Mr. Ash Guglani reports

NEXE INNOVATIONS ANNOUNCES FINANCIAL RESULTS FOR THE TWELVE-MONTH PERIOD ENDED MAY 31, 2023

Nexe Innovations Inc. has released its financial results for the 12-month and three-month periods ended May 31, 2023.

Fiscal 2023 was a pivotal year for Nexe, with several key accomplishments. The company has transitioned into production and, subsequent to year-end, as previously announced, has on-boarded three co-manufacturing customers -- a key segment for Nexe.

2023 accomplishments:

• During the year, Nexe completed building its Windsor facility and transitioned to an in-house, end-to-end manufacturing process where the new facility is equipped for compounding resin, injection moulding key components of Nexe's proprietary, single-serve beverage pods, and dosing and sealing the pods for commercialization. The company received its occupancy permit, installed and tested key equipment, and started to build out the operations team in March, 2023. By the end of July, the Windsor facility was fully commissioned to produce food-grade components for its proprietary single-serve beverage pods, the company hired key personnel and the company moved into production.
• Nexe met the stringent testing requirements for certification from the Biodegradable Products Institute (BPI) for its fully compostable, single-serve beverage pod and associated components at the end of June, 2023. The BPI certification is a third party verification of ASTM D6400 and D6868 standards for compostable products. Being awarded the BPI certification means the product has undergone a rigorous testing process, confirming that the company has met the ASTM compostable standards. The BPI certification is not required to sell its products but does assure customers that Nexe's products are environmentally friendly and comply with the stringent rules established by BPI.
• Since the beginning of August, Nexe has on-boarded three co-manufacturing clients: Awaken Brands Ventures Ltd., Neighborhood Coffee Company and Rooted Grounds Coffee Company. The interest surrounding Nexe's proprietary BPI-certified pod continues to gain momentum, and Nexe continues to advance discussions to drive private label and co-manufacturing opportunities. It expects production will continue to ramp up over the next several months. Nexe's goal is to build a strong base of recurring revenues.
• Nexe completed transitioning its retail brand Nexe Coffee to the BPI-certified single-serve pod. The retail brand of Nexe will be produced in Windsor, Ont., and is available for purchase at the Nexe Coffee website. All operations are consolidated at the Windsor facility, and Nexe is selling its Surrey, B.C., facility.

Fiscal 2023 results

For the year ended May 31, 2023, the company recorded a net loss of $6,137,065, or six cents per share, compared with a net loss of $8,339,913, or nine cents per share, for the 12 months ended May 31, 2022.

• Revenues increased to $49,758 (2022: $26,986) and largely represents the sale of the previous version of the Nexe pod that was composite based. Nexe has transitioned from producing composite pods to the proprietary BPI-certified single-serve pod. The company has on-boarded three clients and is working through the sales pipeline focusing on private label and co-manufacturing opportunities. For first quarter fiscal 2024, revenues are expected to come in higher than total revenues in fiscal 2023. The Q1 2024 quarter will reflect only one month of revenue generation.
• Selling, general and administrative expenses decreased to $4,453,682 (2022: $6,201,830) primarily due to lower marketing, consulting and professional fees. Nexe also decreased salaries and management fee expenses. This is the third year of such decrease as the company continues to maintain a disciplined approach to managing expenses. Expenses were also impacted by one-time costs related to establishing the Windsor facility, and going forward, expenses will benefit from operations being consolidated to one location.
• Depreciation increased to $987,551 (2022: $672,830) due to additional equipment purchased. Capital expenditures were $3.3-million, down from $8.8-million in fiscal 2022. Going forward, it expects capital expenditures to remain within a similar range as fiscal 2023.
• The company recorded a non-cash interest expense of $257,459 (2022: $309,167) related to the accretion of interest associated with the interest-free government loan from the western innovation program.
• Research and development expenses decreased to $380,089 (2022: $336,460) as Nexe continues to invest in product development to stay ahead of the curve.

Outlook and financial position

It believes the fundamentals for the business remain strong and are supported by macro trends. In North America, the government is enacting different regulations and providing incentives to move away from petroleum-based products. The company continues to see consumers moving toward sustainable options to help improve the environment and address the growing concern around the health impact of plastics on the human body. The BPI certification that was granted for Nexe's single-serve pod and associated components requires products to be free of per and polyfluoroalkyl substances (PFAS), reflecting general concerns about the impact of PFAS.

Management believes that significant investments will be needed to meet the changing industry requirements and increase in potential demand. With the expertise gained by the team in onshore manufacturing over the last few years, management believes Nexe will be competitively positioned to replicate and expand its operational capabilities into the United States.

The company has a valuable portfolio of assets, technology and comprehensive intellectual property. The company has moved into revenue generation mode with its new production facility, and management believes it is competitively positioned to leverage the trends in the green economy. The strategic decision to transition to an entirely in-house model, away from third party suppliers, has allowed the company to develop a price-competitive single-serve pod that can compete against other compostable products and the plastic alternative.

At the end of fiscal 2023, Nexe had working capital of $23.0-million and no debt, and with the expected proceeds from the Surrey facility sale, management believes it is well financed to weather the current market volatility. In addition, Nexe amended its warrants such that the exercise price was revised from $2.50 to 65 cents per share, and the expiry date was extended from April 9, 2023, to April 9, 2024. If all outstanding warrants are exercised, the proceeds from the warrants could amount to $5.6-million.

The company's fourth quarter 2023 financial statements and related management's discussion and analysis are available on Nexe's SEDAR+ profile and the company's website.

About Nexe Innovations Inc.

Nexe is a leader in innovative compostable material technology, based in Ontario, Canada. The first product developed by Nexe is one of the only patented, fully compostable, single-serve coffee pods for use in existing major single-serve coffee machines.

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