Mr. Stephen Giblin reports

BIG ROCK BREWERY INC. ANNOUNCES FISCAL 2022 RESULTS & INITIATION OF STRATEGIC REVIEW

Big Rock Brewery Inc. has released its financial results for the three months and year ended Dec. 30, 2022.

"[Two thousand twenty-two] was a challenging year due to a combination of operational concerns as a result of the growth in our co-packing business and related inventory management issues," said interim president and chief executive officer Stephen Giblin. "In response to the corporation's operating results and the corporation's breach in the third quarter of financial covenants under its credit facilities with ATB Financial, the board of directors enacted significant changes. In the fourth quarter of 2022, the corporation changed its chief executive officer, secured a $4.3-million capital injection from a major shareholder, VN Capital Fund I LP, amended the terms of its credit facilities with ATB Financial and restructured its senior management team. The corporation also posted significant one-time charges of $2.4-million that included $1.4-million of inventory writedowns, $200,000 of fixed asset writedowns and $800,000 of charges related to the restructuring. We were also pleased to announce a new multiyear agreement with Browns Social House Ltd., which we feel is a strong testament to the quality and character of the Big Rock brand. As a result of significant organizational streamlining in sales, production and fulfilment, the corporation is now much better positioned to continue to not only focus on the growth of both the branded and co-pack business, but to deliver this growth with profitability at the forefront."

Big Rock also announces that it has initiated a process to evaluate potential strategic alternatives with a view to enhancing shareholder value. The strategic review will be led by a special committee of the board of directors of the corporation, which has engaged Acumen Capital Finance Partners Ltd. as strategic adviser to the special committee. The special committee will review the corporation's operations, and investigate alternate courses of actions including, but not limited to, further cost reductions, restructuring, refinancing, a potential sale of all or part of the corporation's assets, a business combination with another party, or other strategic initiatives.

Big Rock has not set a definitive schedule to complete its identification, examination and consideration of strategic alternatives. The corporation does not intend to comment further on the strategic review, unless and until the board has approved a specific course of action or otherwise determined that further disclosure is appropriate or required by law. The strategic review has not been initiated as a result of receiving any offer, and the company cautions that there are no assurances or guarantees that the process will result in a transaction or, if a transaction is undertaken, the terms or timing of such a transaction.

Financial summary

For the three months ended Dec. 30, 2022, compared with the three months ended Dec. 30, 2021, the corporation reported:

• Sales volumes up 4 per cent to 35,564 hectolitres (hl) compared with 34,429 hl;
• Net revenue increased by 21 per cent to $10.5-million from $8.7-million;
• Operating loss increased by 30 per cent to $3.8-million compared with $2.9-million;
• Net loss increased by $400,000 to $4.2-million; and
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) decreased to negative $3.8-million from negative $2.9-million. Adjusted EBITDA is a non-GAAP (generally accepted accounting principles) financial measure.

For the year ended Dec. 30, 2022, compared with the year ended Dec. 30, 2021, the corporation reported:

• Sales volumes down 3 per cent to 158,496 hl from 163,630 hl;
• Net revenue up 2 per cent to $47.1-million from $46.0-million;
• Operating loss increased to $6.9-million from $2.0-million;
• Net loss increased to $7.1-million from $3.3-million;
• Adjusted EBITDA decreased from $2.1-million to a loss of $3.4-million;
• Capital spending of $1.3-million of the corporation's total $1.4-million 2022 capital program; and
• $13.8-million drawn on total credit facilities of $16.0-million.

Fourth quarter summary:

• Total sales volumes for the fourth quarter of 2022 increased by 3.6 per cent, driven primarily by increased private-label on- and off-premise sales that grew approximately 33 per cent over 2021;
• Cost of sales increased significantly; however, this was driven almost exclusively by a $1.4-million inventory write-off that was captured in the fourth quarter of 2022 that contains expired inventory dating back to 2021;
• Inflationary pressures continued from the third quarter primarily in utilities, distribution and key raw materials; and
• Retail revenue decreased significantly in the fourth quarter of 2022 compared with 2021, driven by the closure of the Vancouver restaurant and tap room in early 2022.

In direct response to the operational and inventory management issues that the corporation experienced in 2022, significant measures have been implemented to revise and optimize the sales and production processes across the business. These initiatives have been implemented to enable Big Rock to better realize the benefits of the growth in co-pack production going forward. The corporation aims to gain market share in an otherwise declining beer market, and premiumize its portfolio via innovation and co-creation with strategic partners. Big Rock takes significant pride in its owned brands and is focused on continuing the tradition of innovation that the corporation was founded upon over 35 years ago.

Alberta government mark-up update

The government of Alberta and the Alberta Gaming Liquor and Cannabis Commission (AGLC) have announced that beginning March, 2023, forward annual worldwide production (AWP) will exclude volume produced under co-packing agreements. This change not only avoids double taxation for Big Rock's co-pack customers, but also allows Big Rock to grow the co-pack portion of its business without negatively impacting the mark-up tax applied to its Big Rock-branded products sold in Alberta.

The focus of both the government of Alberta and the AGLC on reducing red tape and growing beverage manufacturing within the province continues to support Big Rock's strategic goals for growth and innovation.

Additional Information

The audited consolidated financial statements and Management's Discussion and Analysis for the year ended December 30, 2022 dated March 29, 2023, can be viewed on Big Rock's website and on SEDAR under Big Rock Brewery Inc.

Big Rock is also pleased to announce that the Annual Meeting of Big Rock shareholders will be held on May 25, 2023 at 2:00 p.m. (Mountain Standard Time). Further details of the Annual Meeting will follow in due course.

About Big Rock Brewery Inc.

In 1985, Ed McNally founded Big Rock to contest the time's beer trends. Three bold, European-inspired offerings - Bitter, Porter and Traditional Ale - forged an industry at a time heavy on easy drinking lagers and light on flavour. Today, our extensive portfolio of signature beers, ongoing seasonal offerings, ciders (Rock Creek Cider(TM) series), custom-crafted private label products and other notable, licensed alcoholic beverages keeps us at the forefront of the craft beer revolution and still proudly contesting the beer and alcoholic beverage trends of today. Big Rock has brewing operations in Calgary, Alberta, Vancouver, British Columbia, and Toronto, Ontario. Big Rock trades on the TSX under the symbol "BR".

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