Mr. Matt Milich reports

BZAM LTD. REPORTS THIRD QUARTER 2023 RESULTS

BZAM Ltd. has released its financial and operating results for the three- and nine-month period ended Sept. 30, 2023. These filings are available for review on the company's SEDAR+ profile.

Third quarter 2023 highlights:

• Achieved quarterly net revenues of $21.0-million for Q3 2023, an increase of 112 per cent from Q3 2022 and a 9-per-cent increase from second quarter 2023;
• Maintained adjusted general and administrative expenses at 22 per cent of gross revenue in Q3 2023, a reduction of 30 per cent versus Q3 2022 and almost flat with the 21 per cent in Q2 2023;
• Implemented the final phase of the postmerger synergy plan to monetize redundant facilities, clean up inventory and reduce expenses;
• Initiated deliveries further to various export agreements in three international markets, leveraging the company's European Union good manufacturing practice certification obtained in Q2 2023.

Management commentary

Matt Milich, chief executive officer, stated, "In Q3, we completed our extensive postmerger facility consolidation and cost reduction program, while rationalizing a number of low-margin SKUs, which we expect to positively impact our operating metrics going forward."

Net revenue: Net revenue increased by 112 per cent compared with Q3 2022, primarily driven by the expansion in the company's brand and product portfolio resulting from the merger between BZAM Holdings Inc. and The Green Organic Dutchman Holdings Ltd. Relative to Q2 2023, net revenues were 9 per cent higher. The quarter-on-quarter increase in net revenues was driven by increased sales of Highly Dutch flower, -ness vapes and BZAM infused prerolls, partly offset by the planned discontinuation of some low-margin SKUs.

Direct gross profit: Direct gross profit for the quarter was 8 per cent before changes in fair value of biological assets, compared with 6 per cent in Q3 2022 and 16 per cent in Q2 2023. The decrease from Q2 2023 was primarily due to inventory cost provisions and the cleanup of old inventory through sales at or below cost.

Adjusted general and administrative expenses: Adjusted G&A increased year over year by $2.5-million or 59 per cent primarily due to the BZAM transaction, and increased by $510,000 from Q2 2023 or 8 per cent. As a percentage of gross revenue, the adjusted G&A was 22 per cent in Q3 2023, a decrease from 30 per cent of gross revenue in Q3 2022, and on par with 21 per cent of gross revenue in Q2 2023.

Loss from operations: Loss from operations was $12.9-million in Q3 2023, compared with $8.7-million for Q3 2022 and $12.1-million in Q2 2023, with the increase in loss primarily driven by higher net inventory provisions and the restructuring and termination costs incurred in Q3 2023.

Q3 operational highlights

Maximizing facility utilization: The company continues to concentrate activities at its core facilities to maximize utilization and overhead absorption. In September, the company implemented the final phase of its postmerger synergy plan, which included: (i) eliminating redundant facilities; (ii) realigning the company's production activities across its two core sites in Ancaster, Ont., and Pitt Meadows, B.C., to maximize efficiencies; and (iii) reducing selling, general and administrative expenses to achieve its goal of positive EBITDA (earnings before interest, taxes, depreciation and amortization).

International distribution

In Q3 2023, the company received orders under its international distribution agreements in Germany, Australia and the United Kingdom following on receipt of its EU-GMP certification in Q2 2023. As of Oct. 31, 2023, the company had delivered export orders to those three markets totalling $1.05-million.

Capital:

• Postquarter-end, the company secured $1.79-million in borrowing from Stone Pine Capital Ltd., a company controlled by the company's largest shareholder and current chairman. The promissory notes bear interest at prime plus 8.0 per cent, mature no earlier than Jan. 31, 2025, and are subordinate to the company's senior credit facility.
• On Oct. 27, 2023, the company entered into a waiver agreement with its lender, waiving the covenant requiring positive EBITDA until Jan. 31, 2024.

About BZAM Ltd.

BZAM (Canadian Securities Exchange: BZAM) (U.S. OTC: BZAMF) is a leading Canadian cannabis producer with a focus on branded consumer goods, innovation, quality, consistency, integrity and transparency. The BZAM family includes core brands BZAM, TGOD, ness, Highly Dutch Organic and Table Top and partner brands Dunn Cannabis, Fresh and Wyld. BZAM operates facilities in British Columbia, Alberta, Ontario and Quebec, as well as a retail store in Regina, Sask.

BZAM's common shares and certain warrants issued under the indentures dated June 12, 2020, Oct. 23, 2020, and Dec. 10, 2020, currently trade on the CSE under the symbol BZAM, BZAM.WR, BZAM.WA and BZAM.WB, respectively. BZAM's shares trade in the United States on the OTCQX under the symbol BZAMF.

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