Mr. Kingsley Ward reports

SIMPLY BETTER BRANDS CORP. ANNOUNCES YEAR END 2023 FINANCIAL RESULTS

Simply Better Brands Corp. has released its audited financial results for the year ended Dec. 31, 2023. All amounts are expressed in U.S. dollars unless otherwise noted. Certain metrics, including those expressed on an adjusted basis, are non-international financial reporting standard measures.

Selected financial and operating information are outlined herein and should be read with the company's consolidated financial statements and related management's discussion and analysis for the year ended Dec. 31, 2023, which are available under the corporation's profile on SEDAR+.

Simply Better generated revenue of $79.9-million in fiscal 2023, a 22-per-cent increase over the prior year, a gross profit of $46.9-million and an adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) loss of $2.7-million. The primary driver of the adjusted EBITDA loss was the performance of the Purekana LLC subsidiary, which commenced bankruptcy proceedings earlier this month, following completion by Simply Better of a comprehensive review of strategic alternatives for the business.

"Our 2023 performance was highlighted by the continued robust growth of Trubar, which further expanded its distribution footprint across North America and delivered year-over-year revenue growth of 133 per cent," said Simply Better interim chief executive officer and chairman, Kingsley Ward. "With our exit of Purekana now complete, we are putting additional resources and investment behind Trubar, and we are well positioned for continued Trubar revenue growth, driving further profit improvement and debt reduction for SBBC in 2024."

2023 year key commercial highlights:

• Trubar protein bar: Trubar revenue was $24.7-million in 2023 compared with $10.6-million in 2022, an increase of $14.1-million. Growth of the brand in 2023 was driven by continued multichannel distribution expansion to a growing list of major retailers in convenience, grocery, e-commerce and club channels led by Costco. To support its retail expansion, Trubar signed a strategic agreement with Acosta, a full-service sales agency with deep consumer packaged goods brand experience, and added a second manufacturing facility to its supply chain to meet growing product demand.
• No B.S. skin care: Following its on-line launch and exclusive sale at Livenobs and Amazon, the No B.S. brand became available at retail in TJ Maxx locations in second quarter 2023 followed by a national launch into Walgreen's in fourth quarter 2023 across 3,400 locations.

Financial highlights for year ended Dec. 31, 2023

For the 12 months ended Dec. 31, 2023, the company generated revenue of $79.9-million with a gross profit of $46.9-million (59 per cent) compared with $65.4-million with a gross profit of $44.6-million (68 per cent) during the 12 months ended Dec. 31, 2022. Revenue increased by $14.5-million (22-per-cent increase) over the prior-year revenues.

Operating costs for the 12 months ended Dec. 31, 2023, were $57.6-million, an increase of $3.1-million (6 per cent), compared with $54.3-million for the 12 months ended Dec. 31, 2022.

During the 12 months ended Dec. 31, 2023, the company recorded a net loss of $24.3-million compared with a net loss of $12.3-million for the 12 months ended Dec. 31, 2022. Non-cash charges including goodwill impairment, intangible asset impairment, amortization expense and stock-based compensation were $18.1-million. Finance charges accounted for $2.3-million. The impairment charges in 2023 were largely related to the company's hemp-based businesses, and the operating loss was driven by Purekana during 2023. Purekana filed for Chapter 7 bankruptcy on April 3, 2024, after the completion by Simply Better of a comprehensive review of strategic alternatives for the business.

For the three months ended Dec. 31, 2023, the company generated revenue of $12.3-million with a gross profit of $6.7-million (54 per cent) compared with $23.0-million with a gross profit of $16.1-million (70 per cent) during the three months ended Dec. 31, 2022.

Operating costs for the three months ended Dec. 31, 2023, were $10.0-million, a decrease of $9.9-million (50 per cent), compared with $19.9-million for the three months ended Dec. 31, 2022.

During the three months ended Dec. 31, 2023, the company recorded a net loss of $14.6-million compared with a net loss of $5.4-million for the three months ended Dec. 31, 2022. Non-cash charges including goodwill impairment, intangible asset impairment, amortization expense and stock-based compensation were $12.9-million. Finance charges accounted for $600,000.

The company had an adjusted EBITDA loss of $2.7-million for the 12 months ended Dec. 31, 2023, a decrease of $3.2-million over the adjusted EBITDA of $500,000 for the comparable period in 2022. The primary driver for the increased adjusted EBITDA loss of $2.7-million for the 12 months ended Dec. 31, 2023, is the increase in cash operating expenses ($6.2-million), which were offset by increased gross profits ($2.3-million) and non-recurring expenses ($1.2-million), compared with the prior period in 2022. The biggest contributor to the adjusted EBITDA loss was Purekana for the 12 months ended Dec. 31, 2023. On a stand-alone basis, Purekana was the biggest driver of the EBITDA loss before non-recurring expenses. Purekana's 2023 EBITDA loss was $4.1-million compared with Tru's positive EBITDA of $1.0-million during the year. The other divisions did not contribute materially to the adjusted EBITDA loss for the year. Purekana filed for Chapter 7 bankruptcy on April 3, 2024, after the company's board had explored all viable options for this business.

The most directly comparable measure to EBITDA and adjusted EBITDA calculated in accordance with IFRS is net loss. An attached table presents the EBITDA and adjusted EBITDA for the three months ended Dec. 31, 2023, and 2022, and a reconciliation of same to net income (loss).

The company had an adjusted EBITDA loss of $800,000 for the three months ended Dec. 31, 2023, a $1.4-million reduction over the adjusted EBITDA achieved in the comparable period in 2022. The reduction in adjusted EBITDA was due to the lower sales and gross profit in the fourth quarter of 2023 compared with the prior-year sales and gross profit.

Readers are cautioned that EBITDA and adjusted EBITDA should not be construed as an alternative to net income as determined under IFRS, nor as an indicator of financial performance as determined by IFRS, nor a calculation of cash flow from operating activities as determined under IFRS, nor as a measure of liquidity and cash flow under IFRS. The company's method of calculating EBITDA and adjusted EBITDA may differ from methods used by other companies, and, accordingly, the company's EBITDA and adjusted EBITDA may not be comparable with similar measures used by any other company. Except as otherwise indicated, EBITDA and adjusted EBITDA are calculated and disclosed by Simply Better on a consistent basis from period to period. Specific adjusting items may only be relevant in certain periods.

See also earnings before interest, taxes, depreciation and amortization and adjusted EBITDA (non-generally accepted accounting principle measures) in the company's management's discussion and analysis for the year ended Dec. 31, 2023, available on SEDAR+.

Liquidity and capital resources

The company's primary liquidity and capital requirements are for inventory and general corporate working capital purposes. The company had a cash balance of $2.3-million as of Dec. 31, 2023, which will provide capital to support the planned growth of the business and for general corporate working capital purposes. The company's working capital deficiency increased from $9.3-million as of Dec. 31, 2022, to a working capital deficiency of $12.4-million as of Dec. 31, 2023 ($3.1-million increase). Working capital deficiency included the Mainstreet loan ($10.4-million), which is classified as current, whereas the term of the loan is maturing in December, 2025. The Mainstreet loan has a five-year term with principal repayments due to start in December, 2023, with the first $1.5-million principal repayment. Purekana was in discussions with the financial institution to restructure that Mainstreet loan payment into several instalments to be paid in 2024 at year-end. This loan has several covenants, including annual and quarterly reporting and debt service coverage. It has been classified as current as a result of the non-compliance with the debt service covenant. Also see subsequent events in the financial statements concerning the status of the company's Purekana subsidiary and the Mainstreet loan (Purekana filed for Chapter 7 bankruptcy on April 3, 2024). The bankruptcy of Purekana will remove Purekana's $10.4-million loan obligation from Simply Better's consolidated financial statements.

The company continues to focus on improving its working capital position through a number of initiatives, including equity and convertible debt private placements, issuance of promissory notes, and establishment of lines of credit for its subsidiaries.

Private placements

In February, 2023, the company completed a private placement of units for $7-million (Canadian) in equity to be used for further debt reduction, working capital and growth initiatives in 2023.

The company also announced on April 17, 2024, a non-brokered private placement of up to 5,714,285 units of the company at a price of 35 cents per unit, for aggregate gross proceeds of up to $2-million. Each unit will consist of one common share in the capital of the company and one-half of one share purchase warrant. Each warrant will entitle the holder thereof to purchase one additional share at an exercise price of 45 cents per share for a period of 24 months following the closing of the non-brokered private placement.

Convertible debentures

The company paid down $1.7-million in convertible debentures, including accrued interest, that were due in February, 2023.

Line of credit facilities

Additionally, the company has secured several lines of credit facilities for three of its subsidiaries to support the financing of purchase orders from key customers. These lines of credit have been critical to finance the large retail purchase orders the company's subsidiaries have generated during the 12 months ended Dec. 31, 2023. For more information of the line of credit facilities, please refer to Note 10 in the audited financial statements for the year ended Dec. 31, 2023. During the 12 months ended Dec. 31, 2023, the company raised over $18.1-million in funds from these lines of credit to finance purchase orders from its large retail customers. Over the same period, the company repaid over $16.1-million of these credit facilities to the lender. Tru was able to increase its primary line of credit with this lender to $6-million in December, 2022. The nature of these loans is to turn over between three and five months from the time the money is advanced to repayment.

Promissory notes

During the three months ended Dec. 31, 2023, the company reduced the balance of promissory notes outstanding by approximately $1.0-million (see Note 13 in the financial statements for the year ended Dec. 31, 2023). All promissory notes paid off during the year had a maturity fewer than 12 months. The balance of promissory notes was $2.4-million as of Dec. 31, 2022, and the balance as of Dec. 31, 2023, is $1.45-million.

The company's ability to finance operating expenses will depend on its future operating performance, which will be affected by general economic, financial, regulatory and other factors, including factors beyond the company's control.

Management continually assesses liquidity in terms of the ability to generate sufficient cash flow to finance the business. Net cash flow is affected by the following items: (i) operating activities, including the level of accounts receivable, other receivable, accounts payable, accrued liabilities, and unearned revenue and deposits; (ii) investing activities; (iii) financing activities.

About Simply Better Brands Corp.

Simply Better is an international omnichannel platform with a portfolio of diversified assets in the rapidly growing plant-based, natural and clean ingredient space. The company targets informed, health-conscious millennial and Generation Z consumers with a focus on opportunities for expansion into high-growth consumer product categories.

We seek Safe Harbor.