CENTR Brands : MD&A (amended) - English

CENTR BRANDS CORP.

100-2318 Oak Street

Vancouver, BC V6H 4J1

January 7, 2022

MANAGEMENT DISCUSSION & ANALYSIS

This Amended and Restated Management's Discussion & Analysis ("Amended and Restated MD&A") should be read in conjunction with the amended and restated condensed interim consolidated financial statements of CENTR Brands Corp. (the "Company") for the three months ended August 31, 2021 and 2020 and related notes, which have been prepared in accordance with International Accounting Standards 34 - Interim Financial Reporting ("IAS34") of International Financial Reporting Standards ("IFRS"). All amounts in the financial statements and this Amended and Restated MD&A are expressed in United States dollars, unless otherwise indicated.

Further information about the Company, its operations and other continuous disclosure is available through filings with the securities regulatory authorities in Canada under the Company's profile at www.sedar.com.

FORWARD LOOKING INFORMATION

This Amended and Restated MD&A contains certain forward-looking statements and information relating to the Company that are based on the beliefs of management of the Company as well as assumptions made by and information currently available to the Company. When used in this document, the words "anticipate", "believe", "estimate", "expect" and similar expressions, as they relate to the Company or management of the Company, are intended to identify forward-looking statements. This Amended and Restated MD&A contains forward-looking statements relating to, among other things, regulatory compliance, the sufficiency of current working capital, and the estimated cost and availability of funding for the continued development of the Company's beverages. These statements speak only as at the date they are made and are based on information currently available and on the then-current expectations of the party making the statement and assumptions concerning future events, which are subject to a number of known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from that which was expressed or implied by such forward-looking statements, including, but not limited to, risks and uncertainties related to: the performance of the Company's business and operations; the intention to grow the business and operations of the Company; applicable laws, regulations and any amendments thereof; the competitive and business strategies of the Company; the general economic, financial market, regulatory and political conditions in which the Company operates; risks associated with economic conditions, dependence on management; and other risks described in this Amended and Restated MD&A and described from time to time in documents filed by the Company with Canadian securities regulatory authorities. Many factors could cause the actual results, performance or the Company's achievements to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements.

The forward-looking statements contained herein are based on certain key expectations and assumptions, including, but not limited to, expectations and assumptions concerning the success of the operations of the Company. Although the Company believes that the expectations and assumptions on which such forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements, because no assurance can be given that they will prove to be correct. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to the risks described above and other factors beyond the Company's control. Consequently, all forward-looking statements made in this Amended and Restated MD&A are qualified by such cautionary statements and there can be no assurance that the anticipated results or developments will actually be realized or, even if realized, that they will have the expected consequences to or effects on the Company. The cautionary statements contained or referred to in this Amended and Restated MD&A should be considered in connection with any subsequent written or oral forward-looking statements that the Company and/or persons acting on its behalf may issue. The Company does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, other than as required by law.

Overview

The Company was formed under the British Columbia Business Corporations Act ("BCBCA") on September 26, 2012 upon completion of the Amalgamation pursuant to the Plan of Arrangement with Ravencrest Resources Inc. ("Ravencrest"), a CNSX listed company, under the terms of an Arrangement Agreement among Ravencrest, River Wild Exploration Inc. ("Former River Wild"), a private British Columbia company, and 0943173 B.C. Ltd. ("SubCo"), a wholly-owned subsidiary of Ravencrest, pursuant to which the parties agreed to complete a plan of arrangement under sections 288 to 299 of the BCBCA whereby Former River Wild and SubCo would amalgamate to form the Company (the "Amalgamation"). The Arrangement was approved by the Ravencrest shareholders on August 9, 2012 and final court approval from the Supreme Court of British Columbia to the Arrangement was obtained on August 14, 2012.

On April 1, 2019 the Company completed the acquisition of all of the share capital of CBD Lifestyle Corp. (the "Transaction"), which was incorporated under the laws of the Province of Ontario on September 17, 2018. Prior to the acquisition, CBD Lifestyle Corp. was an operational entity. In connection with the Transaction, the Company changed its name from River Wild Exploration Inc. to CENTR Brands Corp. Today, the Company is focused on the creation and launch of a range of non-alcoholic beverages, including a global brand for the cannabidiol (CBD) infused beverage industry.

The Company's first products, called "CENTR" and "CENTR Sugar Free" (collectively, "CENTR"), are sparkling, low-calorie, CBD beverages that the Company manufactures and sells in the United States. The Company expects to launch further projects over the course of the next year. The Company is led by Chief Executive Officer and Director Joseph Meehan, with Arjan Chima as President and Director, David Young as CFO and Director, and Anton Drescher and Campbell Becher as fellow Directors.

Overall Performance

As of today's date, the Company continues its marketing of CENTR in the U.S. and to support sales development and growth, the Company has built a team of sales managers and account representatives. The Company expects to continue to drive national consumer demand and interest for CENTR in fiscal 2022, expanding its sales footprint nationally as profitable sales dictate.

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As of April 23, 2021, the Company entered into a U.S. distribution agreement with Southern Glazer's Wine & Spirits ("SGWS"), the world's preeminent distributor of beverage alcohol. The Company expects overall sales performance in the next year to continue to be strongly correlated to growth in U.S. distribution and clarification of a national regulatory structure for CBD-infused beverages in the U.S. As of today's date, the U.S. Food & Drug Administration (the "FDA") continues to evaluate the regulatory frameworks that apply to CBD-related products, including those that are intended for non-drug uses. The FDA has been clear in its public guidance that there is a need for further study and high quality, scientific information about the safety and potential uses of CBD.

In March 2020 the World Health Organization declared coronavirus COVID-19 a global pandemic. This contagious disease outbreak, which has continued to spread, and many related adverse public health developments, has adversely affected workforces, economies, and financial markets globally, potentially leading to an economic downturn.

Management has closely monitored the impact of COVID-19, with a focus on the health and safety of our employees, business continuity and communities where we sell and produce CENTR. Senior management implemented various measures to reduce the spread of the virus, including allowing our non-sales employees to frequently work from home, mandating COVID-19 vaccinations for all staff, implementing social distancing measures whenever possible, and recommending employees to adhere to preventative measures recommended by the WHO. As our non-sales workforce can effectively work remotely using various technology tools, we continue to maintain our full production and sales program, as well as internal controls over financial reporting and disclosures.

At this time, we remain unable to estimate the long-term impact of COVID-19 on our business, financial condition, results of operations, and/or cash flows. We expect COVID-19 to negatively affect our results of operations, as we expect the effects of the COVID-19 outbreak to continue past calendar year 2021, so long as the current measures used to contain the outbreak remain in effect. We believe we have sufficient liquidity available from cash on hand and our ability to raise cash as required to continue operations.

Discussion of Operations

The Company's initial beverage product, CENTR, commenced sales in fiscal Q1 2020 (August 2019). The Company released CENTR Sugar Free in January 2021. The Company has both focused on and used the proceeds of the financings that it has completed to date for (i) the continued development and marketing of the CENTR brand, (ii) innovating new products under the CENTR brand, (iii) support of its sales team in the U.S., (iv) continued introduction of the CENTR brand to potential retail sales partners in the U.S., and (v) further production of CENTR products.

Overall success and future sales of CENTR, both regionally and nationally in the U.S., strongly depends on several factors, including (i) timely dissemination of a positive national regulatory framework for CBD beverages by the FDA (see "Overall Performance" above), and (ii) continued development of a sizeable and effective distribution channel for CENTR, both currently and thereafter.

Subsequent to the previous issuance of management discussion & analysis for the three months ended August 31, 2021 on November 2, 2021, we have updated the accounting analysis of various transactions leading to revised conclusions as described below. There were no impacts on the management discussion & analysis for the three months ended August 31, 2020. As a result, we have restated the previously issued management discussion & analysis.

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We updated the accounting measurement of the warrants liability, as a result of inappropriate inputs used in the Black Scholes option pricing model, which led to a revised conclusion. The warrants liability was previously carried at $6,036,324 and has been revised to $3,983,607. The revised warrants liability value resulted in the change in fair value recognized in net income (loss) and comprehensive income (loss) from a loss on revaluation of warrants liability of $2,019,519 to a gain on revaluation of warrants liability of $1,325,781. Share capital was revised from $18,623,051 to $17,330,468, as the amount of warrants exercised was revised from $833,686 to $727,004 and the shares issued in private placement revised from $3,750,035 to $2,564,134. The overall impact of the adjustments noted above resulted in an increase in net income and comprehensive income of $3,345,400 from the previously reported net loss and comprehensive loss of $3,041,710 to net income and comprehensive income of $303,590.

Summary of Quarterly Results (expressed in US dollars)

		Q1		Q4		Q3		Q2
	Description	2022		2021		2021		2021
		(As restated)
	Inventory	$1,272,919	$1,119,298	$549,615	$165,655
	Gross sales	981,092	101,587	384,392	417,064
	Net sales	920,116	17,473	293,815	317,845
	Net income (loss) and comprehensive	303,590	(11,969,702)	(774,618)	(726,616)
	income (loss) for the period (1) (2)
	Basic and diluted income (loss) per	0.00		(0.19)		(0.01)		(0.01)
	share

1. Q1 2022's net income and comprehensive income for the period includes non-cash gains of $1,325,781 for the revaluation of warrants as a liability for accounting purposes.
2. Q4 2021's net loss and comprehensive loss for the period includes non-cash losses of $8,014,811 for the revaluation of warrants as a liability for accounting purposes and $1,917,361 for the vesting of restricted share units.

		Q1		Q4		Q3		Q2
	Description	2021		2020		2020		2020
	Inventory	$198,928	$266,003	$394,285	$482,701
	Gross sales	209,591	197,893	177,756	121,204
	Net sales	133,414	180,673	155,331	113,368
	Net loss and comprehensive loss	(786,103)	(764,501)	(635,609)	(705,498)
	for the period
	Basic and diluted loss per share	(0.01)		(0.01)		(0.01)		(0.01)

Results of Operations (expressed in US dollars)

For the three-month period ended August 31, 2021 (Q1 2022)

The Company produced a net income and comprehensive income in Q1 2022 of $303,590, versus a loss of $786,103 in Q1 2021.

Revenue

Gross sales in Q1 2022 increased to $981,092, versus $209,591 in Q1 2021. CENTR's growth was largely driven by an increase in new accounts across a broader geographic footprint.

Net sales in Q1 2022 were $920,116, versus $133,414 in Q1 2021.

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Expenses

General and administrative

General and administrative expenses for Q1 2022 was $1,270,458, versus $670,073 in Q1 2021 and significant amounts included the following:

Salaries and payroll of $973,948, versus $473,606 in Q1 2021. This increase was driven, in part, by the addition of sale professionals across a larger geographic footprint.

Other SG&A expenses of $157,731, versus $100,967 in Q1 2021. The increase in other SG&A was driven by an increased level of sales activity and the Company's increased geographic footprint.

Professional Fees of $133,090, versus $88,203 in Q1 2021.

Marketing

Marketing expenses for Q1 2022 were $83,515, versus $75,847 in Q1 2021. Increases in these expenses corresponded to the Company's increased national sales coverage, new product launches, and expenditures relating to the Company's on-boarding of SGWS.

Share-based compensation

Share-based compensation recognized in Q1 2022 was $119,090, versus $63,830 in Q1 2021.

Other income

In Q1 2022, warrants issued to private placement investors were revalued for accounting purposes which resulted in a gain of $1,325,781.

Liquidity and Capital Resources (expressed in US dollars)

As of August 31, 2021, the Company had a cash position of $3,133,217.

Working capital as of August 31, 2021 was $3,869,989. Operating activities are expected to continue to generate revenue in the next quarter and beyond. The Company believes that funds generated from its operations in conjunction with its current capital reserves will be sufficient to meet demands from its anticipated growth. Despite the Company's growth expectations, the Company has limited capital resources and may also rely upon the funds generated through the issuance of equity and or debt securities to fund its operating expenses, working capital requirements and any other strategic growth investments the Company may consider, including future acquisitions. To ensure the Company has the necessary capital to fund operations, growth and new product development activities, the Company has to-date raised money in the private placement market - most recently a private placement in Q1 2022 raised $4,711,278 CAD in units consisting of common shares and share purchase warrants. Subsequent to August 31, 2021, an additional private placement raised $1,192,002 CAD in units consisting of common shares and share purchase warrants.

Transactions with Related Parties (expressed in US dollars)

The Company transacts with key individuals from management who have authority and responsibility to plan, direct, and control the activities of the Company. Key management personnel are defined as the executive officers of the Company and the Board, including the Chief Executive Officer, President and Chief Financial Officer.

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