cadre nécessaire pour une gestion socialement responsable de la distribution et de la vente de cannabis et de produits connexes. • Faciliter et promouvoir la consommation responsable de cannabis et de produits connexes à l’Île-du-Prince-Édouard. Cannabis Î.-P.-É. s’attend à devenir un levier important de l’économie de la province à moyen et à long termes. Au cours de son cinquième exercice, il a généré un total de plus de 22 millions de dollars en recettes nettes, continuant à réaliser des gains et à perturber le marché illicite. Un plan stratégique triennal ainsi qu’un plan d’affaires annuel sont les mécanismes clés pour veiller à ce que Cannabis Î.-P.-É. atteigne ses objectifs stratégiques et se conforme aux priorités clés des politiques publiques entourant la légalisation du cannabis.

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Cannabis Î.-P.-É. met l’accent sur quatre domaines stratégiques pour mesurer le rendement :

1. Résultats opérationnels 2. Expérience client 3. Responsabilité sociale 4. Personnes et culture

Ces piliers stratégiques et les initiatives tactiques développées au sein de ceux-ci servent de plan directeur pour incorporer les énoncés de vision et de mission au sein des activités courantes. Les résultats de celles-ci sont décrits de manière détaillée dans le présent rapport.

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PEICMC 2022-2023 Annual Report

OPERATIONAL OVERVIEW PEI Cannabis has a 3-year Strategic Plan which guides its activities through to fiscal 2022-2023. The accomplishment of strategic goals is supported by an annual business plan that detail corporate objectives to be accomplished, and measurable targets used to evaluate the degree to which corporate objectives are being met. The following is an overview of the performance in each of the four (4) strategic pillars. STRATEGIC TARGET • BUSINESS RESULTS STRATEGIC GOAL To become a key contributor to PEI’s general revenue through business excellence and the continuous improvement in operational effectiveness and efficiency. CORPORATE OBJECTIVES 1. Grow sales revenues to continuously grow a top-line base for profitability and government transfers; 2. Grow top-line profitability on cannabis products through tactful pricing and supplier relations; 3. Continuously build on the effectiveness and efficiency of cannabis operations through strategic resource deployment; and 4. Grow output of total kilogram (kg) sales of dried cannabis equivalent weight to displace the illicit market.

PERFORMANCE MEASURES

Actual 2021-2022

Target 2022-2023

Actual 2022-2023

% of Target 2022-2023

Target 2023-2024

Total Net Sales Revenue

$21,894,379

$23,500,000

$22,500,680

95.7%

$24,000,000

Gross Margin

25.4%

23.8%

27.1%

113.8%

25.5%

Net (Loss) Income

$2,609,580

$1,267,600

$2,909,096

$1,090,300

229.4%

Dried Cannabis Equivalent Sales General & Administrative Expenses

$5,510,400

$4,416,456

$6,108,500

80.1%

$4,182,171

3,800 kilograms

4,094 kilograms

4,100 kilograms

108%

3,600 kilograms

Application of Net Receipts

Net Receipts

Beverages

Concentrates

Recognition of Capital Assets

Accessories

1.52%

2.1%

0.34%

9.53%

Topicals

Edibles

0.28%

Operating Expenses

4.99%

19.12%

Seeds

0.08%

Ingested Extracts

4.52%

5.21%

Other Income

49.83%

Dried Flower

78.78%

23.7%

Pre-Rolled

Suppliers

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PEICMC 2022-2023 Annual Report

Store by Store Net Sales Analysis

PEI CANNABIS STOREFRONT

Total Net Receipts

% of Sales revenue

Charlottetown Summerside Montague O’Leary

$12,540,163 $5,302,090 $3,298,297 $1,165,139 $194,991 $22,500,680

55.73% 23.56% 14.66% 5.18% 0.87% 100%

Online TOTAL

Average Basket Size by Location

$40.46

CHARLOTTETOWN

SUMMERSIDE

$40.96

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O’LEARY

$43.08

MONTAGUE

$41.88

PEI CANNABIS

$41.11

TACTICAL SUMMARY

PEI Cannabis recognizes the continued presence of a mature, sophisticated illicit cannabis market. Further, this unregulated market is still prominent in the PEI market, and due to the absence of any quality assurance measures or accountability requirements to customers and staff, it also has much lower costs to get product to market. Further, the Corporation acknowledges the pre-legalization customer preferences, and how they continue to shape the licit industry’s current and prospective product offerings (i.e., derivative products, genetics, etc.). To successfully compete with existing market sources, PEI Cannabis executed plans focusing on excellence in Category Management, Supply Chain Management, Retail Expansion, and Risk Management. PEI Cannabis is pleased to have exceeded its sales and profitability targets for fiscal 2023, and more importantly the corporation has achieved success related to incremental illicit market displacement. However, it has also identified some key challenges and opportunities in terms of achieving sustainable outcomes in the medium-to-long term.

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PEICMC 2022-2023 Annual Report

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PEICMC 2022-2023 Annual Report

KEY HIGHLIGHTS

Category Management •

Maintained strong relationships with a well-diversified portfolio of suppliers and ensured consistent access to a range of product options with virtually no retail disruption. • Built on a competitive pricing model that balances public policy priorities and PEI Cannabis corporate objectives surrounding illicit market penetration and responsible sales. PEI Cannabis introduced a wide range of new cannabis products from existing and new suppliers from PEI and across Canada through Fiscal Year 22/23 including edibles, beverages, and various concentrates. • Through an ongoing formal shared services agreement with the PEILCC, PEI Cannabis has maintained a strong supply chain framework with no retail disruption. Retail Expansion • PEI Cannabis continues to look for retail expansion opportunities to provide more safe access to regulated cannabis products and to combat the illicit market. Risk Management • Ensured risks related to operational and capital expenditures were contained by PEI Cannabis to ensure profitability targets were reached. • Ensure product inventory levels are maintained by methods of sku rationalization, FIFO inventory management, and timing of product calls. Supply Chain Management •

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KEY OPPORTUNITIES & CHALLENGES

1. There continues to be an opportunity for PEI Cannabis to grow profitability while it competes against an illicit sale stream that has much lower overhead. 2. There are opportunities for continuous improvement as it relates to operational, supply chain, and systems framework held by PEI Cannabis.

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PEICMC 2022-2023 Annual Report

STRATEGIC TARGET • CUSTOMER EXPERIENCE

STRATEGIC GOAL

To achieve and maintain high levels of customer satisfaction through sales channel accessibility, technical innovation, merchandising value, and fast responsiveness to customer preferences.

CORPORATE OBJECTIVES

1. To provide an engaging retail experience that provides value to PEI Cannabis customers; 2. To facilitate ongoing displacement of the illicit market by attracting new customers; 3. To provide customers with a unique and diversified product offering that meets their evolving expectations; and 4. Adopt new merchandising tactics and engage employees in those new strategies to drive transactional sales growth.

PERFORMANCE MEASURES

Actual 2021-2022

Target 2022-2023

Actual 2022-2023

% of Target 2022-2023

Target 2023-2024

Customer Experience Score

96%

90%

97%

107.7%

90%

Customer Counts

544,976

580,000

548,169

94.51%

630,000

Unique SKUs Sold

650

700

763

109%

750

Customer Counts

SKU Type by Format

Dried Flower

Beverages

163

Concentrates

46

Seeds

6

Topicals

10

Accessories

56

July, 2022 • 50,607

August, 2022 • 52,089

June, 2022 • 45,172

March, 2023 • 47,383

May, 2022 • 43,599

April, 2022 • 42,891

January, 2023 • 45,815

112

December, 2022• 47,242

October, 2022 • 44,470

November, 2022 • 44,116

Edibles

59

February, 2023 • 42,002

Pre-Rolled

September, 2022 • 42,783

42

Ingested Extracts

% of Cannabis Sales by Quality Type

% of Cannabis Sales by Type

1.6%

A/O

14.96%

Craft

Not Applicable

1.6%

CBD Products

2.07%

Value

40.93%

Multi Cannabinoid Products

3.73%

92.6%

42.51%

Mainstream

THC Products

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PEICMC 2022-2023 Annual Report

TACTICAL SUMMARY To be viewed as the preferred source of adult use cannabis, PEI Cannabis has established an accessible sales network and an effective product offering. This remains influenced by rigorous analysis of existing customer insights, and is done with the goal of offering an educational and highly engaging retail experience. Special attention is given to stakeholder engagement in the store network design to ensure the unique sensitivities surrounding cannabis sales do not lead to adverse impacts on the community (e.g., increasing exposure to youth, etc.). To facilitate sustainable interest in PEI Cannabis as a source of adult-use cannabis, PEI Cannabis continued its execution of plans focusing on Sales Channel Design and Customer Service. PEI Cannabis has achieved reasonable short-term success in these areas but has also identified some key challenges and opportunities in terms of sustaining and building on customer engagement and satisfaction in the medium-to-long term.

KEY HIGHLIGHTS

Sales Channel Design • PEI Cannabis built on its award-winning storefront designs through the development and launch of a completely revamped customer education strategy.

Customer Experience •

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PEI Cannabis exceeded its customer count forecast for a fifth consecutive year, which is thought to be a positive measurement of the Corporation’s ongoing ability to compete and displace the illicit market. • PEI Cannabis staff receive regular training to keep pace with the ever changing cannabis industry in order to provide high quality customer service in our retail stores.

KEY OPPORTUNITIES & CHALLENGES

1. PEI Cannabis has observed substantial growth in the volume of total dried cannabis equivalency of products sold, which it feels represents ongoing opportunities for growth in the domestic market share. 2. New product classes present an opportunity for PEI Cannabis to meet evolving customer preferences and continue displacing the illicit market.

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PEICMC 2022-2023 Annual Report

STRATEGIC TARGET • CORPORATE SOCIAL RESPONSIBILTY

STRATEGIC GOAL

To be an excellent corporate citizen with high brand equity achieved through the promotion of responsible cannabis consumption, ongoing stakeholder engagement, and internal CSR campaigns.

CORPORATE OBJECTIVES

1. To build mutually beneficial stakeholder partnerships that align with the PEICMC’s objectives; 2. Ensure cannabis is retailed in a responsible fashion that is educational in nature and aligns with the promotional restrictions; 3. Continuously improve the PEICMC’s reputation as an excellent corporate citizen among stakeholders; and 4. Adopt a rigid internal control framework for inventory management to ensure inventory shrinkage and potential diversion to the illicit market are mitigated as much as possible.

PERFORMANCE MEASURES

Actual 2021-2022

Target 2022-2023

Actual 2022-2023

% of Target 2022-2023

Target 2023-2024

90.00% 100.00%

$150,000 85% 85%

$150,000 85% 85%

$135,675 85%

Investment in CSR Initiatives

$95,000

R etail Responsible Service Score Corporate Citizenship Survey Score

86% 86%

99.2%

84.33%

TACTICAL SUMMARY

Standing out as a corporate citizen that always conducts its corporate affairs in an ethical, transparent fashion is a key strategic focus for PEI Cannabis. Constant alignment with the primary public policy priorities surrounding legalization is the foundation of the Corporation’s business strategy which serves as the common ground it holds with its stakeholders. To be thought of as the preferred provider of cannabis by the public, regardless of their varying perceptions of cannabis use, PEI Cannabis has executed tactical plans focusing on branding, social responsibility, and stakeholder engagement. It has achieved reasonable short-term success in these areas. However, it has also identified some key challenges and opportunities related to how the Corporation can build on its reputation as a good corporate citizen that creates value for all stakeholders in the medium-to-long term.

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PEICMC 2022-2023 Annual Report

KEY HIGHLIGHTS

Branding •

PEI Cannabis has built on its brand equity and remains firmly aligned with the public policy priorities of protecting youth, educating the public, and displacing the illicit market. • A key focus of PEI Cannabis’s branding strategy continues to be the enhancement of consumer education regarding the consumption of cannabis. Over Fiscal 2023, key external partnerships were maintained by PEI Cannabis focusing on responsible cannabis consumption. (e.g., UPEI, Holland College, Kari Ride Sharing Initiative, T3 Transit, MADD Canada’s Weed Out the Risk Program, etc.). • PEI Cannabis continued to participate on a national committee promoting responsible cannabis consumption, called the Canadian Cannabis Jurisdictional Leadership – Social Responsibility Subcommittee. • PEI Cannabis continues to build upon its Mystery Shop Program – a program that monitors compliance of responsible sales and a range of service factors related to the customer experience. Stakeholder Engagement • A third Corporate Citizenship Survey was initiated by PEI Cannabis to seek and obtain valuable feedback from its full range of external stakeholders. • Through positive relationships with supplier partners and fellow jurisdictional leadership groups, PEI Cannabis constantly contributes toward fostering an effective national cannabis industry focused on the public policy priorities that ushered in legalization. Social Responsibility • 1. There are continued opportunities for PEI Cannabis to enhance public awareness and educational campaigns related to the risks and laws associated with cannabis use. 2. The continuation of a Responsible Service Score conducted by impartial mystery shoppers will be a key priority for fiscal 2024. 3. Through its Corporate Citizenship Survey, PEI Cannabis has various opportunities to ensure it can create value for its full range of stakeholders. KEY OPPORTUNITIES & CHALLENGES

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PEICMC 2022-2023 Annual Report

STRATEGIC TARGET • PEOPLE & CULTURE STRATEGIC GOAL

To foster a high-performing, customer-focused culture of engaged employees through open communication, learning & development, safe work environments, and overall wellness. CORPORATE OBJECTIVES 1. Always recruit, develop and retain the best people through fair labour relations and mobility opportunities; 2. Foster a culture of performance, communication, and engagement; 3. Establish and continuously promote a healthy, safe, and respectful workplace; and 4. Increase investment in employee training to always ensure a knowledgeable and confident workforce.

PERFORMANCE MEASURES

Actual 2021-2022

Target 2022-2023

Actual 2022-2023

% of Target 2022-2023

Target 2023-2024

103.1% N/A

95.0% 80% 98%

95% 80% 98%

98% N/A

97.7% N/A 97.24%

Staff Retention Rate

Employee Engagement Score* E mployee Wellness Rate

98.6%

96.65%

TACTICAL SUMMARY PEI Cannabis maintains its belief that high functioning, knowledgeable, and engaged retail teams are imperative to success in adult-use cannabis sales. To compete with the illicit market, PEI Cannabis needs to provide a superior retail experience, and this starts with the corporation’s people. To achieve success in this area, PEI Cannabis continues to execute plans focusing on Workplace Wellness, Engagement, and Professional Success. Short-term success in this area has been realized, which is most notably observed in the customer- oriented retail teams working at PEI Cannabis retail sites. KEY HIGHLIGHTS Workplace Wellness • PEI Cannabis achieved 98.6% of its strategic target related to absenteeism due to injury or illness, which is viewed to be a top corporate success and one to build on through fiscal 2024. Engagement • PEI Cannabis partnered with an external training provider through fiscal 2023 to facilitate a comprehensive training program for all its retail teams. • Store managers continued to be provided with leadership training to ensure that they could foster engagement and continued success within their retail teams. Professional Success • Excellent outcomes around minimal staff turnover over fiscal 2023 is interpreted to be a good sign of a satisfied workforce that continues to view PEI Cannabis as a valued opportunity. • PEI Cannabis maintains a training & development fund available to all employees which seeks to foster mutual growth in its people and the organization. KEY OPPORTUNITIES & CHALLENGES 1. PEI Cannabis’s intention is to complete a formal performance planning, evaluation & coaching program in fiscal 2024. 2. PEI Cannabis must continue to manage absenteeism due to injury or illness so it can preserve the health of its employees and the leanness of its operations. 3. The Corporation must continuously provide staff with educational support and growth opportunities to ensure a flexible, scalable, and engaged workforce.

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PEICMC 2022-2023 Annual Report

PEI CANNABIS OUTLETS

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ADDRESS

PHONE

PEI CANNABIS RETAIL STORES

O’Leary Summerside Charlottetown Montague

478 Main St., O’Leary, PE C0B 1V0 447 Granville St., Summerside, PE C1N 3C4 85D Belvedere Ave. Charlottetown, PE C1A 6B2 509 Main St. Montague, PE C0A 1R0

902-859-0392 902-438-4989 902-569-7758 902-838-0924

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PEICMC 2022-2023 Annual Report

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PEICMC 2022-2023 Annual Report

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FEATURED PRODUCER

Tell us a bit about Remidose. How did it get started? Remidose was established in 2020 with a

aid absorption either inside the cheek or under the tongue. We will be introducing a new product called Live Resin Citrus Drops, which is an easy on-the-go product that is resealable, fits in the palm of your hand, and is easy to dispense! How does Remidose see the fast onset/accurate dosing segment of the cannabis industry evolving? Here at Remidose, our hope is that as research on the benefits of cannabis emerge, there will be a shift on how and why people use cannabis, specifically to achieve their wellness goals. With accurate dosing, consumers have better control of how much cannabis they are consuming and can better titrate to meet their desired therapeutic effects. The demand for fast onset products is high within the industry, and we’ve manufactured our products with this in mind. What can customers expect from Remidose in the next year? We are currently experimenting with new flavours and packaging for the recreational market. We will continue to innovate to provide consumers with alternative options for consuming cannabis as we expand across the Canadian market.

commitment to filling one of the largest gaps in the cannabis sector – creating products that provide fast onset of action and accurate dispensing. Focusing on wellness and innovation, we are providing products that give the consumer an alternate or complimentary way of consuming cannabis. We use pure distillate cannabis oils, high quality ingredients, and delivery systems (inhalers and sprays) that are based on decades of testing and improvements in the pharmaceutical industry. Remidose topicals, sprays and inhalers are redefining the way society approaches the health and wellness benefits of cannabis oil. What are your signature brands? Our signature product would be our cannabis inhalers. Unlike smoking or vaporization, inhalers produce no heat, which preserves the terpene and cannabinoid content in its purest form. With no smoke, no vapor, and no smell, inhalers are discreet and convenient for your personal use. Onset is fast and can replace or complement a cannabis user’s intake What are some of the new products that Remidose is excited about? We are listening to our consumers and continuously finding ways to adapt to their needs. One of the new products we are excited about is our Lemon Haze THC Oral Mist. When sprayed, its fine mist can

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PEICMC 2022-2023 Annual Report

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PEICMC 2022-2023 Annual Report

MANAGEMENT’S REPORT

Mr. John Abbott, Chair PEI Cannabis Management Corporation 3 Garfield Street, Charlottetown, PE C1A 6A4

Dear Mr. Abbott:

The preparation of financial information is an integral part of management’s responsibilities, and the accompanying Financial Statements are the responsibility of PEI Cannabis Management Corporation. This responsibility includes the selection of appropriate accounting policies and making judgments and estimates consistent with International Financial Reporting Standards. • PEI Cannabis maintains an accounting system and related controls providing: • Reasonable assurance that transactions are executed and recorded as authorized; • That assets are properly safeguarded and accounted for; and • That financial records are reliable for the preparation of financial statements in accordance with International Financial Reporting Standards (IFRS). Financial information presented elsewhere in this Annual Report is consistent with that in the financial statements.

PLEASE DON’T DRIVE IMPAIRED

Respectfully submitted,

Daniel MacDonald Chief Executive Officer

Matt McMillan Acting Chief Financial Officer

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PEICMC 2022-2023 Annual Report

INDEPENDENT AUDITOR'S REPORT

To the Directors of Prince Edward Island Cannabis Management Corporation Opinion

We have audited the financial statements of Prince Edward Island Cannabis Management Corporation (the Corporation), which comprise the statement of financial position as at March 31, 2023, and the statements of changes in equity, profit or loss and cash flow for the year then ended, and notes to the financial statements, including a summary of significant accounting policies. In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Corporation as at March 31, 2023, and the financial performance and cash flow for the year then ended in accordance with International Financial Reporting Standards. Basis for Opinion We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Corporation in accordance with ethical requirements that are relevant to our audit of the financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the Corporation's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Corporation or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Corporation's financial reporting process. Auditor's Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. (continues)

1

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PEICMC 2022-2023 Annual Report

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:  Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.  Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Corporation’s internal control.  Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.  Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Corporation’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Corporation to cease to continue as a going concern.  Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

PLEASE CONSUME RESPONSIBLY

MRSB CHARTERED PROFESSIONAL ACCOUNTANTS INC.

Charlottetown, PE June 27, 2023

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PEICMC 2022-2023 Annual Report

PRINCE EDWARD ISLAND CANNABIS MANAGEMENT CORPORATION Statement of Financial Position March 31, 2023 PRINCE EDWARD ISLAND CANNABIS MANAGEMENT CORPORATION Statement of Financial Position March 31, 2023 2023 ASSETS

2022

Current Cash

$ 2,704,776

$ 2,505,809

378,786 3,537,491

Accounts receivable (Note 5)

532,768 2,085,062

2023

2022

Inventory (Note 6)

ASSETS

6,621,053

5,123,639

Current Cash

Property and equipment (Schedules 1 and 2)

$ 2,704,776 3,409,681

$ 2,505,809 3,130,925

378,786 3,537,491 6,621,053 3,409,681

Accounts receivable (Note 5)

532,768 2,085,062 5,123,639 3,130,925

$ 10,030,734

$ 8,254,564

Inventory (Note 6)

LIABILITIES

Property and equipment (Schedules 1 and 2) Current Accounts payable and accrued liabilities (Note 7) Due to Province of Prince Edward Island (Note 8) Current portion of lease liabilities (Note 9) Current Accounts payable and accrued liabilities (Note 7) Due to Province of Prince Edward Island (Note 8) Current portion of lease liabilities (Note 9) Deferred revenue Lease liabilities (Note 9) Deferred revenue

$ 2,850,048

$ 3,518,301

$ 10,030,734 12,347 5,304,141

$ 8,254,564 10,156 3,383,297

219,547

160,060

LIABILITIES

$ 2,850,048 8,386,083 1,644,651 12,347 5,304,141 219,547

$ 3,518,301 7,071,814 1,182,750 10,156

3,383,297 160,060 7,071,814 1,182,750

$ 10,030,734

$ 8,254,564

8,386,083 1,644,651

Lease liabilities (Note 9) Contractual obligations (Note 10)

$ 10,030,734

$ 8,254,564

Contractual obligations (Note 10)

PEICMC 2022-2023 Annual Report On behalf of the Board _____________________________ Chair _____________________________ Director Notes 1 to 18 are an integral part of these financial statements 3 On behalf of the Board _____________________________ Chair _____________________________ Director Notes 1 to 18 are an integral part of these financial statements 3

30

PRINCE EDWARD ISLAND CANNABIS MANAGEMENT CORPORATION Statement of Changes in Equity Year Ended March 31, 2023

2023

2022

Retained earnings - beginning of year

$

-

$

-

2,909,096

Net income (Statement 5)

2,609,580

2,909,096 (2,909,096)

2,609,580 (2,609,580)

Annual income distribution to Province of Prince Edward Island

Retained earnings - end of year

$

-

$

-

PLEASE DON’T DRIVE IMPAIRED

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PEICMC 2022-2023 Annual Report

Notes 1 to 18 are an integral part of these financial statements 4

PRINCE EDWARD ISLAND CANNABIS MANAGEMENT CORPORATION Statement of Profit or Loss Year Ended March 31, 2023

2023

2022

Income

$ 22,500,680

Sales

$ 21,894,379

16,400,816

Cost of sales (Note 6)

16,330,772

6,099,864

Gross margin

5,563,607

Expenses Amortization of property and equipment (Schedule 1 and 2) Amortization of right-of-use assets (Schedule 1 and 2)

303,927 131,868 77,157

284,393 131,868 72,019 127,112 48,109 166,390

Insurance and property taxes (Note 11) Interest on debentures (Note 11) Interest on lease liabilities (Note 9) Other operating expenses (Note 12) Repairs and maintenance Salaries and benefits (Notes 11, 13) Rent

-

44,172 154,171 2,048 217,521 3,145,768 245,481 14,177 80,166

1,820

254,490 2,831,879 181,207

Store and office supplies

Travel Utilities

6,059 76,825

4,416,456

4,182,171

Income from operations Other income (Note 14)

1,683,408 1,225,688

1,381,436 1,228,144

Net income

$ 2,909,096

$ 2,609,580

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PEICMC 2022-2023 Annual Report

Notes 1 to 18 are an integral part of these financial statements 5

PRINCE EDWARD ISLAND CANNABIS MANAGEMENT CORPORATION Statement of Cash Flow Year Ended March 31, 2023

2023

2022

Cash flows from operating activities Net income Items not affecting cash: Amortization of property and equipment Amortization of right-of-use assets

$ 2,909,096

$ 2,609,580

303,927 131,868

284,393 131,868 33,592

-

Loss on disposal of property and equipment

3,344,891

3,059,433

Changes in non-cash working capital: Accounts receivable

153,982 (1,452,428)

(72,637) 1,434,604

Inventory

-

Prepaid expenses

4,545

(668,253)

Accounts payable and accrued liabilities

1,457,869

2,190

Deferred revenue

4,359

PLEASE CONSUME RESPONSIBLY

(1,964,509)

2,828,740

1,380,382

5,888,173

Cash flows from investing activities

(77,275) (637,276)

Purchase of property and equipment Purchase of right-of-use assets

(162,590)

-

(714,551)

(162,590)

Cash flows from financing activities

1,920,844 (2,909,096) 637,276 (115,888)

Advances from Province of Prince Edward Island Annual income distribution to Province of Prince Edward Island

2,542,292 (2,609,580) (111,951) (5,054,613) -

Proceeds from lease liabilities Repayment of lease liabilities Repayment of debentures payable

-

(466,864)

(5,233,852)

Increase in cash

198,967

491,731

Cash - beginning of year

2,505,809

2,014,078

Cash - end of year

$ 2,704,776

$ 2,505,809

Cash consists of: Cash on hand

$ 36,782 2,667,994

$ 36,115 2,469,694

Cash in financial institution

$ 2,704,776

$ 2,505,809

Cash flow supplementary information Interest received

$ 72,945

$ 14,841

$ 44,172

Interest paid

$ 230,258

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PEICMC 2022-2023 Annual Report

Notes 1 to 18 are an integral part of these financial statements 6