Mr. Dale McClanaghan reports

LOTUS ANNOUNCES FINANCIAL RESULTS FOR FISCAL YEAR 2022

Lotus Ventures Inc. has released the financial results for the period ending Aug. 31, 2022.

Corporate highlights

The primary feature of fiscal 2022 was the diversification of sales channels from an almost exclusive business-to-business (B2B) sales model to adding additional business-to-consumer (B2C) channels. Difficulties in the B2B market generated a steep decline in sales volume and pricing which culminated in a large year-end loss of $4,792,759 after significant inventory and fair value accounting writedowns. Overhead and operating expenses are lean, and the company has obtained short-term debt from related and other parties during this transition period. At the date of this news release, sales are recovering as Lotus implements the marketing and sales evolution strategy initiated last year. The highlights of the company's efforts during the year ended Aug. 31, 2022, are as follows:

• Lotus received approval for the direct delivery sales program in British Columbia for cultivators producing under 3,000 kilograms per year. Subsequent to year-end, the company started utilizing the program through wholesale relationships in B.C.
• Building on the evolving sales diversification strategy detailed in the news release dated July 27, 2022, Lotus has made progress in the B2C channels by applying for provincial product calls in B.C., Ontario and Atlantic Canadian provinces, and by diversifying wholesale partners in B.C.
• Lotus continued the development of its product portfolio of exclusively grown strains in the legal Canadian market. Lotus added three premium strains to its production which are first-to-market strains in the legal Canadian market. As of the date of this news release, the Lotus Keylime Kush 3.5-gram flower and three-by-0.5-gram prerolls are being sold in British Columbia with additional announcements expected in 2023.

Sales and marketing highlights:

• In April, 2022, following on the successful launch of the Kalifornia, Lotus launched the Tranquil Elephantizer in collaboration with Kolab Project. During the year-end period, the Tranquil Elephantizer was sold in a 3.5-gram format in British Columbia and Ontario. Lotus continued sales efforts for the Kalifornia and Tranquil Elephantizer with both products listed in British Columbia and Ontario during the year.
• The company sold a total of 1,013 kg of cannabis in the 12-month period, generating revenue of $1.6-million. Bulk wholesale of cannabis accounted for 100 per cent of revenue during the 12-month period. The Lotus flower was sold primarily in British Columbia and Ontario during the year compared with in several provinces in previous years.
• During the year, the wholesale selling price of flower was between $1.25 and $3.50 per gram. The overall market has become oversaturated which has resulted in price compression.

Operational highlights:

• During the year, Lotus completed its 100th consecutive production harvest since commencing operations in 2018. The company has found operational success with its controlled-environment agriculture (CEA) method of indoor hydroponic cannabis cultivation.
• Lotus harvested its largest single LOT of the Tranquil Elephantizer with an over-50-per-cent-greater yield than original expectations. Tranquil Elephantizer has been grown with THC (tetrahydrocannabinol) ranging between 21 per cent and 28 per cent and terpene content between 2 per cent and 3.3 per cent.
• The company produced 2,008 kg during the 12-month period ending Aug. 31, 2022, compared with 2,200 kg in the prior-year period. As at Aug. 31, 2022, the company had approximately 1,439 kg of cannabis available for sale consisting of the Kalifornia and Tranquil Elephantizer strains.
• Lotus finished developing its subsequent premium cannabis strains, following strong launches of the Kalifornia and Tranquil Elephantizer. Building on tradition, the recently grown Lotus strains are again expected to be first-to-market in Canada and are expected to be in the range of 24 per cent to 30 per cent in THC content and between 2.5 per cent and 3.1 per cent in terpene content.

Selected annual information

The financial information herein is derived from the company's audited consolidated financial statements for the years ended Aug. 31, 2022, 2021, and 2020.

Summary of quarterly results

During the year ended Aug. 31, 2022, the company had net loss of $4,792,759 (2021 -- $301,797 net income). The financial results of the company for the eight most recent quarters are summarized herein.

During the three months ended Aug. 31, 2022, the company recognized a net loss of $4,930,606, compared with net income of $42,625 for the three months ended Aug. 31, 2021.

Net income for the three months ended Aug. 31, 2022, decreased by $4,962,812 as a result of the decline in sales and gross margin, and impairment of inventory in the current period as compared with the prior comparative period.

Loans payable at year-end, primarily from related parties, totalled $1,011,020, up from $319,704 the previous year. As at Dec. 31, 2022, the amount outstanding totalled approximately $2,920,508.

Significant items making up the change for the three months ended Aug. 31, 2022, as compared with the three months ended Aug. 31, 2021, were as follows:

• Gross margin before fair value adjustments decreased by $838,566 as a result of the decrease in sales and impairment of inventory.
• Impairment of $1,437,000 in harvested cannabis inventory was recognized due to the capitalized costs exceeding the estimated net realizable value of that inventory in the three months ended Aug. 31, 2022.
• Loss for changes in fair market value of biological assets increased by $2,455,985 due to a decline in market prices.
• Bank fees and interest increased by $122,597 as a result of an increase in interest on outstanding loans received.

Significant items making up the change for the three months ended Aug. 31, 2022, as compared with the three months ended Aug. 31, 2021, were as follows:

• Gross margin before fair value adjustments decreased by $838,566 as a result of the decrease in sales and impairment of inventory.
• Impairment of $1,437,000 in harvested cannabis inventory was recognized due to the capitalized costs exceeding the estimated net realizable value of that inventory in the three months ended Aug. 31, 2021.
• Loss for changes in fair market value of biological assets increased by $2,455,985 due to a decline in market prices.
• Bank fees and interest increased by $122,597 as a result of an increase in interest on outstanding loans received.

About Lotus Ventures Inc.

Lotus Ventures is a B.C.-based licensed producer of premium cannabis. Lotus owns the premium-craft consumer brand Lotus Cannabis Co., which has had its cannabis flower sold by wholesale partners in all provinces to date. Lotus is an experienced cultivator on a mission to produce the cleanest and most consistent premium cannabis in Canada. With operations in the North Okanagan, B.C., the Lotus Cannabis team has launched popular cultivars like the Keylime Kush, Black Blossom, Tranquil Elephantizer and Kalifornia, and currently has flower being sold in British Columbia, Alberta, Manitoba and Ontario.

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