Mr. Meni Morim reports

LIFEIST REPORTS SECOND QUARTER 2023 FINANCIAL RESULTS

Lifeist Wellness Inc. has released its financial results for the three months ended May 31, 2023 (Q2 2023), compared with the same period last year (Q2 2022). All financial figures are in Canadian dollars unless otherwise indicated.

Second quarter highlights:

• Net revenue for Q2 2023 increased 51 per cent from the same quarter last year to $6.2-million compared with $4.1-million in Q2 2022. The improvement was mainly driven by a year-over-year increase of $1.2-million in Aus Vapes hardware revenue, due to a two-month shutdown in 2022. CannMart cannabis revenue and Mikra nutraceutical revenue also contributed to the growth with year-over-year revenue growth of $580,000 and $255,000, respectively.
• The success of CannMart's in-house Roilty brand and the launch of the Mikra nutraceuticals business is driving growth, leading to a 22.5-per-cent increase in North American sales for Q2 2023 versus Q2 2022.
• The strategic focus on high-margin activities and operational efficiency continues to pay off in Q2 2023 with a $1.1-million improvement in gross profit, a $2.1-million reduction in adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) losses and gross margins of 29 per cent as Lifeist drives toward profitability.

"Our ongoing journey to transform Lifeist into a diversified wellness company with high-margin business units remains on track," affirmed Meni Morim, chief executive officer of Lifeist. "In our second quarter results, we experienced growth across all our key metrics, including achieving another historic high gross profit. Though the path has been challenging, we are making continuous improvements and efficiencies are having an impact as we move toward our goal of profitability and positive cash flow.

"The growth in second quarter 2023 revenue was led by our Aus Vapes business which experienced a significant rebound in revenue, having introduced new product categories, a new marketing strategy, and successfully relocated warehouse operations into a larger and more modern facility improving efficiencies after devastating spring floods. In addition, both of our main wellness businesses, CannMart and Mikra, continue to deliver solid results. CannMart has successfully established itself a leading cannabis brand within a short span of two years. Through innovation, strategic partnerships with provincial buyers and unwavering support from our retailers, we are driving distribution and enhanced sell-through of our expanding portfolio of premium and mid-range concentrate products.

"Mikra too has undergone a transformation and is now selling multiple products through our own website and through Amazon.com, the largest on-line direct-to-consumer platform in the world. Looking ahead, we anticipate accelerated growth as we shift our focus towards our partnership with Jose Bautista and launching new products and expanding our range of SKUs [stock-keeping units] through these and other established channels. We continue to execute our strategy with our vision for Lifeist to becoming a leading player in the wellness industry. We remain committed to delivering exceptional products, pursuing innovation, and driving sustainable growth for our valued customers and shareholders."

Second quarter operating highlights

Cannabis: CannMart Inc. and CannMart Labs Inc.:

• Lifeist's cannabis business continued to make progress on its path to profitability in Q2 2023, highlighted by expanding gross profit and a narrowing of adjusted EBITDA losses. The improved profitability is being driven by the shift to in-house brand Roilty.
• Recreational cannabis revenue (net of exercise taxes) grew 16.3 per cent to $4.1-million in Q2 2023 compared with $3.6-million in Q2 2022, driven largely by Roilty through increased distribution and retail sell-through of an expanding portfolio of premium and mid-range concentrate products in all of Canada's provincial markets.
• Adjusted EBITDA loss for CannMart improved to $625,363 in Q2 2023 compared with $1.1-million in Q2 2022. The reduced loss was due to higher gross margins and better operational efficiency.

Nutraceuticals: Mikra Cellular Sciences Inc.:

• Mikra took several significant steps to expand its product portfolio and open new distribution channels over the past several months, which are bolstering the platform for future revenue growth.
• Mikra reported revenue of $361,049 in Q2 2023 compared with $106,262 in Q2 2022. Results were driven by sales of flagship product Cellf, with additional contribution from Rescue which was launched in mid-December.
• Mikra sales in Q2 2023 have been generated on the Mikra website.
• Adjusted EBITDA loss for Mikra improved to $280,047 in Q2 2023 compared with $733,077 in Q2 2022.

Australian Vaporizers Pty. Ltd. (Aus Vapes):

• Aus Vapes revenue increased by 271 per cent to $1.7-million in Q2 2023, due to the Aus Vapes team introducing new product categories and a new marketing strategy, plus the successful relocation of warehouse operations into a larger and more modern facility improving efficiencies and product assortment, after a shutdown in 2022 due to flooding.

Financial summary

Net revenue increased 50.6 per cent to $6.2-million in Q2 2023 compared with $4.1-million in Q2 2022 due mainly to a $1.3-million increase in Aus Vapes hardware revenue in Q2 2023, as compared with Q2 2022. Also contributing to the increase was a 16.3-per-cent increase or $579,750 in cannabis revenue and $254,787 increase in revenue generated by Mikra.

Gross profit before inventory adjustment increased 167 per cent to $1.8-million compared with $667,118 in Q2 2022, with margins expanding to 29 per cent from 16 per cent.

The increase in gross profit in Q2 2023 as compared with the same period prior year reflects the company's resilience and confirms the success of its strategic focus on individual segments, geographies and products, as well as a continuous effort to improve production efficiencies across all segments.

Adjusted EBITDA loss improved to $2.4-million in Q2 2023 compared with $4.5-million in Q2 2022. Net loss from continuing operations was $2.2-million, or (one cent) per diluted share, in Q2 2023 compared with a loss of $4.6-million, or (one cent) per share, in Q2 2022.

Balance sheet and cash flow

Cash and cash equivalents were $2.2-million at May 31, 2023, compared with $3.8-million at Nov. 30, 2022.

Inventories were $5.7-million at May 31, 2023, compared with $4.5-million at Nov. 30, 2022.

The working capital position was $4.2-million at May 31, 2023.

Net cash provided by operations was $600,000 in Q2 2023 compared with $8.9-million used in operations in Q2 2022, due in part to investments in CannMart and Mikra, offset by improved margins and higher revenue.

Corporate update

Sitting at the forefront of the growing wellness movement, Lifeist is transforming human wellness through advancements in science and technology. While maintaining its legacy business in the cannabis and vape sectors, Lifeist is leveraging expertise in innovation, consumer packaging and distribution to forge its own path in the large and growing nutraceutical sector. Here is a corporate update of Lifeist's recent activities.

Mikra

Mikra is Lifeist's biosciences and consumer wellness subsidiary seeking to unlock cellular potential and maximize the health of humans. The Mikra management team is focused on growth through expanding its product portfolio organically and through mergers and acquisitions, and through the addition of new distribution channels. To that goal Mikra has engaged Singular Narrative, a United States-based strategic business consulting firm, which specializes in business and product development within the biotech, wellness and nutraceuticals markets. Singular has identified a number of potential business opportunities which the company is pursuing.

In Q2 2023 Mikra's Cellf and Rescue debuted on Amazon, gaining exposure to a wide customer base. Amazon provides a global reach and unparalleled visibility, allowing Mikra to showcase its unique offerings to health-conscious consumers across North America and beyond. Cellf and Rescue are available for purchase on Mikra's website and on Amazon USA.

Mikra's dedication to scientific research and development has resulted in a significant milestone in Q2 2023: a preclinical study aimed at understanding the effects of Cellf on health span (the years of one's life spent in good health) and lifespan (the number of years lived). This study showcases Mikra's commitment to evidence-based products and its pursuit of solutions that positively impact people's well-being. Such breakthroughs are crucial in establishing Mikra as a brand trusted for its innovation and efficacy.

Mikra also began production activities in Q2 on its third product, a new wellness-focused protein bar, Chroma. Chroma is Mikra's first product to offer consumers a healthy alternative nutritional bar packed with cordyceps, free of added sugars, and certified gluten-free and vegan. When available Chroma will attract a broad and diverse health-conscious audience and the grocery-focused formulation will appeal to large brick-and-mortar chains like Whole Foods Market, small gyms, studios and health-focused shops alike.

Earlier in 2023, Mikra announced an exciting collaboration as part of its focus on nutraceuticals, joining forces with the highly accomplished athlete Mr. Bautista. The initial collaboration centred around a remarkable cellular therapeutic designed for athletes aged 30 and above to optimize exercise performance, reduce postworkout fatigue and inflammation, and accelerate recovery time. While launch of this product is targeted for the second half of 2023, the teams are working to expand the collaboration into a diverse line of cellular health products and accessories.

In January, 2023, Lifeist announced a distribution agreement with GNC for Cellf v1.2 and its future derivatives in the United States through retail stores, on the GNC website and on GNC's channel on Amazon. GNC is a leading global health and wellness brand that provides high-quality, science-based products and solutions consumers need to live mighty, live fit and live well. After an initial purchase order, Mikra and GNC have decided to step back to refine marketing strategies, packaging and display designs, with the future goal of making a significant impact in both GNC's on-line and retail stores. This will ensure the greatest impact within GNC's complex vendor system.

CannMart

CannMart continues to make strides establishing itself as the leading business-to-business intermediary for Canadian licensed producers and brands, and their recreational consumers across Canada. Growth across key business drivers, including store penetration, product expansion and market share, has been reported across all categories in the first half of 2023.

With the recent acquisition of Zest Cannabis, CannMart has two in-house brands it can call its own: Roilty, CannMart's brand for high-quality concentrates serving everything from shatter to sugar wax, resin, vape cartridges and wax; and now Zest, which offers premium-quality extract-infused preroll and Liquid Diamond vape products. These leading brands are joined by Rilaxe, Lot 420 and Apothecary Labs, rounding out CannMart's portfolio of cannabis brands.

In addition, CannMart launched a new business-to business (B2B) platform to facilitate wider wholesale distribution for its exclusive partnership with award-winning Hamilton Devices. Leveraging its existing wholesale distribution channel, the portal makes these award-winning products available to a wider range of customers, including head shops, vape and smoke shops, convenience stores, including gas stations, and other retailers that sell cannabis accessories.

Aus Vapes

After a challenging 2022, Aus Vapes has emerged as a stronger, more versatile company. The company has made significant changes due to the changing landscape in the local market, including devastating floods of spring 2022. The Aus Vapes team has worked incredibly hard introducing new product categories, executing a new marketing strategy, plus successfully relocated warehouse operations into a larger and more modern facility improving efficiencies and product assortment, which has led to a significant rebound in business year-over-year.

Corporate update

The company reports that Slava Klems, chief financial officer at Lifeist, is transitioning to a fractional CFO position. Having established a robust financial structure and a strong and efficient team that handles day-to-day operations, Ms. Klems will continue to lead the company's financial strategy and oversee financial operations focused on optimizing revenues and reducing costs. This decision aligns with the company's continuing efforts to optimize resources, track and measure business metrics while maintaining financial stability.

The company also announces a correction to its press release entitled "Lifeist Wellness Closes on Zest Acquisition" issued on July 21, 2023. The initial press release incorrectly stated that the acquisition was completed pursuant to the terms of an amended and restated share purchase agreement, dated July 19, 2023. The acquisition was completed on July 20, 2023. This correction does not change any other information reported in the initial press release.

Additional information

The company's complete financial statements and management's discussion and analysis for Q2 2023 are available on Lifeist's website and SEDAR.

About Lifeist Wellness Inc.

Sitting at the forefront of the postpandemic wellness revolution, Lifeist leverages advancements in science and technology to build breakthrough companies that transform human wellness. Portfolio business units include: CannMart, which operates a B2B wholesale distribution business facilitating recreational cannabis sales to Canadian provincial government control boards; CannMart Labs, a BHO extraction facility for the production of high-margin cannabis 2.0 products; Aus Vapes, Australia's largest on-line retailer of vaporizers and accessories; and Mikra, a biosciences and consumer wellness company seeking to develop innovative therapies for cellular health.

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