Hill Incorporated — Management Reports 2025

May 30, 2025

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HILL INCORPORATED

MANAGEMENT'S DISCUSSION AND ANALYSIS

For the three- and nine-month periods ended March 31, 2025 and 2024

The following management's discussion and analysis ("MD&A") provides a review of the activities, results of operations and financial condition of Hill Incorporated Inc., (the "Company", "We" or "Hill") for the three-and nine-month periods ended March 31, 2025 and 2024. These comments should be read in conjunction with the audited consolidated financial statements for the years ended June 30, 2024 and 2023 and accompanying notes included therein, which have been prepared in accordance with IFRS. This MD&A has been prepared as of May 30, 2025. Additional information relating to Hill is available on SEDAR.

All amounts are stated in Canadian dollars unless otherwise identified.

For the purposes of preparing this MD&A, management, in conjunction with the Board of Directors, considers the materiality of information. Information is considered material if: (i) such information results in, or would reasonably be expected to result in, a significant change in the market price or value of the Company's common shares; (ii) there is a substantial likelihood that a reasonable investor would consider it important in making an investment decision; or (iii) it would significantly alter the total mix of information available to investors. Management, in conjunction with the Board of Directors, evaluates materiality with reference to all relevant circumstances, including potential market sensitivity.

Further information about the Company and its operations can be obtained from the Company website at www.hillincorporated.com, or at the Company's profile on http://www.sedarplus.ca/.

FORWARD-LOOKING STATEMENTS

Except for the historical information contained herein, the discussion in this MD&A contains certain forward-looking statements that involve risks and uncertainties, such as statements of Hill's plans, objectives, strategies, expectations and intentions. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "may", "will", "expect", "intend", "anticipate", "seek", "plan", "believe" or "continue" or the negatives of these terms or variations of them or similar terminology. Although Hill believes that the expectations and assumptions reflected in these forward-looking statements are reasonable, undue reliance should not be placed on these forward-looking statements. These forward-looking statements are not guarantees and reflect Hill's views as of May 30, 2025 with respect to future events. Future events are subject to certain risks, uncertainties, and assumptions, which may cause actual performance and financial results to differ materially from such forward-looking statements. Any forward-looking statements, including statements regarding expected revenues, volumes, operating efficiencies, or costs may be based on, among other things, the following material factors and assumptions: sales volumes or licensing revenues will increase over time; no material changes in basic consumer preferences; manufacturing and packaging efficiencies will improve over time; the cost of input materials for manufacturing will increase over time; competitive activity from competitors will continue; foreign currency exchange rates will change; there will likely be material changes to the regulatory environment in which Hill operates, particularly regarding cannabis-related

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products, and there will be no material supply, cost or quality control issues with vendors. Readers are urged to consider the foregoing factors and assumptions when reading the forward-looking statements and for more information regarding the risks, uncertainties and assumptions that could cause Hill’s actual financial results to differ from the forward-looking statements, to also refer to the remainder of the discussion in this MD&A, Hill’s various other public filings as and when released by Hill. The forward-looking statements included in this MD&A are made only as of May 30, 2025 and, except as required by applicable securities laws, Hill does not undertake to publicly update such forward-looking statements to reflect new information, future events or otherwise.

HIGHLIGHTS FOR THE PERIOD ENDED MARCH 31, 2025

• DehydraTECH licensing revenues increased again in Q3 FY 2025 vs. same quarter year ago on an adjusted basis, as comparisons continue to be impacted by adjustments to last year’s recorded revenues for amounts subsequently written off at the close of FY 2024. Fiscal year-to-date licensing revenues have also increased on an adjusted basis but have declined on an accounting basis
• Vin(Zero) alcohol-free wine business had a strong revenue quarter as expected based on our planned inventory order pattern and resulting sales. Net revenue on this business is up 58% for the nine-month fiscal year-to-date vs. the same period year ago as we have normalized inventory levels, while retailer depletions are up 2% for the fiscal year-to-date.
• Despite net revenue and gross profit declines vs. prior year on an accounting basis, the continued focus on managing costs enabled Hill to continue significantly narrowing the net loss in the quarter and for the nine-month period.

BUSINESS HIGHLIGHTS FOR THE PERIOD ENDED MARCH 31, 2025

DehydraTECH Licensing Business

DehydraTECH licensing revenues increased again in Q3 FY 2025 vs. same quarter year ago on an adjusted basis, as comparisons continue to be impacted by adjustments to last year’s recorded revenues for amounts subsequently written off at the close of FY 2024. Fiscal year-to-date licensing revenues have also increased on an adjusted basis but have declined on an accounting basis.

DehydraTECH licensing revenues continue to be underpinned by legacy licensee 1906 as well as the sublicensees brought on through Hill partner Dehydr8, LLC. However, because Hill wrote down revenue from 1906 at the close of FY 2024, we have made comparisons in this MD&A of Q3 2025 results to the same quarter prior year (which are pre-write-off) as well as on an adjusted basis (adjusting for the write offs) to provide the most accurate view of the trends.

The US cannabis industry continues to face a market environment of significant price reductions and margin compression, along with extended accounts receivable and delays and challenges in cash receipt. The impacts to Hill’s DehydraTECH licensing business from these industry-wide challenges, which we have faced in previous quarters and continue to face this quarter, are mainly that licensing fee rates have been compressed within our ecosystem of sublicensing partners and our accounts receivable of licensing fees from our licensee partners are affected by collection delays downstream. At this time, our outlook is that licensing fee rates will likely continue to be pressured down in our US DehydraTECH business, even as the industry grows and licensees continue to expand operations.

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Dehydr8, which now has DehydraTECH licensing rights in all US states, continues to focus on the rollouts and expansion of its base of DehydraTECH customers, while facing this very challenging cannabis market environment, price and margin compressions, and extended accounts receivable from its customers.

The key DehydraTECH customers of Dehydr8’s in the US include MariMed, Greenlight Dispensary and Drecisco Farms.

1. MariMed

Major multi-state operator MariMed Inc. now has brands powered by DehydraTECH in Massachusetts, Maryland, Missouri, Delaware and Illinois, with more states on the horizon.

Today, the MariMed brands being powered by DehydraTECH include ‘Vibations™’ all-natural, full-spectrum cannabis drink mix, which won first place in the beverages category of the High Times Cannabis Cup in Massachusetts, ‘K Fusion™’ chewable tablets, and ‘InHouse™’ gummies.

MariMed Inc. is a leading multi-state cannabis operator, known for developing and managing state-of-the-art cultivation, production, and retail facilities. Their award-winning portfolio of cannabis brands sets them apart as an industry leader. The trusted brands, crafted with quality and innovation, are recognized and loved by consumers across the country. With a commitment to excellence, MariMed continues to drive growth and set new standards in the cannabis industry. More information on MariMed’s brands can be found at MariMed Brands.

1. Greenlight Dispensary

Multi-state operator Greenlight Dispensary has launched new DehydraTECH-powered edibles products in its home state of Missouri.

Greenlight Dispensary is one of the leading cannabis brands in the United States, with operations in Missouri, Arkansas, West Virginia, Illinois and South Dakota. Greenlight’s founders are some of the most innovative operators in the US, having built one of the world’s largest dispensaries in Las Vegas, Nevada, the world’s first “Marijuana Farmers Market” and the first cannabis museum in a dispensary.

1. Drecisco Farms

Drecisco Farms sells their “SweetBuzz” DehydraTECH-powered cannabis edibles products in Illinois including:

• “Sweet Somethings” candy cups
• “Sweet Sparks” chocolatey candies, and
• “Sweet Empowder” dissolvable powder

Drecisco Farms is a social equity craft grow in Illinois, driven by the belief that delicious taste and a quality cannabis experience should be one and the same. Bringing their experience managing and leading a mainstream confectionary company, they are proud to bring their generational confectionary knowledge crafting the candies that consumers have known and loved to a craveable cannabis experience with their brand SweetBuzz.

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Vin(Zero) Alcohol-Free Wine Business

Vin(Zero) alcohol-free wine business had a strong revenue quarter as expected based on our planned inventory order pattern and resulting sales. Net revenue on this business is up 58% for the nine-month fiscal year-to-date vs. the same period year ago as we have normalized inventory levels, while retailer depletions are up 2% for the fiscal year-to-date.

As communicated, we fundamentally transformed our Vin(Zero) business model beginning in FY 2023, with major adjustments across all the key areas of production planning, shipping and logistics, warehousing, sales and retail distribution. These changes led to several key positive financial impacts:

• removed the Hill onshore warehousing of finished goods, which reduced our warehousing costs as well as the level of working capital that we hold in finished goods inventory;
• shortened our order-to-cash cycle, as we now recognize revenue and invoice our distributor when inventory arrives onshore directly to the distributor's warehouse;
• reduced the need for more expensive temperature-controlled containers for our products as our forecasting, operations planning, and inventory logistics models create a more efficient shipping cycle.

The streamlined commercial model created a new and different cadence to the business, where dramatic quarter-to-quarter swings on the recognized revenues are planned based on inventory efficiencies and the timing of direct inventory arrivals to our distributor.

Our planned ordering and inventory management cycle resulted in higher revenue for Q3 FY 2025 compared to a very low Q3 FY 2024, as we were reducing the overall inventories in our ecosystem last year. Net revenues from this line of business were a strong $541,145 for the quarter and are up 53% year-to-date. As we've advised before, analysis of this business is better done over an extended time frame vs. looking at quarter-to-quarter fluctuations, as inventory management and order arrivals are the drivers of the revenues.

As we adapt to the new cadence of supply shipments and recognized revenues associated with strategic inventory management patterns, we look carefully at our case depletions, which represent the shipment figures from our distributor to retailers and are a more accurate indicator of the pace of the business. Our shipments from distributor warehouses to retail customers are up 2% for the nine-month fiscal year to date.

FINANCIAL HIGHLIGHTS FOR THE PERIOD ENDED MARCH 31, 2025

Despite net revenue and gross profit declines vs. prior year on an accounting basis, the continued focus on managing costs enabled Hill to continue significantly narrowing the net loss in the quarter and for the nine-month period.

The Company reported a net loss of $239,873 for the three-month period ended March 31, 2025, improving net earnings by 27%. The improvement for Q3 drove a year-to-date improvement of 32% for the first nine months of the fiscal year.

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DESCRIPTION OF THE BUSINESS

Hill Incorporated is a progressive bioscience implementation company that is dedicated to building pathways to better and healthier living by leveraging our deep CPG expertise to commercialize leading-edge technologies to craft superior cannabis solutions and non-alcoholic beverage products globally. The Company has fundamentally transformed its legacy business model to embrace a more profitable and more scalable global growth agenda.

The Company currently operates two lines of business:

1. Hill Street Beverages

This business unit represents the Company's legacy alcohol-free consumer beverage marketing and distribution business. It includes Vin(Zero) alcohol-free wine in Canada, and on a smaller scale, in the United States. Vin(Zero) uses only the finest craft ingredients and a proprietary process to remove alcohol from high-quality wines, delivering all the flavour, savour & splendour that you expect from fine wines, without the alcohol. Vin(Zero) has a simple mission of bringing consumers better quality experiences that taste better and are better for you. The products are sold in retail chain stores through Canadian distributors, exported outside of Canada through foreign distributors and offered direct to consumers online at www.hillstreetbeverages.com.

1. Hill Avenue Cannabis

Our Hill Avenue Cannabis business unit is pioneering the space where craft consumer products meet bioscience by combining our deep CPG commercialization expertise with our rights to use Lexaria Bioscience Corp's ground-breaking DehydraTECH patent portfolio for product development, licensing and B2B and B2C sales of cannabis ingredients or products on a global scale. DehydraTECH is a revolutionary, patented biodelivery technology that is scientifically proven to consistently and rapidly deliver precise doses of bioactive substances like cannabinoids into the bloodstream, for unparalleled bioavailability and onset time. For additional detail about Hill Avenue Cannabis or DehydraTECH technology, visit www.dehydratech-thc.com.

DehydraTECH technology was first developed in 2014 by Lexaria Bioscience Corp., a global innovator in drug delivery platforms. Today, the DehydraTECH intellectual property portfolio consists of 28 granted patents and approximately 50 patents pending worldwide. Hill Avenue Cannabis acquired the exclusive global rights to use and commercialize the DehydraTECH technology to power THC-infused cannabis products in late 2020.

Hill Avenue Cannabis is the DehydraTECH technology licensing, product development and commercialization partner to progressive cannabis brands worldwide who are committed to bringing exceptional, best-in-class cannabis products to market. Hill Avenue Cannabis also provides DehydraTECH-enabled business-to-business (B2B) solutions for both cannabis extractors and ingredient suppliers and consumer packaged goods (CPG) manufacturers whose products are infused with cannabis and or hemp extracts.

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Findings from extensive scientific studies on the DehydraTECH technology performed by its creator Lexaria include:

• Increased bioavailability up to 5-10x – to equate to blood absorption by inhalational delivery
• Increased brain permeation up to 19x – as demonstrated in animal studies
• Avoids first-pass liver metabolism - mitigating unwanted side effects
• Reduced time of onset – effects are felt within 15-20 minutes vs. 60-120 minutes
• Masks unwanted tastes – eliminating the need for sugar-filled edibles

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NINE-MONTH RESULTS OF CONSOLIDATED OPERATIONS

Results for the Nine-Month Period Ended	March 31, 2025	March 31, 2024	March 31, 2023
	$	$	$
Gross Revenue	2,295,408	2,023,159	2,675,711
Chargebacks & listing fees	(425,528)	(288,696)	(275,931)
Net Revenue	1,869,880	1,734,463	2,399,780
Cost of sales	(959,565)	(537,383)	(866,130)
Gross profit	910,315	1,197,080	1,533,650
Expenses
Accretion expense	-	-	6,377
Bad debt expense	-	381,358	118,651
Bank charges and interest	30,815	1,941	11,863
Consulting fees	3,461	80,724	24,063
Depreciation	186,999	201,129	238,878
Donations, dues & licenses	-	3,043	2,981
Filing and transfer agent fees	22,105	28,010	69,719
Insurance	72,533	103,160	211,036
Interest on promissory note	198,878	189,869	175,951
Management fees	65,432	49,919	110,690
Marketing	1,750	(10,515)	77,969
Office and miscellaneous	77,716	103,581	198,233
Professional fees	45,489	51,168	220,997
Stock-based compensation	41,154	66,475	132,390
Travel and meal allowance	2,953	14,145	41,274
Wages and salaries	635,643	785,982	664,636
Selling and delivery	268,815	167,348	334,282
	1,653,743	2,217,337	2,639,990
Loss before other income (expenses)	(743,428)	(1,020,257)	(1,106,340)
Other income (expenses)
Foreign exchange gain	4,092	8,202	5,119
Gain on termination of lease	-	-	7,868
Gain on assets held for sale	-	-	40,512
Loan forgiveness	-	20,000	-
Other income	54	303	19,416
Recovery of bad debts	64,285	-	-
Write-off of property and equipment	-	-	(90,758)
	68,431	28,505	(17,843)
Net loss and comprehensive loss	(674,997)	(991,752)	(1,124,183)

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FOR THE NINE-MONTH PERIOD ENDED MARCH 31, 2025 AND 2024

CONSOLIDATED NET REVENUES

For the Nine-Month Period Ended		March 31, 2025	March 31, 2024
Non-alcoholic beverage sales	$	1,732,517	1,092,411
DehydraTECH licensing income		525,960	855,999
Other income		36,931	74,749
Chargebacks and listing fees		(425,528)	(288,696)
	$	1,869,880	1,734,463

For the nine-month period ended March 31, 2025, consolidated net revenues increased by 8% to $1,869,880, compared to $1,734,463 for the nine-month period ended March 31, 2024. The increase in net revenue vs. FY 2024 was due to a 53% increase in sales of alcohol-free wine vs. the same period year ago based on the planned inventory management ordering pattern and resulting net revenues. The DehydraTECH licensing revenue comparison to year ago continues to be impacted by the year ago period including amounts ultimately written off. Adjusted net revenue on DehydraTECH licensing is up 78% for the nine-month period vs. prior year, while revenues are down 38% on an accounting basis.

Chargebacks are fees charged by retailers and distributors for marketing programs and discounts, as well as other fees or penalties. Chargebacks for the nine-month period ended March 31, 2025 were $425,528, compared to $288,696 for the nine-month period ended March 31, 2024. These figures fluctuate based on both revenues within a quarter as well as retailer programs that are going on during longer time periods and do not tie directly to the current revenue for the period.

Non-Alcoholic Beverage Sales

9 months	Mar 31, 2025	Mar 31, 2024	Mar 31, 2023
Gross Revenue	1,732,517	1,092,411	1,697,480
Chargebacks*	(425,528)	(288,696)	(275,931)
Net Revenue	1,306,989	803,715	1,421,549
CoGS	(959,565)	(537,383)	(866,130)
Gross Profit	347,424	266,332	555,419
GP %*	20%	24%	33%

• As noted above, chargebacks are tied more closely to retail depletions from our distributor than to the timing of shipment arrivals and revenue recognition, which alters the calculation of GP% based on timing of these two independent components.

DehydraTECH Licensing Revenue

For the three-month period ended March 31, 2025, DehydraTECH adjusted licensing revenues increased by 14% to $138,317, compared to $121,610 for the three-month period ended March 31, 2024. For the nine-month period ended March 31, 2025, adjusted licensing revenues increased by 78% to $525,960, compared to $294,927 for the nine-month period ended March 31, 2024. The increase in adjusted DehydraTECH revenues vs. year ago was due to reductions in FY 2024 revenues associated with the write-off and reversal of 1906 licensing fees as part of our FY 2024 licensing fee structure renegotiation.

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The following chart shows the quarterly adjusted licensing revenues, taking into account the write-offs for previous periods.

	Mar 31, 2025	Dec 31, 2024	Sept. 30, 2024	June 30, 2024	Mar 31, 2024	Dec 31, 2023	Sept. 30, 2023	June 30, 2023
Adjusted Licensing Revenue*	138,317	177,011	210,632	142,093	121,610	134,746	38,571	221,450

*Licensing Revenue has been adjusted to reflect licensing revenues, net of actual bad debts recognized in subsequent periods that would relate to the previous period's income.

COST OF SALES/DIRECT COSTS

Consolidated cost of sales were $959,565 or 42% of gross revenue for the nine-month period ended March 31, 2025, compared to $537,383 or 27% of gross revenue, for the nine-month period ended March 31, 2024. The increase in cost of sales is the result of a change in the mix of consolidated sales for the period compared to the previous year on an accounting basis. For the nine-month period ended March 31, 2025, we had 53% sales growth on alcohol-free wine and the year ago accounting-based revenues also included higher DehydraTECH licensing revenues that do not have significant costs of sales.

OPERATING EXPENSES

Ordinary operating expenses include selling, delivery and marketing expenses, employee expenses, interest, insurance, professional fees, and other general and administrative expenses. For the nine-month period ended March 31, 2025, operating expenses were $1,653,743, compared to $2,217,337 for the nine-month period ended March 31, 2024. The decrease was primarily driven by a significant $381,358 reduction in bad debt expense, as well as reductions in wages and salaries, stock-based compensation, insurance, office and miscellaneous, depreciation and consulting fees, partially offset by increases in selling and delivery expenses from higher alcohol-free wine sales, management fees and interest expenses related to the shareholder loan obtained during the period.

OPERATING EXPENSES – ONE TIME

For the nine-month period ended March 31, 2025, the Company incurred non-cash expenses totaling $448,157 which includes expenses related to the vesting of restricted share units, depreciation, and accrued interest. For the nine-month period ended March 31, 2024, the Company incurred non-cash expenses of $818,831, which also includes expenses related to the vesting of restricted share units, bad debt, depreciation, accrued interest and loan forgiveness.

OTHER INCOME (EXPENSES)

For the nine-month period ended March 31, 2025, the Company recognized other income totaling $68,431, which includes a recovery of bad debts of $64,285, a foreign exchange gain of $4,092, and other income of $54. For the nine-month period ended March 31, 2024, the Company recognized other income totaling $28,505, including a foreign exchange gain of $8,202, loan forgiveness of $20,000 and other income of $303.

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NET EARNINGS

The Company improved its net earnings by 32%, reporting a net loss of $674,997 for the nine-month period ended March 31, 2025, compared to a net loss of $991,752 for the nine-month period ended March 31, 2024. The improvement was primarily driven by a 25% reduction in operating expenses as discussed above.

The basic and diluted loss per share for the nine-month period ended March 31, 2025 was $0.21 per share, compared to $0.30 for the nine-month period ended March 31, 2024, representing a 30% improvement.

THIRD QUARTER FY 2025 RESULTS OF CONSOLIDATED OPERATIONS

Results for the Three-Month Period Ended	Mar. 31, 2025	Mar. 31, 2024	Mar. 31, 2023
	$	$	$
Gross Revenue	841,760	557,218	468,297
Chargebacks & listing fees	(162,298)	(31,585)	-
Net Revenue	679,462	525,633	468,297
Cost of sales	(396,078)	(86,801)	(14,877)
Gross profit	283,384	438,832	453,420
Expenses
Bad debt expense	-	217,644	-
Bank charges and interest	11,615	2,594	4,322
Consulting fees	-	10,583	1,900
Depreciation	62,333	67,043	77,881
Donations, dues & licenses	-	3,043	2,981
Filing and transfer agent fees	6,805	12,128	51,791
Insurance	22,133	21,702	76,055
Interest on promissory note	68,933	64,137	59,067
Management fees	22,103	8,141	46,704
Marketing	1,263	963	31,671
Office and miscellaneous	25,199	41,573	74,986
Professional fees	24,551	21,505	44,605
Stock-based compensation	10,557	17,026	42,561
Travel and meal allowance	2,473	4,156	10,397
Wages and salaries	198,521	281,386	149,012
Selling and delivery	104,734	34,851	28,902
	561,220	808,475	702,835
Loss before other income (expenses)	(277,836)	(369,643)	(249,415)
Other income (expenses)
Foreign exchange (loss) gain	(5,031)	18,867	13,406
Gain on assets held for sale	-	-	40,512
Gain on termination of lease	-	-	7,868
Loan forgiveness	-	20,000	-
Recovery of bad debts	42,940	-	-
Write-off of property and equipment	-	-	(90,758)

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Other income

54	1,275	15,092
37,963	40,142	(13,880)
(239,873)	(329,501)	(263,295)

REVENUES

Consolidated net revenues for the three-month period ended March 31, 2025, were $679,462 on an accounting basis compared to $525,633 for the three-month period ended March 31, 2024. This 29% increase vs. prior year was driven primarily by an increase in Vin(Zero) alcohol-free wine inventory production orders and associated sales revenue. DehydraTECH licensing revenues were down this quarter when compared with last year's unadjusted Q3 revenues, but increased 14% in the quarter when compared with last year's Q3 adjusted revenues as subsequently adjusted down due to write-offs..

COST OF SALES/DIRECT COSTS

Consolidated cost of sales were $396,078 or 47% of gross revenue for the three-month period ended March 31, 2025, compared to $86,801 or 16% of gross revenue for the three-month period ended March 31, 2024. The increase in cost of sales is the result of the planned ordering and inventory management cycle resulting in higher alcohol-free inventory arrivals and sales for Q3 FY 2025 compared to Q3 FY 2024 when we were adjusting inventories down in our ecosystem. The change in revenue mix between the two businesses results in the large change in gross profit % across the three nine-month periods shown in the above chart, as DehydraTECH licensing revenues do not have significant costs of sales.

OPERATING EXPENSES

Ordinary operating expenses include selling, delivery and marketing expenses, employee expenses, interest, insurance, professional fees, and other general and administrative expenses. For the three-month period ended March 31, 2025, operating expenses were $561,220, compared to $808,475 for the three-month period ended March 31, 2024. The significant 31% decrease was primarily driven by a reduction in bad debt vs. Q3 year ago, as well as reductions in wages and salaries, stock-based compensation, consulting fees, office and miscellaneous, and depreciation, partially offset by increases in management fees, insurance, interest expenses related to the shareholder loan, and a large increase in selling and delivery expenses driven by the change in mix to higher alcohol-free wine sales..

OPERATING EXPENSES – ONE TIME

For the three-month period ended March 31, 2025, the Company incurred non-cash expenses totaling $149,922 which includes expenses related to the vesting of restricted share units, depreciation, and accrued interest. For the three-month period ended March 31, 2024, the Company incurred non-cash expenses of $345,850, which also includes expenses related to the vesting of restricted share units, significant bad debt charges, depreciation and accrued interest.

OTHER INCOME (EXPENSES)

For the three-month period ended March 31, 2025, the Company recognized other income totaling $37,963, which included a recovery of bad debt of $42,940 and other income of $54, partially offset by a foreign exchange loss of $5,031. For the three-month period ended March 31, 2024, the Company

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recognized other income totaling $40,142, which included a foreign exchange gain of $18,867, loan forgiveness of $20,000 and other income $1,275.

NET EARNINGS

The Company improved its net earnings by 27%, reporting a net loss of $239,873 for the three-month period ended March 31, 2025, compared to a net loss of $329,501 for the three-month period ended March 31, 2024. The improvement was primarily driven by a 31% reduction in operating expenses, which offset the reduction in gross profit related to the change in sales mix between alcohol-free wine sales and DehydraTECH licensing revenues.

The basic and diluted loss per share for the three-month period ended March 31, 2025 was $0.07 per share, compared to $0.10 for the three-month period ended March 31, 2024, representing a 30% improvement.

SELECTED QUARTERLY INFORMATION

The following table summarizes certain financial information of the Company for the quarters indicated below:

	March 31, 2025	Dec 31, 2024	Sept 30, 2024	June 30, 2024	March 31, 2024	Dec 31, 2023	Sept. 30, 2023	June 30, 2023
Gross Revenue	$841,760	$768,789	$684,859	$601,326	$557,218	$1,239,884	$226,057	$608,095
Net Revenue	$679,462	$661,123	$529,295	$473,040	$525,633	$982,773	$226,057	$484,028
Direct Costs	$396,078	$314,663	$248,824	$329,308	$86,801	$445,555	$5,027	$169,487
Gross Profit	$283,384	$346,460	$280,471	$143,732	$438,832	$537,218	$221,030	$314,541
Net Loss	$239,873	$187,395	$247,729	$633,183	$329,501	$334,313	$327,938	$983,019
Total Assets	$3,078,479	$3,059,520	$3,112,954	$3,087,123	$3,612,621	$3,882,180	$4,042,167	$4,495,982
Total Liabilities	$3,643,169	$3,394,894	$3,275,724	$3,017,970	$2,903,727	$2,860,811	$2,706,016	$2,861,811
Shareholder's (Deficiency) Equity	($564,690)	($335,374)	($162,770)	$69,153	$708,894	$1,021,369	$1,336,151	$1,634,171

LIQUIDITY AND CAPITAL RESOURCES

FINANCIAL POSITION

The Company's principal capital needs are for operating expenses related to inventory, general and administrative, public company costs, and marketing expenses for its two main lines of business. The

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Company's alcohol-free beverage business requires significant periodic investments in finished goods production orders that are not necessary in the DehydraTECH licensing business. As discussed, we have dramatically reduced the order-to-cash cycle and the level of working capital in this business. However, in Q1 FY 2025, the company received an unsecured loan of $250,000 from Holdco (St. Catharines) Ltd. ("Holdco") to help support the inventory purchasing and to pay certain operational costs related to its alcohol-free wine business.

Additional investments may be made to support the Company's DehydraTECH licensing business to monetize the DehydraTECH intellectual property rights.

The Company will continue prioritizing the push to achieve positive quarterly cash flow without additional fundraising through its revenue generation and cost containment. However, as our DehydraTECH business relies on the US cannabis industry, we continue to face significant challenges with price compression negatively affecting our licensing revenue and with significant delays and challenges in the collection of accounts receivable.

To that end, we have had productive dialogue with Holdco, our lender, regarding potential extension of the maturity date of the unsecured loan as well as other potential alternatives to secure cash needed to continue operations.

WORKING CAPITAL

As of March 31, 2025, the Company had a positive working capital of $19,220 compared to a positive working capital of $253,709 at June 30, 2024.

Balances for the Period Ended	Mar. 31, 2025	June 30, 2024
Cash	$193,885	$66,001
Accounts receivable	$450,666	$454,785
Total Cash + Accounts receivable	$644,551	$520,786

CASH FLOWS

During the nine-month period ended March 31, 2025, Hill experienced a 87% improvement in cash flows used in operating activities, with negative cash flow of $114,616 compared to negative cash flow of $869,008 for the nine-month period ended March 31, 2024. This improvement was primarily due to a decrease in the changes in accounts receivable and accounts payable and accrued liabilities compared to the prior year's period.

During the periods ended March 31, 2025 and 2024, there were no cash flows from investing activities.

Cash provided by financing activities for the nine-month period ended March 31, 2025, totaled $242,500. The positive cash flow was driven by proceeds from an unsecured loan of $250,000 received from Holdco,

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reduced by a $7,500 commitment fee paid to the same party. The negative cash flow in the prior year quarter was due to the Company's partial repayment of promissory notes payable.

CONTRACTUAL OBLIGATIONS

A summary of the Company's contractual obligations for future periods is as follows:

Contractual Obligations	Payments due in:				Total
	1 year	2-3 years	4-5 years	Over 5 years
Accounts payable and accrued liabilities	$500,432	-	-	-	$500,432
Holdco Loan	$266,319	-	-	-	$266,319
Note payable	$54,962	$148,500	$124,538	$2,551,111	$2,879,111
Total	$821,713	$148,500	$124,538	$2,551,111	$3,645,862

SHARE CAPITAL

The Company is authorized to issue an unlimited number of Common Shares of which 3,282,812 Common Shares are issued and outstanding as of the date thereof.

No common shares, stock options or RSUs were issued during the nine-month period ended March 31, 2025.

CAPITAL RESOURCES

As of March 31, 2025, the Company did not have commitments for capital expenditures.

OFF-BALANCE SHEET ARRANGEMENTS

The Company does not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on the financial performance or financial condition of the Company.

TRANSACTIONS WITH RELATED PARTIES

The Company considers its executive officers and directors to be key management personnel. The Company incurred the following amounts to related parties during the respective periods for key management personnel compensation.

During the nine-month period ended March 31,	2025	2024
Total salaries, benefits and management fees	$514,416	$563,923
Stock-based compensation	$41,154	$66,475
Management and director compensation	$555,570	$630,398

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Included in accounts payable and accrued liabilities as at March 31, 2025 is $61,626 (June 30, 2024: $42,751) payable to directors and officers of the Company for officer wages, including vacation payable. The amount is non-interest bearing and unsecured.

On August 9, 2024, Hill Street Marketing Inc., a wholly-owned subsidiary of the Company, received an unsecured loan of $250,000 from Holdco, the Company's largest shareholder. The loan bears interest at a rate of 10% per annum and matures on the earlier of August 9, 2025, or upon the occurrence of certain events as outlined in the Loan Agreement. In connection with the loan, the Company paid a commitment fee of $7,500.

OUTLOOK

Both the Company's alcohol-free beverage and DehydraTECH licensing businesses have growth potential in on-trend, global consumer categories. We have made significant advances in transforming our alcohol-free beverage business model for efficiencies and better financial metrics.

We have faced and will continue to face challenges associated with the growing US cannabis industry, even as we have expanded our US commercial operations on a state-by-state basis for DehydraTECH licensing and have developed a broad portfolio of consumer form factors with an expanded ecosystem of multi-state partners. As mentioned earlier, we anticipate that licensing fee rates will likely continue to be pressured down in our US DehydraTECH business, even as the industry grows and we continue to expand operations. Significant delays and challenges in collection of accounts receivable are also impacting the Company's cash position.

OUTSTANDING SHARE DATA

As of May 30, 2025, the Company has the following securities issued and outstanding:

Security Designation	Number issued and outstanding
Common Shares	3,282,812
Incentive Stock Options	176,379
Restricted Share Units	141,482
Fully Diluted	3,600,673

CRITICAL ACCOUNTING ESTIMATES

The determination of income tax is inherently complex and requires making certain estimates and assumptions about future events. While income tax filings are subject to audits and reassessments, the Company has adequately provided for all income tax obligations. However, changes in facts and circumstances as a result of income tax audits, reassessments, jurisprudence and any new legislation may result in an increase or decrease in the provision for income taxes.

Calculation of the net book value of machinery and equipment requires management to make estimates of the useful economic life of the assets, residual value at the end of the asset's useful economic life, method of depreciation and whether impairment in value has occurred. Residual values of the assets, estimated useful lives and depreciation methodology are reviewed annually with prospective application of any changes, if deemed appropriate. Changes to estimates could be caused by a variety of factors,

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including changes to the physical life of the assets. A change in any of the estimates would result in a change in the amount of depreciation and, as a result, a charge to net income recorded in the period in which the change occurs, with a similar change in the carrying value of the asset on the balance sheet.

GOING CONCERN

As at March 31, 2025, the Company had not yet achieved profitable operations, had a net loss of $674,997 (March 31, 2024: $991,752), accumulated deficit of $26,630,705 (June 30, 2024: $25,955,708), and expects to incur further losses in the foreseeable future, all of which indicate the existence of a material uncertainty that may cast significant doubt upon the Company's ability to continue as a going concern. We continue, along with the cannabis industry, to face challenges with price compression negatively impacting our licensing revenues and significant delays and challenges in the collection of accounts receivable. Realization values may be substantially different from carrying values as shown and these condensed interim consolidated financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern. Such adjustments could be material.

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