Ms. Crystal Buckner reports

CRAFT 1861 GLOBAL HOLDINGS INC. SUBMITS ANNUAL & INTERIM FILINGS AFTER COMPLETION OF AUDITED FINANCIALS; MANAGEMENT COMMENTARY

Craft 1861 Global Holdings Inc. has filed the company's annual information form, its audited annual financial statements, and corresponding management's discussion and analysis for the year ended Dec. 31, 2022, and unaudited interim consolidated financial statements and corresponding management's discussion and analysis for the period ended March 31, 2023. The annual and interim filings are available for download from the company's SEDAR profile.

The filing of the annual and interim filings is an automatic application to the Ontario Securities Commission to revoke the previously disclosed failure-to-file cease trade order (the FFCTO). Trading is expected to resume on Neo Exchange Inc., operating as Cboe Canada, shortly after the revocation of the FFCTO.

Management update

On March 8, 2023, the company's auditor resigned, with GreenGrowth CPAs Inc. being appointed as successor auditor. The company worked diligently with GreenGrowth to complete the reviews necessary for the release and filing of the annual filings. In addition to the delays related to the company's preparation of the annual filings, the company experienced difficulties in receiving and accessing the cash proceeds of the investment made by Brott LCC. The Brott investment, which will be used to finance the company's growth strategy, comprises a $100-million equity investment and a $900-million (U.S.) line of credit. The delays in receiving and accessing the Brott funds are the result of restrictions in the U.S. banking industry regarding the cannabis industry. The company continues to work with its banking partners to resolve these issues and will update the market on any further developments.

2022 annual filings highlights

The company reported revenue for the year ended Dec. 31, 2022, of $2,011,885, an increase of $310,072, or 18 per cent, compared with revenue of $1,701,813 as of the year ended Dec. 31, 2021. The increase in revenue was primarily the result of an increase in sales with 1861 Market. 1861 Market is a state of New Mexico legal retail cannabis operating entity. Craft 1861 (CBD (cannabidiol)) revenue for the year ended Dec. 31, 2022, was $90,091, an increase of $51,591, or 134 per cent, compared with revenue of $38,500 for the year ended Dec. 31, 2021.

Costs of goods sold, excluding adjustments to the fair value of biological assets and inventory sold for the year ended Dec. 31, 2022, were $767,600, an increase of $33,617 or 5 per cent, compared with cost of goods sold, excluding adjustments to the fair value of biological assets and inventory sold, of $733,983 for the year ended Dec. 31, 2021. The company reported gross profit for the year ended Dec. 31, 2022, of $3,247,602, an increase of $820,661 or 34 per cent compared with gross profit of $2,426,941 for the year ended Dec. 31, 2021. The increase in gross profit is directly attributable to an increase in revenue and an increase in unrealized gain on changes in the fair value of biological assets.

The company reported total operating expenses for the year ended Dec. 31, 2022, of $31,049,967, an increase of $19,607,448 or 1,714 per cent compared with $11,442,519 for the year ended Dec. 31, 2021. The increase in total operating expenses was primarily attributable to an increase in the amortization of intangibles, subcontractor expenses and management fees and an increase in SG&A (selling, general and administrative) investment preparing for the next phase of company growth. Operating loss for the year ended Dec. 31, 2022, was $(27,802,365), an increase in loss of $18,786,787, or 2,084 per cent, compared with the operating loss of $9,015,578 for the year ended Dec. 31, 2021. Net loss for the year ended Dec. 31, 2022, was $(21,924,377), an increase in loss of $12,511,610, or 1,329 per cent, compared with a $(9,412,767) loss for the year ended Dec. 31, 2021. The increase in net loss was primarily driven by increases in operating expenses.

2023 first quarter interim filings highlights

The company reported revenue for the three months ended March 31, 2023 ,of $482,319, an increase of $291,926, or 153 per cent, compared with revenue of $190,393 as of the three months ended March 31, 2022. The increase in revenue was primarily the result of an increase in sales with 1861 Market due to the approval of recreational sales in the state of New Mexico on April 1, 2022.

Costs of goods sold, excluding adjustments to the fair value of biological assets and inventory sold for the three months ended March 31, 2023, were $(184,021), an increase of $158,345, or 616 per cent, compared with cost of goods sold, excluding adjustments to the fair value of biological assets and inventory sold, of $(25,676) for the three months ended March 31, 2022. The company reported gross profit for the three months ended March 31, 2023, of $865,416, an increase of $773,396, or 884 per cent compared with gross profit of $92,020 for the three months ended March 31, 2022. The increase in gross profit was primarily driven by the increase in unrealized gain on changes in fair value of biological assets on hand.

The company reported total operating expenses for the three months ended March 31, 2023, of $18,565,912, an increase of $9,603,679, or 107 per cent compared with $8,962,233 for the three months ended March 31, 2022. The increase in total operating expenses was primarily attributable to an increase in the depreciation and amortization of intangible assets and an unrealized foreign exchange on loss of sponsorship liabilities. Operating loss for the three months ended March 31, 2023, was $(17,700,496), an increase in loss of $8,830,283, or 100 per cent, compared with the operating loss of $(8,870,213) for the three months ended March 31, 2022. Net loss for the three months ended March 31, 2023, was $(60,393,864), an increase in loss of $50,865,548), or 537 per cent, compared with a $(9,442,127) loss for the three months ended March 31, 2022. The increase in net loss was primarily driven by the listing expense, the depreciation and amortization of intangible assets, and unrealized foreign exchange loss on revaluation of sponsorship liability.

Project timing for launch of business segments

As a result of the delay in the receipt of and access to the Brott funds, the company is experiencing related delays in the achievement of certain business objectives and milestones previously set out in BGP Acquisition Corp.'s final prospectus filed Dec. 2, 2022. In particular, the company now expects (i) to ramp up sales in its CBD operations in Q1 2024 (previously Q2 2023); (ii) the launch of its e-commerce business in Q1 2024 (previously Q1 2023); (iii) the launch of business-to-business sales in Q1 2024 (previously Q2 2023); and (iv) the full launch of its strategic partnerships in Q1 2024 (previously Q2 2023).

We seek Safe Harbor.