Mr. Kingsley Ward reports

SIMPLY BETTER BRANDS CORP. ANNOUNCES FIRST QUARTER 2024 INTERIM FINANCIAL RESULTS

Simply Better Brands Corp. has released interim financial results for the first quarter ended March 31, 2024. All amounts are expressed in United States dollars unless otherwise noted. Certain metrics, including those expressed on an adjusted basis, are non-international financial reporting standards (IFRS) measures.

On April 2, 2024, the company announced the suspension of operations of its PureKana LLC subsidiary and the commencement of bankruptcy proceedings under Chapter 7 of the Bankruptcy Code of the United States. Accordingly, the results of the Purekana business for the first quarter of 2024 are reflected as discontinued operations in Simply Better's financial statements. The following discussion highlights Simply Better financial results on a continuing operations basis.

Simply Better generated net revenue of $14-million in the first quarter of 2024, a 22-per-cent increase over the prior year, gross profit of $4-million, and adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $700,000 from its continuing operations.

"We are very pleased with the continued strong performance and robust growth of Trubar in the quarter and the further expansion of the brand's distribution footprint across North America," said Simply Better interim chief executive officer and chairman, Kingsley Ward. "With the action we have taken to streamline our portfolio, we are putting additional resources and investment behind Trubar to continue building on its momentum and creating value for SBBC."

2024 first quarter commercial highlights:

• Trubar protein bar: Trubar generated gross revenue of $15.9-million in the first quarter, a 60-per-cent year-over-year increase versus Q1 2023 revenue of $10.2-million. On a net basis, Q1 revenue was $13-million, reflecting the impact of a $2.9-million trade promotion expense to drive consumer awareness and trial nationwide at Costco. In addition to the Costco promotion, growth of the brand in the quarter was driven by continued multichannel distribution expansion in the convenience, grocery, e-commerce and club channels. These included a chain-wide rollout of Trubar across more than 700 Sheetz convenience locations, the introduction of the brand in more than 250 additional regional grocery and convenience stores, and increased consumer purchases on Amazon. Looking ahead, the Trubar team has secured new distribution in major regional and national retailers representing an additional 5,000 stores. This new distribution is expected to roll out over the next two quarters.
• No B.S. Skincare: The No B.S. brand recorded revenue of $700,000 in the first quarter of 2024, an increase of 133 per cent versus Q1 2023 revenue of $300,000. The increase was driven by the national launch of the No B.S. brand in Walgreen's in Q4 2023 across the retail chain's 3,400 locations.

Selected financial and operating information is outlined below and should be read with the company's interim consolidated financial statements and related management's discussion and analysis for the quarter ended March 31, 2024, which are available under the corporation's profile on SEDAR+.

Financial highlights for quarter ended March 31, 2024

For the three months ended March 31, 2024, the company generated revenue of $14-million with a gross profit of $4-million (29 per cent) compared with $11.9-million with a gross profit of $4.5-million (38 per cent) during the three months ended March 31, 2023. Trubar's first quarter revenue for the three months ended March 31, 2024, was $13-million compared with $10.2-million for the comparable period in 2023 (increase of $2.8-million or 27 per cent).

Operating costs for the three months ended March 31, 2024, were $3.5-million, a decrease of $2-million (36 per cent), compared with $5.5-million for the three months ended March 31, 2023.

During the three months ended March 31, 2024, the company recorded a net loss of $960,000 compared with a net loss of $2.7-million for the three months ended March 31, 2023. The company's PureKana subsidiary accounted for $800,000 of the consolidated $960,000 loss reported in Q1 2024.

The company had adjusted EBITDA of $700,000 from continuing operations for the three months ended March 31, 2024, a $200,000 improvement over the adjusted EBITDA achieved in the comparable period in 2023. The improvement in adjusted EBITDA was due to the lower operating expenses in the first quarter of 2024 compared with the prior year.

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 March 31, 2024, 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 $12.4-million as of Dec. 31, 2023, to a working capital deficiency of $13.2-million as of March 31, 2024 ($800,000 increase). Working capital deficiency included the Mainstreet loan ($10.4-million) which is classified as current. It has been classified as current as a result of the non-compliance with the debt service covenant and nonpayment by PureKana of a loan payment due Dec. 11, 2023 (approximately $1.2-million). 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 PureKana Mainstreet loan and its liabilities contributed materially to the working capital deficiency of the company as of March 31, 2024. With PureKana's Chapter 7 filing on April 3, 2024, the loan and liabilities will no longer be reflected on the company's consolidated working capital position starting in the second quarter of 2024.

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

The company completed a non-brokered private placement for $4-million (Canadian) in equity to be used for working capital and for growth initiatives in 2024 on May 9, 2024.

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 successfully generated during the three months ended March 31, 2024. During the three months ended March 31, 2024, the company raised over $3.4-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 $9.7-million of these credit facilities to the lender. Trubar 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 turnover between three and five months from the time the money is advanced to repayment.

Promissory notes and loans payable

During the three months ended March 31, 2024, the company reduced the balance of promissory notes and loans payable outstanding by approximately $500,000.

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 Brands 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.

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