PEI Cannabis Annual Report 2024

FOR THE YEAR ENDED MARCH 31, 2024 2024 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. 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 2023-2024 Annual Report

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PEICMC 2023-2024 Annual Report

TABLE OF CONTENTS

PEICMC - What Guides Us

1

Table of Contents

3 4 4 5 6 7 7 7 7 7 8

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 the Public

Appointment of Board Members Responsibilities of Board Members

Audit Committee Organizational Chart Executive Summary

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Sommaire

11

Operational Overview

12 12 16 18

Strategic Target - Business Results Strategic Target - Customer Experience

Strategic Target - Corporate Social Responsibility

Strategic Target - People & Culture

20

PEI Cannabis Outlets

21

Featured Producer - FOG Organics Store Of The Year - Summerside

22 24 25 26 26

Management’s Report

Appendix

Auditor’s Report and Audited Financial Statements

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PEICMC 2023-2024 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 6th Annual Report of the Prince Edward Island Cannabis Management Corporation.

Respectfully submitted,

Honourable Jill Burridge, 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 6th Annual Report of the Prince Edward Island Cannabis Management Corporation covering the period of April 1, 2023, to March 31, 2024.

Respectfully submitted,

John Abbott, Chair

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PEICMC 2023-2024 Annual Report

MESSAGE FROM THE CEO

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

Dear Mr. Abbott,

As we reflect on the fiscal year 2024, it is my privilege to introduce the annual report of the Prince Edward Island Cannabis Management Corporation (PEICMC). I am proud of the remarkable progress and resilience demonstrated by our PEICMC team which has positioned us for continued growth and success in this dynamic cannabis industry. This year was big… marked by a pivotal 5-year cannabis legalization milestone! I am pleased to report total

sales exceeding $24.9 million. This represents a significant increase of over $2.4M from the previous fiscal year, with a recorded net income of $3.04 million. Additionally, we contributed $3.8 million in excise tax revenue to the province. We have expanded our product offerings, enhanced our social responsibility initiatives, and optimized our inventory and supply chain processes to meet the ever-evolving demands of the industry. We have worked to promote responsible practices and support local causes, reinforcing our role as a conscientious corporate citizen. We are dedicated to increasing safety awareness through campaigns such as “Impaired is Impaired”, an impaired driving campaign which informs Islanders it is not okay to drive after consuming cannabis. This message remains critical to be shared to keep our Island roads safe. Another social responsibility message I feel the need to highlight is “Know Your Source,” this campaign informs Islanders that the only legal way to purchase adult-use cannabis in Prince Edward Island is through PEI Cannabis. Purchasing legal cannabis ensures the product adheres to strict Health Canada regulations and undergoes rigorous testing by federally licensed third-party laboratories. Cannabis from illegal sources may contain dangerous contaminants, and labels might not accurately reflect the THC or CBD content. Looking ahead, we are excited about the opportunities that lie before us. The opening of our Stratford location was crucial to meet the growing demand and to remain competitive with the illicit market. We are strategically positioned to lead in innovation, quality, and customer satisfaction. Our vision is clear: to be the preferred source of adult-use cannabis, and we will continue to work towards that mission to ensure that access to safe, regulated cannabis is available to all 19+ Islanders. I would like to express my gratitude to outgoing board members Perry Gotell and Susan Milligan for their dedication and commitment during their terms with the PEICMC. I would also like to extend a warm welcome to new board members, Kelly Shea Rayner and Ian Burge. I am deeply appreciative of our entire team, whether at the executive level, in our stores, warehouse, or head office. Everyone has contributed to the success of our organization, and for that, I am sincerely grateful. 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 2024 on behalf of the Prince Edward Island Cannabis Management Corporation.

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Warm Regards,

Daniel MacDonald, Chief Executive Officer

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PEICMC 2023-2024 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: Kate Shreenan - Recording Secretary, Ian Burge - Member, Nicole DesRoche - Member, Kelly Shea Rayner - Member

Seated: Daniel MacDonald - Chief Executive Officer, John Abbott - Chair, Kim Griffin - Vice - Chair, Murray Murphy - Corporation Solicitor (absent from photo)

EXECUTIVE MANAGEMENT TEAM Standing: Gerald O’Halloran - Director, Supply Chain and Property Management, Heather Rossiter - Director, Corporate Affairs and Regulatory Services, Shawn Alexander - Director, Human Resources and Employee Wellness 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 2023-2024 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 2023-2024 Annual Report

ORGANIZATIONAL CHART

* Shared-services agreement with the PEI Liquor Control Commission (PEILCC). ** For the period starting May 14, 2024

HON. JILL BURRIDGE

Minister of Finance

JOHN ABBOTT

Chair

**

KIM GRIFFIN

IAN BURGE

Member Vice - Chair

Member

**

KELLY SHEA RAYNER

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

Director, Supply Chain and Property Management

SHAWN ALEXANDER

GERALD O’HALLORAN

PAUL CRABBE

Director, Operations and Strategic Development

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PEICMC 2023-2024 Annual Report

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PEICMC 2023-2024 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. • 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 sixth fiscal year it generated over $24.9M 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. The mandate under the Cannabis Management Corporation Act has two primary purposes:

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 2023-2024 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. Sa présidente ou son président relève du ministre responsable de Cannabis Î.-P.-É. • 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 sixième exercice, il a généré un total de plus de 24,9 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. Le mandat conféré à l’organisme par la Cannabis Management Corporation Act a deux objectifs principaux :

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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 2023-2024 Annual Report

OPERATIONAL OVERVIEW PEI Cannabis has a 3-year Strategic Plan which guides its activities through to fiscal 2023-2024. 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 TARGET 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.

Actual 2022-2023

Target 2023-2024

Actual 2023-2024

Target % 2023-2024

Target 2024-2025

PERFORMANCE MEASURES

Total Net Sales Revenue $22,500,680 $24,000,000 $24,966,165

104% $25,900,000

Gross Margin

27.1%

25.5%

27.4%

107.5%

26.5%

Net (Loss) Income

$2,909,096 $1,090,300 $3,035,779

278.4% $1,470,000

General & Administrative Expenses

$4,416,456

$6,108,500 $5,000,762

81.9%

$6,379,500

Dried Cannabis Equivalent Sales

4,094 kilograms

4,100 kilograms

5,074 kilograms

5,262 kilograms

128%

Application of Net Receipts

Net Receipts

Beverages

Other Income

Recognition of Capital Assets

Accessories

2.16%

1.98%

0.34%

4.95%

Topicals

Edibles

0.36%

Operating Expenses

5.85%

19.47%

Seeds

0.04%

Ingested Extracts

3.67%

Concentrates

14.83%

43.42%

Dried Flower

78.37%

24.56%

Pre-Rolled

Suppliers

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PEICMC 2023-2024 Annual Report

Store by Store Net Sales Analysis

PEI CANNABIS STOREFRONT

Total Net Receipts

% of Sales Revenue

Charlottetown

$13,568,940

54.35%

Summerside

$5,983,557

23.97%

*Stratford

$492,861

1.98%

Montague

$3,443,201

13.79%

O’Leary

$1,351,876

5.41%

Online

$125,730

0.50%

TOTAL

$24,966,165

100%

* Opened January 22, 2024

Average Basket Size by Location

CHARLOTTETOWN $39.57

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SUMMERSIDE

$40.00

O’LEARY

$42.55

MONTAGUE

$40.59

STRATFORD

$37.33

HOME DELIVERY

$89.59

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 2024, 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 2023-2024 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 23/24 including clones, 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 •

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 2023-2024 Annual Report

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STRATEGIC TARGET • CUSTOMER EXPERIENCE

STRATEGIC TARGET

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.

Actual 2022-2023

Target 2023-2024

Actual 2023-2024

Target % 2023-2024

Target 2024-2025

PERFORMANCE MEASURES

Customer Experience Score

97%

90%

95%

105.55%

95%

Customer Counts

548,169

630,000

622,367

98.78%

645,295

Unique SKUs Sold

763

750

725

96.66%

725

Customer Counts

Listed SKU Type by Format

Beverages

25

73

Dried Flower

Concentrates

147

8

Seeds

11

Topicals

57

Accessories

110

67

April, 2023 • 45,347

May, 2023 • 49,447

June, 2023 • 50,638

July, 2023 • 56,979

August, 2023 • 58,086

September, 2023 • 51,688

October, 2023 • 53,461

November, 2023 • 51,782

December, 2023 • 52,565

January, 2024 • 51,486

February, 2024 • 47,999

March, 2024 • 52,889

Pre-Rolled

Edibles

39

Ingested Extracts

% of Cannabis Sales by Quality Type

% of Cannabis Sales by Type

0.46%

A/O

19.87%

Craft

Not Applicable

0.45%

CBD Products

1.54%

Value

37.67%

Multi Cannabinoid Products

5.42%

92.59%

42.00%

Mainstream

THC Products

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PEICMC 2023-2024 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.

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Customer Experience

• PEI Cannabis exceeded its customer count forecast for a sixth 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.

3. There is a short product life cycle due in part to frequent rotation of new product innovations.

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PEICMC 2023-2024 Annual Report

STRATEGIC TARGET • CORPORATE SOCIAL RESPONSIBILTY STRATEGIC TARGET 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. 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. CORPORATE OBJECTIVES

Actual 2022-2023

Target 2023-2024

Actual 2023-2024

Target % 2023-2024

Target 2024-2025

PERFORMANCE MEASURES

Retail Responsible Service Score

85%

85%

87%

102.35%

85%

Corporate Citizenship Survey Score 84.33%

85%

83.58% 98.32%

85%

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 2023-2024 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. During Fiscal 2024, PEI Cannabis supported several Corporate Social Responsibility initiatives. Key external partnerships were maintained by PEI Cannabis focusing on responsible cannabis consumption. (e.g., UPEI, Holland College, Kari Ride Sharing Initiative, T3 Transit, Stingray/MBS radio, 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 fifth 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 2025. 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 2023-2024 Annual Report

STRATEGIC TARGET • PEOPLE & CULTURE STRATEGIC TARGET

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.

Actual 2022-2023

Target 2023-2024

Actual 2023-2024

Target % 2023-2024

Target 2024-2025

PERFORMANCE MEASURES

Staff Retention Rate

98%

95.0%

89.1%

93.8%

95%

Training Hours per Employee

N/A

80%

N/A

N/A

80%

Employee Wellness Rate

96.65%

98%

96.91%

98.9%

98%

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 98.9% 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 2025. Engagement • PEI Cannabis partnered with PEI Liquor and external training providers through fiscal 2024 to facilitate a comprehensive training programs for 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. • PEI Cannabis initiated a corporate performance planning, evaluation and coaching program in fiscal 2024. Professional Success • Excellent outcomes around minimal staff turnover over fiscal 2024 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 must continue to manage absenteeism due to injury or illness so it can preserve the health of its employees and effectiveness and efficiency of its operations. 2. 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 2023-2024 Annual Report

PEI CANNABIS OUTLETS

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PEI CANNABIS RETAIL STORES

ADDRESS

PHONE

O’Leary

478 Main St., O’Leary, PE C0B 1V0

902-859-0392

Summerside

447 Granville St., Summerside, PE C1N 3C4

902-438-4989

Charlottetown

85D Belvedere Ave., Charlottetown, PE C1A 6B2

902-569-7758

Stratford

9 Kinlock Road, Unit 310, Stratford, PE C1B 1L8

902-370-9333

Montague

509 Main St., Montague, PE C0A 1R0

902-838-0924

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PEICMC 2023-2024 Annual Report

Tell us a bit about FOG Organics. What does FOG stand for and how did it get started? FOG Organics, short for Fields of Green Organics, is a small cannabis farm located in Margate, PEI, which is quite literally a field of green cannabis plants. Someday, we hope to have multiple fields of green and live up to our name. Our founder, Don Mangos, began FOG Organics to keep active and spend time outdoors as he eased into retirement. He was always an avid gardener, growing most of his family’s produce, and believed that organic growing in living soil produces the best tasting food and cannabis while minimizing the impact on our environment. What is FOG’s signature product grown at its farm in Margate? FOG’s signature product is a sativa dominant hybrid called Bruce Banner that is craft-cured by a proprietary method, decades in the making, that produces a premium product. It is grown outdoors, in living soil, on our

Photo left to right: Nick DesRoches, FOG Quality Director and Partner Don Mangos, FOG General Manager, at their outdoor cannabis farm in Margate, PEI.

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PEICMC 2023-2024 Annual Report

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How does FOG see the organic cannabis industry evolving? We feel that the Canadian cannabis industry is evolving into more of an agricultural product in place of a pharmaceutical, and policy makers are slowly making changes that will allow products to carry the certified organic logo. Once these changes take effect it will give consumers the power to choose certified organic products. What can customers expect from FOG over the next year? Over the next year FOG intends to continue supplying its customers with reasonably priced, quality products through PEI Cannabis stores. Looking towards the future, we hope to eventually be able to serve customers directly at our farm in Margate.

Margate farm because it is preferred over artificial light by this cultivar, and it respects some of FOGs core values; respect for the land and low carbon footprint (no supplemental lighting and mechanicals requiring energy). In addition, all the energy that FOG consumes is supplied by an on-site solar array. The outdoor part of the operation starts in the first week of June when the plants have about 3-4 nodes. That is when they are planted in the field. Our Bruce Banner finishes in mid-September and the drying and curing can take up to 6 months. What are some of the new products that FOG is excited about? Some new products that FOG is excited to begin offering very soon include two products on opposite ends of the spectrum. Our heavy hitting Bruce Banner outdoor grown whole flower, grown in our living soil garden, and our high CBD, tasty craft hemp pre rolls, rolled from hemp grown in a partner’s craft hemp farm.

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PEICMC 2023-2024 Annual Report

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PEICMC 2023-2024 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 2023-2024 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, 2024, and the statements of changes in equity, profit or loss and cash flow for the year then ended, and notes and schedules 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, 2024, 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)

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PEICMC 2023-2024 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 25, 2024

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PEICMC 2023-2024 Annual Report

PRINCE EDWARD ISLAND CANNABIS MANAGEMENT CORPORATION Statement of Financial Position March 31, 2024 PRINCE EDWARD ISLAND CANNABIS MANAGEMENT CORPORATION Statement of Financial Position March 31, 2024 2024

2023

ASSETS

Current Cash

2024

2023

$ 2,017,293

$ 2,704,776

269,441 2,322,711

Accounts receivable (Note 5)

378,786 3,537,491

ASSETS

Inventory (Note 6) Prepaid expenses

Current Cash

500

-

$ 2,017,293

$ 2,704,776

269,441 2,322,711 4,609,945 3,980,406 500

Accounts receivable (Note 5)

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

Inventory (Note 6) Prepaid expenses Property and equipment (Schedules 1 and 2)

-

4,609,945 3,980,406 $ 8,590,351 $ 8,590,351 $ 2,251,228

6,621,053 3,409,681 $ 10,030,734 $ 10,030,734 $ 2,850,048 $ 2,850,048 219,547 5,304,141 12,347

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

LIABILITIES

16,238 4,615,720

LIABILITIES

$ 2,251,228 238,800

16,238 4,615,720 238,800 7,121,986 1,468,365

12,347 8,386,083 1,644,651 5,304,141 219,547

7,121,986 1,468,365 $ 8,590,351

8,386,083 1,644,651 $ 10,030,734

Lease liabilities (Note 9)

Contractual obligations (Note 10)

$ 8,590,351

$ 10,030,734

Contractual obligations (Note 10)

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

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PEICMC 2023-2024 Annual Report

PRINCE EDWARD ISLAND CANNABIS MANAGEMENT CORPORATION Statement of Changes in Equity Year Ended March 31, 2024

2024

2023

Retained earnings - beginning of year

$

-

$

-

3,035,779

Net income (Statement 5)

2,909,096

3,035,779 (3,035,779)

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

Annual income distribution to Province of Prince Edward Island

Retained earnings - end of year

$

-

$

-

PLEASE DON’T DRIVE IMPAIRED

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

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PEICMC 2023-2024 Annual Report

PRINCE EDWARD ISLAND CANNABIS MANAGEMENT CORPORATION Statement of Profit or Loss Year Ended March 31, 2024

2024

2023

Revenues Sales

$ 24,966,165

$ 22,500,680

18,117,146

Cost of sales (Note 6)

16,400,816

6,849,019

Gross margin

6,099,864

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

319,503 179,663 97,873 64,519 215,132

303,927 131,868 77,157 44,172 154,171

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

810

2,048

295,408 3,537,495 187,079 16,822 86,458

217,521 3,145,768 245,481

Store and office supplies

Travel Utilities

14,177 80,166

5,000,762

4,416,456

Income from operations Other revenues (Note 14)

1,848,257 1,187,522

1,683,408 1,225,688

Net income

$ 3,035,779

$ 2,909,096

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

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PEICMC 2023-2024 Annual Report

PRINCE EDWARD ISLAND CANNABIS MANAGEMENT CORPORATION Statement of Cash Flow Year Ended March 31, 2024

2024

2023

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

$ 3,035,779

$ 2,909,096

319,503 179,663

303,927 131,868

3,534,945

3,344,891

Changes in non-cash working capital: Accounts receivable

109,345 1,214,781

153,982 (1,452,428)

Inventory

(500)

Prepaid expenses

-

(598,820)

Accounts payable and accrued liabilities

(668,253)

3,893

Deferred revenue

2,191

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728,699

(1,964,508)

4,263,644

1,380,383

Cash flows from investing activities

(1,069,894)

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

(77,275) (637,276)

-

(1,069,894)

(714,551)

Cash flows from financing activities

(688,421) (3,035,779) (157,033)

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

1,920,844 (2,909,096) (115,889)

Repayment of lease liabilities Proceeds from lease liabilities

-

637,276

(3,881,233)

(466,865)

Increase (decrease) in cash

(687,483)

198,967

Cash - beginning of year

2,704,776

2,505,809

Cash - end of year

$ 2,017,293

$ 2,704,776

Cash consists of: Cash on hand

$ 44,782 1,972,511

$ 36,782 2,667,994

Cash in financial institution

$ 2,017,293

$ 2,704,776

Cash flow supplementary information Interest received

$ 218,505

$ 72,945

$ 64,519

Interest paid

$ 44,172

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

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PEICMC 2023-2024 Annual Report