Pason Systems Inc. — Management Reports 2024

Dec 19, 2024

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CIZZLE BRANDS LTD.

MANAGEMENT DISCUSSION & ANALYSIS

For the three months ended October 31, 2024

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS & RESULTS OF OPERATIONS

The following Management's Discussion and Analysis ("MD&A") should be read in conjunction with the condensed consolidated interim financial statements of Cizzle Brands Ltd. ("the Company") and the notes to those statements for the three months ended October 31, 2024. The accompanying condensed consolidated interim financial statements have been prepared and are the responsibility of the Company's management. The condensed consolidated interim financial statements, including comparatives, have been prepared per International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board. Dollar amounts are expressed in Canadian dollars unless otherwise noted.

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COMPANY OVERVIEW

Cizzle Brands Ltd. ("Cizzle Brands" or the "Company"), founded in 2024, is committed to health and wellness through innovative beverage and nutrition products. In May 2024, the Company launched CWENCH Hydration, a sports drink designed with natural ingredients and aimed at enhancing athletic performance. CWENCH Hydration contains no sugar, less than 10 calories per serving, and features a mix of 6+ electrolytes, promoting effective hydration. CWENCH Hydration is currently available in four flavors, including Blue Raspberry, Cherry Lime, Rainbow Swirl, and Berry Crush.

Cizzle Brands partners with high-profile athletes such as Nathan MacKinnon, Andrew Wiggins, Cole Caufield and Adriana Leon to enhance brand visibility and foster authentic connections with performance-driven consumers. This strategic collaboration positions the brand as a trusted choice for athletes and health-conscious individuals seeking clean, effective hydration options.

Cizzle Brands aims to become a leader in the health, wellness and hydration markets, leveraging its athlete endorsements and product formulations to differentiate itself from competitors.

ANNUAL 2024 HIGHLIGHTS

• Revenues of $2,790,934 for the three months ended October 31, 2024
• Gross margins of $1,750,281, or 63%.
• Operating loss of $2,863,250

OUTLOOK & STRATEGY

Cizzle Brands' mission is to elevate the game in health & wellness by positioning itself at the forefront of an emerging secular shift happening in consumer markets. Specifically, consumers are becoming increasingly aware of how unhealthy foods continue to have a significantly negative impact on health and quality of life. Globally, obesity rates have tripled since 1975 and increased nearly 33% since 2018. In the US 42.4% of adults and 19.7% of children are classified as obese.¹ As a result, the number of people with Type 2 diabetes has increased 5x since 1980,² with 34.2 million Americans now having Type 2 diabetes² and rates climbing more steeply in children and young adults.³

The Company views the primary driver of the changes noted above to be diet, with ultra-processed foods often being rich in added sugars, unhealthy fats, and artificial ingredients. Sugar has become the new "bad word" in the world of health & wellness.

While some consumers attempt to eat healthier, their choices are often unappetizing, uninspired or expensive. This has created an opportunity for companies with strong brands, high quality ingredients and premium products to thrive.

¹https://www.who.int/news-room/fact-sheets/detail/obesity-and-overweight
²IFS Diabetes Atlas
³CDC Diabetes Data & Statistics

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The Company seeks to provide consumers with high-performing alternatives that are healthy, taste great, and meet their needs.

The Company's first product to market is CWENCH Hydration. Containing no sugar, only 10 calories and 6+ performing electrolytes, CWENCH Hydration is a next generation sports hydration drink developed by strength coach, Andy O'Brien, and the team at Cizzle Brands. CWENCH Hydration is endorsed by world-class athletes, including 2024 National Hockey League ("NHL") MVP and Colorado Avalanche forward, Nathan MacKinnon, Montreal Canadian forward, Cole Caufield, National Basketball Association ("NBA") All-Star and Golden State Warrior, Andrew Wiggins, Canadian Olympic soccer player, Adriana Leon, and up-and-coming professional hockey players Gavin McKenna, Chloe Primerano and Jade Iginla.

To date, CWENCH Hydration has been ordered by more than 14 NHL Teams, 9 Major League Baseball teams, and 1 NBA team. CWENCH Hydration is currently available in over 1,000 points of distribution across North America, including Spot-check, Canadian Tire, LifeTime Fitness and Source for Sports. CWENCH Hydration is also being distributed by a number of major distributors.

The Company has a robust portfolio of innovative products and brands that it expects to launch over the next 12-24 months, which includes but is not limited to the products listed below, and will continue to evaluate market conditions to determine when and if to launch any of the following products.

• Spoken Nutrition: a premium line of nutritional supplements, designed to bring elite athletes into the Cizzle ecosystem. Spoken Nutrition's supplements are formulated and/or reviewed by scientists, trainers and physicians, including Andy O'Brien, Ben Greenfield, Dr. Matt Frakes, Dr. Jordan Shallow and Dr. Andrew Weil.
• CWENCHIE: a formulation and format of CWENCH Hydration designed specifically for children.
• SnakStars: a brand of snack products fortified with 8g - 12g of protein designed for the youth snack market.
• Sport Pasta: a high protein, low-glycemic index pasta.

Our Strategy

As a premium, all-natural and sugar-free beverage CWENCH Hydration is positioned to thrive in the global functional beverage and sports drinks market, in which demand for premium and zero sugar products are the fastest growing categories (51% and 46%, respectively).

To penetrate these markets, the Company is utilizing a comprehensive sales channel mix, with initial focus on "points of sweat" (e.g. gyms, arenas, training facilities) and speciality sports retailers (including SportChek, Source for Sports, Canadian Tire). As brand presence for CWENCH Hydration grows, the Company's channel mix will increasingly include convenience stores and gas stations, grocery stores, pharmacies, wholesale clubs, food service companies and online sales platforms in both Canada and the US. This strategic approach ensures that its products are readily available to consumers across a wide range of locations, meeting the demands of diverse markets.

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GOING CONCERN DISCLOSURE

Management of the Company is appropriately conservative and will continue to take actions to increase revenues and lower costs to provide confidence that the Company will meet expectations for the 2025 fiscal year.

Despite strong initial financial performance, there remains a material uncertainty that may cast significant doubt on the Company's ability to continue as a going concern. The 2025 condensed I consolidated interim Financial Statements include a “Going Concern” note, but do not include adjustments to the recoverability and classification of recorded asset and liabilities and related expenses that might be necessary should the Company be unable to continue as a going concern and therefore be required to realize its assets and liquidate its liabilities and commitments in other than the normal course of business.

SELECTED ANNUAL FINANCIAL INFORMATION

For the three months ended
October 31, 2024

Net Revenue	$ 2,790,934
Gross Margin	1,750,281
Total Assets	15,439,818
Total Current Liabilities	3,710,506

RESULTS FROM OPERATIONS

1. Revenue

Net revenue for the three months ended October 31, 2024, totaled $2,790,934, reflecting the successful launch of the CWENCH Hydration product line in May 2024. This product line, available in both ready-to-drink and powder formats, generated robust sales within its first three months on the market. Revenues were derived from both wholesale and direct-to-consumer channels, underscoring the Company's dual-market strategy. The Company is actively pursuing growth opportunities across Canadian, U.S., and international markets, leveraging early traction to drive market penetration and expand its global footprint. The Company's performance in this initial period highlights the potential of the CWENCH Hydration brand to establish itself as a key player in the hydration segment.

For the three months ended
October 31, 2024

Net Revenue	$ 2,790,934
Total Revenue	$ 2,790,934

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1. Cost of Sales

Cost of Sales for the Company represent the cost of the raw materials, packing and production costs used in producing the products. During the three months ended October 31, 2024, the Company incurred cost of sales of $1,040,653. This represents 37% of net sales.

For the three months ended October 31, 2024

Cost of Sales	$ 1,040,653
Total Cost of Sales	$ 1,040,653
As a % of Revenue	37%
Total Revenue	37%

1. Marketing

During the three months ended October 31, 2024, the Company incurred marketing costs of $1,366,047. The marketing spend was used to help develop the CWENCH Hydration brand, through advertising and promotion, trade shows and partnerships with athletes and social media personalities

1. Expenses

Selling, general and administrative costs include all other costs incurred in operating the Company, this includes Salaries and Benefits, Share Based Payments, Processional Fees, R&D and Quality control, Transportation and Distribution, depreciation and other administrative costs. During the three months ended October 31, 2024, the Company incurred SG&A of $3,253,375.

1. Segmented Information

The Company has two reportable business segments, wholesale/retail and direct-to-consumer. The wholesale/retails segment reflects the results from the distribution of product to retail stores, grocery chains, gyms and athletic facilities and professional sports organization, which are subsequently sold to end consumers. The direct-to-consumer segment includes sales of products directly to consumers through online sales on the Company's website. The Company sells domestically in Canada, along with the United States and other international countries.

The majority of the Company's sales were to wholesale/retail channel in Canada representing $1,928,352, or 69% of total sales. Total wholesale/retail sales were 96%, or $2,675,194 of total sales during the three months ended October 31, 2024 ended. Direct-to-Consumer sales represent 4% of total sales, or $115,740. Total sales in Canada were $2,004,158, or 72% of total sales, including wholesale/retail and director to consumer, whereas sales to the United States and other countries represented $786,776, or 28% of total sales.

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| | For the three months ended
October 31, 2024 | | |
| --- | --- | --- | --- |
| | Retail | Consumer | Total |
| Canada | $ 1,928,352 | $ 75,806 | $ 2,004,158 |
| United States | 375,695 | 39,934 | 415,629 |
| International | 371,147 | - | 371,147 |
| Total Sales | $ 2,675,194 | $ 115,740 | $ 2,790,934 |

LIQUIDITIY AND CAPITAL RESOURCES

1. Net Working Capital

Net working capital is a capital management measure and is defined as current assets less accounts payable, and accrued liabilities. The Company had a net working capital of $5,965,192 as of October 31, 2024. The net working capital is made up of $2,471,415 in cash, $1,907,038 in trade receivables, $124,496 in other current assets, and $5,172,749 in inventory, deposits, and prepaids. This is offset by accounts payable and accrued liabilities of $3,432,005, and the current portion of lease liabilities of $278,501.

2. Capital Expenditure

During the three months ended October 31, 2024, the Company spent $8,047 on computers equipment. The Company also spent $890,729 on Right of Use assets in relation to the naming rights for the CWENCH Centre by Canlan Sports in Toronto, ON. The agreement with Canlan Sports, provided the Company with naming rights to the arena, and also sponsorship, marketing and hydration exclusivity within Canlan Arenas. The sponsorship agreement was accounted for as a prepaid and will be expensed on a straight-line method over the term of the contract.

3. Intangible Assets

On January 25, 2024, the Company acquired 100% of Cizzle Brands Inc. for $5,000,000. An Intangible Asset was recognized in the condensed consolidated interim financial statements for the formulations acquired through this transaction. As there was no business combination, and thereby no purchase price allocation (PPA) conducted to separately identify and value intangible assets, the full amount of the excess purchase price has been classified as intangible assets. The Company will amortize the intellectual property over a 10-year period, on a straight-line basis, reflecting the expected benefit period of the acquisition.

4. Lease Liabilities

The Company currently has a lease liability of $1,008,990 for the rental of the corporate offices and naming rights to the CWENCH Centre by Canlan Sports (refer to item 2).

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1. Share Capital

Prior to July 31, 2024, the Company raised $14,487,622 net of issuance costs and commissions through the issuance of 73,473,270 units at a price of $0.20/unit (the "Private Placement"). Each unit consisted of 1 common share and one-half warrant, with an exercise price of $0.40 and an expiry of 4 years from the date of issue. In connection with the Private Placement, the Company issued 966,000 units as commission for services rendered in relation to the funds raised. The commission units were issued on the same terms as those offered in the Private Placement.

In August 2024, the Company issued 3,750,000 units at a price of $0.20/unit. Each unit consisted of 1 common share and one-half warrant, with an exercise price of $0.40 and an expiry of 4 years from the date of issue. In connection with the private placement, the Company issued 1,875,000 units as commission for services rendered in relation to the funds raised. The commission units were issued on the same terms as those offered in the private placement.

In October 2024, the Company issued 6,767,057 common shares its at a price of $0.30/share. The company incurred issuance costs of $13,341 in relation to this issuance.

As of the date of this MD&A, the Company's authorized share capital consists of an unlimited number of common shares without par value. The Company had the following securities outstanding on October 31, 2024:

Number Outstanding
Common Shares	187,459,827
Warrants	39,246,385
Stock Options	19,400,000
Fully Diluted	246,106,212

MATERIAL ACCOUNTING POLICIES

See Note 3 of the consolidated financial statements to summarize all material accounting policies.

CRITICAL JUDGEMENTS, ESTIMATES AND ASSUMPTIONS

The Company's management makes judgments in its process of applying the Company's accounting policies in the preparation of its consolidated financial statements. In addition, the preparation of financial data requires that the Company's management make assumptions and estimates of the effects of uncertain future events on the carrying amounts of the Company's assets and liabilities at the end of the reporting period and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates as the estimation process is inherently uncertain. Estimates are reviewed continuously based on historical experience and other relevant factors. Revisions to estimates

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and the effects on the carrying amounts of the Company's assets and liabilities are accounted for prospectively.

Note 4 reflects the critical judgments, estimates, and assumptions used to prepare the Company's consolidated financial statements.

RISK FACTORS AND UNCERTAINTIES

The Company is exposed to business risks that are inherent to the consumer-packaged goods industry along with being a newly formed company. The Company is focused on growing its business with new and existing customers and scaling to achieve continued growth and profitability. The details of these risks are set out in the listing document, which is available on SEDAR+.

1. Going Concern

The consolidated financial statements (the "financial statements") have been prepared on a going concern basis in accordance with International Financial Reporting Standards ("IFRS") as issued by International Accounting Standards Board (IASB). The going concern basis of presentation assumes the Company will continue to operate for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of business. During the three months ended October 31, 2024, the Company incurred a comprehensive loss of $2,863,250 and negative cash flows from operations of $1,775,336. The Company has an accumulated deficit of $7,420,741.

There remains a material uncertainty that may cast significant doubt on the Company's ability to continue as a going concern. As disclosed in Note 1A, the condensed consolidated interim financial statements do not include adjustments to the recoverability and classification of recorded assets and liabilities and related expenses that might be necessary should the Company be unable to continue as a going concern and therefore be required to realize its assets and liquidate its liabilities and commitments in other than the normal course of business at amounts different from those in the accompanying consolidated financial statements. Such adjustments could be material.

The Company's ability to continue as a going concern is highly dependent upon the Company's ability to obtain the ongoing support of its creditors, lenders and investors, obtain profitable operations, generate significant sales and/or raise additional capital. The condensed consolidated interim financial statements do not reflect adjustments in the carrying values of assets and liabilities, the reported revenues and expenses, and the statement of financial position classifications used that would be necessary if the Company were unable to realize its assets and settle its liabilities as a going concern in the normal course of operations. Such adjustments would be material.

2. Limited Operating History

Cizzle Brands faces inherent risks associated with being a new company, having only been in operation for ten months. As a newly established company, it lacks an extensive track record, which can limit its ability to predict future performance reliably and may pose challenges in securing sustained market traction.

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Additionally, the Company's ability to achieve growth targets, optimize its operations, and establish brand loyalty is still evolving. The limited operating history also increases exposure to unforeseen operational challenges, market fluctuations, and the competitive dynamics of the health beverage industry.

3. Future Capital Needs

The Company may require additional financing to support working capital needs in the future. The amount of additional capital required, the timing of capital needs and the availability of financing to fund those needs will depend on a number of factors, including the Company's strategic initiatives and operating plans, the performance of its business and the market conditions for debt or equity financing. Additionally, the amount of capital required will depend on the Company's ability to meet its sales goals and otherwise successfully execute its operating plan. The Company believes it is imperative that it meet these sales objectives in order to lessen its reliance on external financing in the future. The Company intends to continually monitor and adjust its operating plan as necessary to respond to developments in its business, its markets and the broader economy. Although the Company believes various debt and equity financing alternatives will be available to it to support its working capital needs, financing arrangements on acceptable terms may not be available to the Company when needed. Moreover, these alternatives may require significant cash payments for interest and other costs or could be highly dilutive to the Company's existing shareholders. Any such financing alternatives may not provide the Company with sufficient funds to meet its long-term capital requirements. If necessary, the Company may explore strategic transactions that it considers to be in the best interest of the company and its shareholders, which may include, without limitation, public or private offerings of debt or equity securities, a rights offering, and other strategic alternatives; however, these options may not ultimately be available or feasible when needed.

4. Changes in Consumer Preferences

Consumer demand and appetite for premium hydration products and beverages in general, as well as industry trends, may change and evolve over time. The Company's future success will depend, in part, upon the Company's continued ability to maintain customer loyalty to the Company's existing product offering and develop and introduce new and innovative products over time. The Company's ability to compete, grow and differentiate itself requires it to be competitive in the areas of taste, quality, innovation and wellness. There can be no assurance of the Company's ability to do so. In addition, product lifecycles for some premium hydration brands and/or products and/or packages may be limited before consumers' preferences change. While the Company's main product profile has resonated positively in the market, and many of the Company's consumers are becoming loyal to the Company's brands and their taste profiles, there can be no assurance that such preferences will continue into the future. The Company may be unable to achieve volume growth through product and packaging differentiation in the markets in which the Company competes.

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FINANCIAL INSTRUMENTS, RISKS AND CAPITAL MANAGEMENT

The Company has exposure to counterparty credit risk, liquidity risk, and market risk associated with its financial assets and liabilities. The Company's risk management program seeks to minimize potential adverse effects on the Company's financial performance and ultimately shareholder value. The Company manages its risks and risk exposures through a combination of insurance, a system of internal controls, and sound business practices.

The Company's financial instruments and the nature of the risks to which they may be subject to are set out in the following table.

Risks
	Credit	Liquidity	Market
			Foreign Exchange	Interest Rate
Cash	Yes	-	Yes	-
Trade receivables	Yes	-	Yes	-
Other receivables	Yes	-	Yes	-
Accounts payable and accrued liabilities	-	Yes	-	-

The carrying values of cash, trade receivables, accounts payable and accrued liabilities, approximate their fair values due to their relatively short periods to maturity.

Credit risk

Credit risk arises from cash held with banks and trade receivables and these financial assets are subject to the expected credit loss model. The maximum exposure to credit risk is equal to the carrying value of the financial assets. The objective of managing counterparty credit risk is to prevent losses on financial assets. The Company minimizes the credit risk of cash by depositing with only reputable financial institutions and minimizes the credit risk of trade receivables by monitoring the counterparty's creditworthiness and setting exposure limits.

To optimize cash flow and reduce the balance of prepaid expenses, the Company is actively negotiating improved credit terms with its suppliers. By securing longer payment periods and more favorable terms, the Company aims to reduce the need for large upfront payments, thereby enhancing liquidity and working capital management. These efforts are expected to strengthen the Company's financial position and support its long-term growth and sustainability.

Trade receivables with specific customers, each with 10% or more of total Company trade receivables are summarized as follows:

| | As at
October 31, 2024 | As at
July 31, 2024 |
| --- | --- | --- |
| Customer 1 | $ 229,139 | $ 203,183 |
| Customer 2 | 192,871 | 130,754 |
| Total Major Trade Receivables | $ 422,010 | $ 333,937 |

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Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company manages liquidity risk by continuously monitoring forecasts and actual cash flows and taking the necessary actions to maintain enough liquidity for operations and for growth objectives.

	Carrying amount	Maturing in less than 1 year
As at October 31, 2024:
Accounts payable and accrued liabilities	$ 3,432,005	$ 3,432,005
Total	$ 3,432,005	$ 3,432,005

Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates will affect the fair value of a financial instrument or its future cash flows.

The Company operates internationally with a sales coming from United States and other countries. The Company is, therefore, subject to foreign currency risk. The Company reports its financial results in Canadian dollars. The Company incurs expenses in both Canadian and U.S. dollars. To date, the Company has not used foreign currency forward contracts or other hedging strategies to manage its foreign currency exposure.

As of October 31, 2024, the Canadian entities US-dollar net monetary assets totaled approximately US $366,947. A 10% strengthening in the Canadian dollar against the United States dollar as at October 31, 2024, would have increased comprehensive income (loss) and decreased shareholder's equity by $49,537. A 10% weakening would have had the equal but opposite effect. This analysis assumes that all other variables remain constant.

Capital management

The Company's objective in managing capital is to ensure a sufficient liquidity position to safeguard the Company's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders. The Company defines capital as equity and debt, comprised of issued common shares, warrants, contributed surplus, and accumulated deficit. The Company seeks to ensure that it has sufficient cash resources to maintain its ongoing operations and finance its research and development activities, corporate and administration expenses, working capital, and overall capital expenditures.

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KEY MANAGEMENT COMPENSATION

Compensation for key management personnel, including the Company's officers and directors, was as follows for the three months ended October 31, 2024:

	For the three months ended October 31, 2024
Salaries and other short-term benefits	$ 185,108
Total	$ 185,108

MANAGEMENT'S STATEMENT OF RESPONSIBILITY

The accompanying consolidated financial statements of Cizzle Brands Ltd. and all information contained herein are the responsibility of management and have been approved by the Board of Directors. The consolidated financial statements include some amounts based on management's best estimates that have been made using careful judgment. Management has prepared the consolidated financial statements in accordance with International Financial Reporting Standards. Financial and operating data elsewhere in the report are consistent with the information contained in the consolidated financial statements. Although no cost-effective system of internal controls will prevent or detect all errors and irregularities, these systems are designed to provide reasonable assurance that assets are safeguarded from loss or unauthorized use, transactions are correctly recorded, and the financial records are reliable for preparing consolidated financial statements.

CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS

This MD&A includes "forward-looking information" and "forward-looking statements" within the meaning of applicable Canadian securities laws. All information, other than statements of historical facts, included in this MD&A that addresses activities, events or developments that the Company expects or anticipates will or may occur in the future is forward-looking information. Forward-looking information is often identified by the words "may", "would", "could", "should", "will", "intend", "plan", "anticipate", "believe", "estimate", "expect" or similar expressions and includes, among others, information regarding:

• future products and services;
• expansion to product distribution;
• the Company's growth;
• marketing and business plans and short-term objectives;
• the intention to grow the business, operations and potential activities of the Company;
• revenue;
• use of available funds;
• business milestones and objectives;
• the protection of intellectual property;
• exploration of new products and opportunities;

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• future risks to operations;
• the Company’s business objectives;
• the Company’s expectations regarding its business, financial condition and results of operations
• future market share;
• the outcome of legal proceedings which involve the Company;
• strategic plans; and
• strategic relationships with third parties.

These statements reflect the Company’s current views with respect to future events and are based on assumptions and subject to a number of risks and uncertainties, some of which are unknown at this time. Certain assumptions made in preparing the forward-looking statements contained in this MD&A include:

• the Company’s ability to meet its obligations as they become due;
• the Company’s ability to implement its growth strategies;
• the Company’s competitive advantages;
• the development of new products and product formats for the Company’s products;
• the Company’s ability to manage any indebtedness as required;
• the Company’s ability to obtain and maintain financing or to re-finance existing indebtedness on acceptable terms, as necessary;
• the impact of competition;
• changes and trends in the beverage industry and markets;
• changes in laws, rules and regulations;
• the Company’s ability to maintain and renew required licences;
• the Company’s ability to maintain good business relationships with its customers, distributors and other strategic partners;
• the Company’s ability to keep pace with changing consumer preferences;
• the Company’s ability to protect intellectual property;
• the Company’s ability to retain key personnel;
• The absence of material adverse changes in the industry and in Canadian, US or global economies
• The Company’s future business performance;
• The demand for the Company’s products; and
• The conditions of the markets that the Company’s serves.

Although the Company believes that the assumptions underlying its statements are reasonable, they may prove to be incorrect. Given these risks, uncertainties and assumptions, investors should not place undue reliance on the forward-looking information.

The purpose of forward-looking information is to provide the reader with a description of management’s expectations, and such forward-looking information may not be appropriate for any other purpose. In particular, but without limiting the foregoing, disclosure in this MD&A under “Description of the Business” as well as statements regarding the Company’s objectives, plans and goals, including future operating results and economic performance may make reference to or involve forward-looking information. Although the Company believes that the expectations reflected in such forward-looking information are reasonable, it can give no assurance that such expectations will prove to have been correct.

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While the Company believes its plans, intentions and expectations reflected in the forward-looking information are reasonable, it cannot assure you that these plans, intentions or expectations will be achieved. The Company's actual results, performance or achievements could differ materially from those contemplated, expressed or implied by the forward-looking information relating to the Company contained in this MD&A as a result of various factors, including the risks, uncertainties and assumptions previously discussed, which include, but are not limited to, the following:

• Ability to achieve and manage growth;
• Failure to effectively expand sales capabilities could harm the Company's ability to increase distribution and achieve broader market acceptance of its products;
• The Company may need additional financing in the future, which may not be available when needed or may be costly and dilutive;
• Changes in consumer preferences may reduce demand for some of the Company's products;
• The Company's brand and image are keys to its business and any inability to maintain a positive brand image could have a material adverse effect on its results of operations;
• The Company may be adversely impacted by the effects of high or prolonged inflation;
• Competition from traditional and large, well-financed non-alcoholic beverage manufacturers may adversely affect the Company's distribution relationships and may hinder development of its existing markets, as well as prevent the Company from expanding its markets;
• The Company competes in an industry characterized by rapid changes in consumer preferences and public perception, so its ability to continue developing new products to satisfy the changing preferences of consumers will determine its long-term success;
• The Company's reliance on distributors, retailers and brokers could affect its ability to efficiently and profitably distribute and market its products, maintain its existing markets and expand its business into other geographic markets;
• The Company incurs significant time and expense in attracting and maintaining key distributors;
• If the Company loses any of its key distributors or national retail accounts, its financial condition and results of operations could be adversely affected;
• It is difficult to predict the timing and number of sales because most distributors and retailers are not required to place minimum orders with the Company;
• If the Company does not adequately manage its inventory levels, its operating results could be adversely affected;
• If the Company fails to maintain relationships with its independent contract manufacturers, its business could be harmed;
• The Company's dependence on independent contract manufacturers could make management of its manufacturing and distribution efforts inefficient or unprofitable;
• The Company relies upon our ongoing relationships with its key flavor suppliers. If the Company is unable to source its flavors on acceptable terms from its key suppliers, the Company could suffer disruptions in its business;
• Criticism of the packaged beverage market generally could adversely affect the Company's operating results;
• If the Company is unable to maintain brand image or product quality, its business could suffer;
• Increased competition could hurt the Company's business;
• Consolidation of retailers, wholesalers and distributors and the dominant position of a limited number of key players in the industry may result in downward pressure on sales prices;
• The Company's failure to accurately estimate demand for its products could adversely affect its business and financial results;

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• If the Company fails to obtain and retain high-visibility sponsorship or endorsement arrangements with celebrities, or if the reputation of any of the celebrities that the Company partners with is impaired, the business of the Company may suffer;
• The Company's distributors and vendors are material to the Company's success. If the Company is unable to maintain good relationships with its existing distributors and vendors, its business could suffer;
• Changing retail landscape could hurt the Company's business;
• Incorrect product design or development could hurt the Company's business;
• Product information misrepresentations could happen and may adversely affect the Company's business;
• The Company relies on third party distributors and other logistics providers;
• The Company relies on key inputs;
• The Company's success relies on its quality control systems;
• The Company is subject to risks and uncertainty regarding future product development;
• Risks related to the Company's human capital;
• Revenues derived entirely from packaged beverages;
• Increases in costs and/or shortages of raw materials and/or ingredients and/or fuel could harm the Company's business;
• Fluctuation of quarterly operating results;
• No assurance of profitability;
• Fluctuations in foreign currency exchange rates may adversely affect the Company's operating results;
• Significant changes in government regulation may hinder sales;
• Contamination or recalls of the Company's ingredients or end products could adversely affect its business;
• The Company's intellectual property rights are critical to the Company's success, and the loss of such rights could materially adversely affect its business;
• Litigation or legal proceedings could expose the Company to significant liabilities and thus negatively affect its financial results;
• Future effective tax rates could be subject to volatility or adversely affected by a number of factors;
• Catastrophic events could impact the Company's operations and affect the Company's ability to grow its business;
• Climate change may negatively affect the Company's business;
• The Company's business is seasonal and adverse weather conditions could negatively affect its business;
• The Company depends on key information systems and third-party service providers;
• If the Company is unable to securely maintain its customers' confidential or credit card information, or other private data relating to the Company or its employees, the Company could be subject to negative publicity, costly government enforcement actions or private litigation, which could damage its business reputation and negatively affect its results of operations;
• The Company must continually maintain and/or upgrade its information technology systems;
• Conflicts of interest;
• Limited operating history as a public company;
• Potential volatility of share price;
• No assurance of active market for shares;

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• Dividends;
• A return on the Company’s securities is not guaranteed;
• Global financial conditions;
• Future sales of common shares by existing shareholders;
• Additional issuances and dilution;
• Publication of inaccurate or unfavourable research and reports; and
• As a public company, there are costs associated with maintaining a public listing.

These risks, uncertainties, assumptions and other factors could cause the Company’s actual results, performance, achievements and experience to differ materially from its expectations, future results, performances or achievements expressed or implied by the forward-looking information.

The forward-looking information made in this MD&A relates only to events or information as of the date on which the statements are made in this MD&A. In addition, even if results and developments are consistent with the forward-looking information contained in this MD&A, those results and developments may not be indicative of results or developments in subsequent periods. The Company undertakes no obligation to update or revise publicly any forward-looking information, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events unless required under applicable securities laws. The Company’s forward-looking information is expressly qualified in their entirety by this cautionary statement.

An investor should read this MD&A with the understanding that the Company’s actual future results may be materially different from what is expected.

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