Swiss Water Decaffeinated Coffee : 2023 Fourth Quarter MD&A

SWISS WATER DECAFFEINATED COFFEE INC.

Management Discussion and Analysis

For the year ended December 31, 2023

MANAGEMENT DISCUSSION AND ANALYSIS

This Management's Discussion and Analysis ("MD&A") of Swiss Water Decaffeinated Coffee Inc. ("Swiss Water" or the "Company"), dated as of March 13, 2024, provides a review of the financial results for the quarter and year ended December 31, 2023 relative to the comparable periods of 2022. The quarter period represents the fourth quarter ("Q4") of our 2023 fiscal year. This MD&A should be read in conjunction with Swiss Water's audited consolidated financial statements for the year ended December 31, 2023, and in conjunction with the Annual Information Form ("AIF"), which are available on www.sedar.com.

All financial information is presented in Canadian dollars, unless otherwise specified.

FORWARD-LOOKING STATEMENTS

This MD&A contains forward-looking statements, including statements regarding the future success of our business and market opportunities. Forward-looking statements typically contain words such as "believes", "expects", "anticipates", "continue", "could", "indicates", "plans", "will", "intend", "may", "projects", "schedule", "would" or similar expressions suggesting future outcomes or events, although not all forward- looking statements contain these identifying words. Examples of such statements include, but are not limited to, statements concerning: (i) expectations regarding Swiss Water's future success in various geographic markets; (ii) future financial results, including anticipated future sales and processing volumes; (iii) future dividends; (iv) the expected actions of the third parties described herein; (v) factors affecting the coffee market including supplies and commodity pricing; (vi) the expected cost to complete upgrades to production lines; and (vii) the business and financial outlook of Swiss Water. In addition, this MD&A contains financial outlook information that is intended to provide general guidance for readers based on our current estimates, which are based on numerous assumptions and may prove to be incorrect. Therefore, such financial outlook information should not be relied upon by readers. These statements are neither promises nor guarantees but involve known and unknown risks and uncertainties that may cause our actual results, level of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed in or implied by these statements. These risks include but are not limited to, risks related to processing volumes and sales growth, operating results, supply of coffee, supply of utilities, general industry conditions, commodity price risks, technology, competition, foreign exchange rates, interest rate risks, any new equipment upgrades timing, inflation, costs and financing of capital projects, general economic conditions and those factors described herein under the heading 'Risks & Uncertainties'.

The forward-looking statements contained herein are also based on assumptions that we believe are current and reasonable, including but not limited to, assumptions regarding: (i) trends in certain market segments and the economic climate generally; (ii) the financial strength of our customers; (iii) the value of the Canadian dollar versus the US dollar ("US$"); (iv) the expected financial and operating performance of Swiss Water going forward; (v) the availability and expected terms and conditions of debt facilities; (vi) the expected level of dividends payable to shareholders; (vii) the potential impact of pandemics (viii) the potential impact of any war and terrorist activity (ix) the potential impact on any labour union disputes (x) potential impact of environmental changes or unexpected acts of God. We cannot assure readers that the actual results will be consistent with the statements contained in this MD&A. The forward-looking statements and financial outlook information contained herein are made as of the date of this MD&A and are expressly qualified in their entirety by this cautionary statement. Except to the extent required by applicable securities law, Swiss Water undertakes no obligation to publicly update or revise any such statements to reflect any change in our expectations or in events, conditions, or circumstances on which any such statements may be based, or that may affect the likelihood that actual results will differ from those described herein.

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SWISS WATER DECAFFEINATED COFFEE INC.

Management Discussion and Analysis

For the year ended December 31, 2023

EXECUTIVE SUMMARY

The following selected information, other than Adjusted EBITDA was derived from the financial statements for the year ended December 31, 2023, prepared in accordance with IFRS. For the definition of Adjusted EBITDA, refer to the Non-IFRS Measures section of this MD&A.

In $000s except per share amounts		3 months ended December 31,		Year ended December 31,
(unaudited)		2023		2022		2023		2022
Revenue	$	41,237	$	43,998	$	166,277	$	176,935
Gross Profit		6,916		5,759		18,798		26,088
Operating income		3,372		2,792		5,630		13,381
Net income (loss)		961		(254)		(528)		2,387
Adjusted EBITDA1		5,008		3,087		13,354		16,659
Net income (loss) per share - basic2	$	0.10	$	(0.03)	$	(0.06)	$	0.26
Net income (loss) per share - diluted2	$	0.10	$	(0.03)	$	(0.06)	$	0.26

1. Adjusted EBITDA is defined in the 'Non-IFRS Measures' section of this MD&A and is a "Non-GAAP Financial Measure" as defined by CSA Staff Notice
   52-306.
2. Per-sharecalculations are based on the weighted average number of shares outstanding during the periods. Diluted earnings per share take into account shares that may be issued upon the exercise of warrants and RSUs.

Operational highlights

• During late Q3, commercial decaffeination on the second line in Delta, BC started for the first time. This marked the completion of the consolidation of production activities into one site, and the end of the transition away from our legacy production assets in Burnaby, BC. Production volumes and quality metrics on the new line increased during the three months ended December 31, 2023, and enabled the delivery of a very strong fourth quarter.
• As expected, total sales volume for the three months ended December 31, 2023 increased by 17% compared to the fourth quarter of 2022. The consolidation of production in Delta was completed during the third quarter, and as a result, we are no longer capacity constrained. This enabled us to maximize organic growth opportunities and clear a small backlog of orders with existing customers during the fourth quarter. For the full year, volume decreased by 7%, primarily due to anticipated capacity limitations realized during the second and third quarters of 2023.
• In anticipation of the consolidation of production in Delta, BC, and the temporary reduction in capacity driven by this change, we proactively communicated with customers and suppliers regarding the availability of decaffeinated coffee. As a result, many of our customers moved orders ahead into the first half of the year, or delayed deliveries into the fourth quarter. These decisions necessitated some higher than normal working capital investments during the first half of the year, and yielded some higher than normal reductions in working capital during the fourth quarter. The proactive communication of the transition successfully minimized disruption to our customers and to our business.
• Full-yearsales volumes in each of our major geographic markets were down from the 2022 level due to the temporary capacity constraints we experienced during the transition out of our legacy Burnaby facility. Although sales volumes delivered to North America and International markets decreased during the first three quarters of the year, this was not unexpected. During the fourth quarter, North American sales volumes recovered and grew by 11%, compared to Q4 of 2022. In Europe, acute inflationary pressures,

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SWISS WATER DECAFFEINATED COFFEE INC.

Management Discussion and Analysis

For the year ended December 31, 2023

together with concerns regarding the conflicts in Ukraine and the Middle East, contributed to reduced coffee consumption in 2023. It is difficult to forecast how these factors will affect European demand patterns in 2024.

• Our largest geographical market by volume in 2023 was the United States, followed by Canada and international markets. By dollar value, 50% of our sales were to customers in the United States, 29% were to Canadian customers, and the remaining 21% were to international customers. Overall, we recorded sales of $166.3 million for the full year, which represents a $10.7 million, or 6%, decrease from the 2022 level.
• Regarding customer mix, full-year commercial and specialty roaster volumes decreased 1% and 15% respectively, when compared to 2022. During 2023, some of our specialty customers proactively managed their order flows as they tried to reduce inventory levels in response to rising interest rates, falling coffee quality differentials, and uncertainty around coffee consumption patterns. The temporary capacity constraint we managed through during our transition from Burnaby also had a negative impact on annual volumes delivered to all customer categories. However, during the fourth quarter, our commercial and roaster volumes returned to growth, increasing by 26% and 8% respectively when compared to the fourth quarter of 2022.
• As expected, our inventory levels fell during the second half of 2023 due to the consumption of the coffee inventories we built up to bridge the production constraints we experienced during the transition from Burnaby and the consolidation of all processing in Delta. We remained focused on optimizing inventory levels and our year-end volumes on hand were rebalanced at levels not recorded since the first quarter of 2021. Moving forward, we are well positioned with green coffee inventory and can react to short-term demand increases in most coffee origins. Although we saw a marked reduction in the disruption to green coffee deliveries and supply chain bottlenecks during the year, some shipping delays and increased freight rates persist. As a recent example, the port strike in July 2023 affected more than 30 ports across BC, including the Port of Vancouver. We are cautiously optimistic that any current and future disruptions will not have a material impact on our operations as we move into 2024.
• Looking back, the NY'C' coffee commodity price for Arabica coffee increased rapidly beginning in the third quarter of 2021 and remained exceptionally high until the third quarter of 2022. During this period, the tight availability of exportable coffee due to crop shortages and logistical backlogs kept the pressure on the futures market and we saw spot availability of coffees fall substantially. Although the NY'C' came down, beginning in the fourth quarter of 2022, coffee prices remain relatively high. The effects of this elevated coffee market continued to be felt throughout 2023, and its impact moving forward will depend on the futures market remaining at, or below, the current level for a sustained period.
• Throughout 2023, we continued to feel inflationary pressures within other components of our variable cost structure. These persist and include: higher costs for natural gas, carbon, packaging, shipping, and labour. To help maintain margins, we last increased our process price rates toward the end of the fourth quarter of 2021. Since then, we have worked diligently to maximize efficiencies across our value chain to limit the need for further price increases.

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SWISS WATER DECAFFEINATED COFFEE INC.

Management Discussion and Analysis

For the year ended December 31, 2023

Financial highlights

• Revenue for the quarter and year ended December 31, 2023, was $41.2 million and $166.3 million respectively. This represents a $2.8 million decrease in Q4 and a $10.7 million decrease for the full year, when compared to the 2022 result. The drop in full-year revenue was an expected result of the temporary reduction in capacity we experienced during the second and third quarters as we transitioned production out of Burnaby. Higher than normal volumes shipped in the first and fourth quarters helped mitigate the impact of the capacity constraint. A decline in the NY'C' also contributed to the year-over-year drop in revenue.
• Effective January 1, 2023, Swiss Water reduced the estimated useful life of the non-salvaged assets at our legacy production facility in Burnaby, by 12 years. The useful life of these assets was re-aligned against the final production date at the site, which was in April 2023. At the time of the change in estimate, these assets had a carrying value of approximately $3.0 million. As such, these non-salvaged assets were fully depreciated and an expense of $3.0 million is reflected within the $6.8 million of total depreciation expenses for the 2023 fiscal year. The financial impact of the change in estimate was a one-time incremental depreciation expense of $2.5 million for the year. There was no such change in estimate during the comparative period in 2022.
• Gross profit for the fourth quarter was $6.9 million, an increase of $1.2 million from Q4 of 2022. For the full year, gross profit of $18.8 million was down by $7.3 million from the 2022 level. The fourth quarter increase in gross profit was primarily due to higher volumes and efficiencies of scale leveraged from within our production process. During Q4, the consolidation of all Swiss Water production into a single facility also started to generate savings from reduced building maintenance, utilities consumption, staffing, and transportation between locations. As anticipated, the year-over-year drop in gross profit was due to the temporary production constraint described above, as well as materially lower green coffee differential margins and the one-time incremental depreciation expense of $2.5 million. In addition, we experienced inflationary pressures on variable production costs, including natural gas, carbon and labour, as well as freight and storage costs.
• Net income of $1.0 million for the fourth quarter was up by $1.2 million from 2022. For the full year, we recorded a net loss of $0.5 million, down by $2.9 million from net income of $2.4 million in 2022. The differences in net income for both periods were driven by the same factors influencing gross profit, as described above, as well as a material increase in finance expenses due to higher borrowings. These negative factors were partially offset by gains on risk management activities, higher finance income, reduced losses on foreign exchange, and lower income tax expense.
• Fourth quarter adjusted EBITDA1 was $5.0 million, an increase of $1.9 million over Q4 of 2022. For the full year, adjusted EBITDA was $13.4 million down by $3.3 million, when compared to 2022. The fourth quarter increase is reflective of high production volumes and scale efficiencies, while the decrease in annual adjusted EBITDA was primarily driven by lower volume due to the capacity constraint during the third quarter transition from Burnaby, and reduced green coffee differential margins as noted above.
  During the first half of 2023, we increased inventory levels significantly, primarily to address anticipated capacity gaps and uphold high levels of customer service. The commissioning of our second production line in Delta led to an acceleration in raw materials usage and increased shipments of finished goods

1 Adjusted EBITDA is defined in the 'Non-IFRS Measures' section of the MD&A and is a "Non-IFRS Financial Measure" as defined by CSA

Staff Notice 52-306.

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SWISS WATER DECAFFEINATED COFFEE INC.

Management Discussion and Analysis

For the year ended December 31, 2023

during the third and fourth quarters of the year. As a result, inventories closed 2023 at their lowest levels since Q1 of 2021 and generated a material release of working capital back into the business. By the end of the fourth quarter, the value of our inventory on hand had dropped to $30.3 million from $60.2 million at December 31, 2022. This provided an opportunity for us to pay down debt while leaving adequate inventory on hand to support our operations and near-term growth.

NON-IFRS MEASURES

Adjusted EBITDA

Adjusted EBITDA is a Non-GAAP measure that is often used by publicly traded companies as a measure of cash from operations, as it excludes financing costs, taxation, and non-cash items. We believe that disclosing this Non-IFRS measure provides readers of this MD&A with important information regarding Swiss Water's financial performance and our ability to pay distributions to stakeholders. By considering Adjusted EBITDA in combination with IFRS, we believe that readers are provided with additional and more useful information about Swiss Water than readers would have if they simply considered IFRS measures alone. Reported Adjusted EBITDA is intended to assist readers with their own financial analysis. However, since this measure does not have a standardized meaning prescribed by IFRS, it is unlikely to be comparable to similar measures presented by other entities.

We define Adjusted EBITDA as net income before interest, depreciation, amortization, impairments, share- based compensation, gains/losses on foreign exchange, gains/losses on disposal of property and equipment, fair value adjustments on embedded options, gains/losses on extinguishment of debt, adjustment for the impact of IFRS 16 - Leases, other gains/loss related to asset retirement obligation and provision for income taxes. Our definition of Adjusted EBITDA also excludes unrealized gains and losses on the undesignated portion of foreign exchange forward contracts.

Adjusted EBITDA for the quarter and year ended December 31, 2023, was $5.0 million and $13.4 million respectively, compared to $3.1 million and $16.7 million for the same periods in 2022. The decrease in Adjusted EBITDA was primarily driven by temporary constraints on production capacity and a reduction in green coffee differential margin.

To help readers better understand our financial results, the following table provides a reconciliation between Adjusted EBITDA and operating income, the most comparable IFRS measure for the periods as indicated:

In $000s		3 months ended December 31,		Year ended December 31,
(unaudited)		2023		2022		2023		2022
Operating income	$	3,372	$	2,792	$	5,630	$	13,381
Depreciation and amortization		1,752		1,686		9,188		7,018
Share-based compensation		130		173		597		552
(Gain) loss on risk management activities		356		(65)		457		(1,560)
Unrealized (gain) loss on foreign exchange forwards		38		(796)		127		44
Impact of IFRS 16 Leases		(640)		(703)		(2,645)		(2,776)
Adjusted EBITDA	$	5,008	$	3,087	$	13,354	$	16,659

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SWISS WATER DECAFFEINATED COFFEE INC.

Management Discussion and Analysis

For the year ended December 31, 2023

The reconciliation of net income, an IFRS measure, to Adjusted EBITDA is as follows:

In $000s		3 months ended December 31,		Year ended December 31,
(unaudited)		2023		2022		2023		2022
Net income (loss) for the period	$	961	$	(254)	$	(528)	$	2,387
Income tax expense (recovery)		430		(130)		(4)		819
Income (loss) before tax	$	1,391	$	(384)	$	(532)	$	3,206
(Gain) loss on the embedded option		126		(513)		(76)		(513)
(Gain) on the extinguishment of debt		-		(583)		-		(583)
Other gains		-		-		(175)		-
Finance income		(492)		(174)		(1,629)		(509)
Finance expense		2,326		1,577		8,265		5,567
Impairment of plant and equipment		-		2,470		-		2,470
Loss on foreign exchange		377		334		234		2,183
Depreciation and amortization		1,752		1,686		9,188		7,018
Unrealized loss (gain) on foreign exchange forwards		38		(796)		127		44
Share-based compensation		130		173		597		552
Impact of IFRS 16 Leases		(640)		(703)		(2,645)		(2,776)
Adjusted EBITDA	$	5,008	$	3,087	$	13,354	$	16,659

OUTLOOK

The 12 months ended December 31, 2023, was a transformational period for Swiss Water. During the third quarter we completed construction of our new second production line in Delta, BC and shortly thereafter successfully decaffeinated our first batch of commercial coffee on the new line. These milestone events were the culmination of a decade-long project to relocate, modernize and expand the capacity of our state-of-the- art production assets from Burnaby. It also signaled the end of a temporary period of restricted capacity that we managed with our customers during the second and third quarters of the year as we demolished the Burnaby site and commissioned the new line.

Although Swiss Water's volume growth in 2023 was limited by restricted capacity, we continued to see strong demand for our chemical free decaffeinated coffee offerings. Our sales and logistics teams managed our customers' needs and volume allocations remarkably well throughout 2023. This enabled the delivery of strong volume growth and financial results during Q4, following the consolidation of production in Delta, BC. All order backlogs built up over the summer were processed and shipped during the final three months of the year.

Looking ahead into 2024, Swiss Water is well positioned with two modern processing lines, including our newly installed second production line, enabling us to optimize our operational processes and produce premium decaffeinated coffee of consistently high quality. The performance of all our Delta production assets has been good and we are optimistic that we can utilize what we've learned from operating Line 1 to unlock further efficiency gains on our new Line 2. Furthermore, we will take advantage of the larger processing capacity on our newest line to establish base lines on longer runs and enable future quality improvements.

Operationally, Swiss Water has been running at very high utilization rates over the last two years. The consolidation of operations in Delta, BC has released this pressure somewhat, and medium-term growth is not expected to be constrained by available capacity. Furthermore, the consolidation of production in one location has unlocked some value creation efficiencies that will be fully realized in 2024.

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SWISS WATER DECAFFEINATED COFFEE INC.

Management Discussion and Analysis

For the year ended December 31, 2023

Current production rate and capacity utilization metrics at our consolidated production facility indicate, that with some modest targeted investment, we have adequate capacity to satisfy our anticipated medium-term growth needs.

Volatility in the coffee futures market persisted throughout 2023 as roasters reset their inventories following a prolonged period of logistical challenges. Looking forward into 2024 we are cautiously optimistic that the reset of the coffee supply chain is materially complete, and we don't anticipate that further supply chain disruptions will effect our 2024 performance materially.

Despite the underlying strength of our business, uncertainty persists. Inflationary pressures and interest rates remain high. Furthermore, geo-political tension across the world increased during 2023 and looks set to persist throughout 2024. We cannot reliably predict the ultimate effect these factors will have on global supply chains and customer demand. However, our chemical-free decaffeination services remain highly valued by our customers and are becoming increasingly relevant to health conscious coffee consumers across the globe. With this in mind, and carrying momentum from a strong final quarter of 2023, we are optimistic that we will deliver volume growth and improved profitability in 2024.

During the second half of 2023, we made good progress in reducing inventory levels and subsequently reducing working capital investments. These movements enabled us to start reducing borrowings during the fourth quarter of 2023. We anticipate that this trend will continue as we move through 2024. In Q4 2024 Swiss Water is scheduled to fully repay a Debenture with Warrants, held by Mill Road Capital (MRC). This repayment will further reduce overall debt. We anticipate the repayment of this debt will primarily be funded using, but not limited to, available cash reserves and proceeds from operations, supplemented by incremental borrowings on our existing debt facilities, as needed.

BUSINESS OVERVIEW

Swiss Water Decaffeinated Coffee Inc. is a premium green coffee decaffeinator located in Delta, British Columbia. We employ the proprietary Swiss Water® Process1 to decaffeinate green coffee without the use of chemical solvents, leveraging science-based systems and controls to produce coffee that is 99.9% caffeine free. Our process is certified organic by the Organic Crop Improvement Association and is the world's only consumer-branded decaffeination process. Decaffeinating premium green coffee without the use of harmful chemical solvents is our primary business.

Our Seaforth subsidiary provides a complete range of green coffee logistics services including devanning coffee received from their origin; inspecting, weighing, and sampling coffees; and storing, handling, and preparing green coffee for outbound shipments. Seaforth provides all of Swiss Water's local green coffee handling and storage services. In addition, Seaforth handles and stores coffees for several other coffee importers and brokers and is the main green coffee handling and storage company in Metro Vancouver. Seaforth is organically certified by Ecocert Canada.

Swiss Water shares trade on the Toronto Stock Exchange under the symbol 'SWP'. As at the date of this report, 9,212,955 shares were issued and outstanding.

1 The Company is a registered owner of this trademark.

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SWISS WATER DECAFFEINATED COFFEE INC.

Management Discussion and Analysis

For the year ended December 31, 2023

Swiss Water Decaffeinated Coffee's Business

We carry an inventory of premium-grade Arabica and Robusta coffees that we purchase from the specialty green coffee trade, decaffeinate and then sell to our customers (our "Regular" or "Non-Toll" business). Revenue from our Regular business includes both processing revenue and green coffee cost recovery revenue.

We also decaffeinate coffee owned by our customers for a processing fee under toll arrangements (our "toll" business). The value of the coffee processed under toll arrangements does not form part of our inventory, our revenue, or our cost of sales. Revenue from toll arrangements consists entirely of processing revenue.

Our cost of sales is comprised primarily of the cost of green coffee purchased for our regular business, plant labour and other processing costs directly associated with our production facility. This incorporates an allocation of fixed overhead costs, which includes depreciation of our production equipment and amortization of our proprietary process technology. For our regular business, we work with coffee importers to source premium-grade green coffees from coffee-producing countries located in Central and South America, Africa, and Asia. The purchase price is based on the NY'C' coffee futures price on the Intercontinental Exchange, plus a quality differential. The NY'C' component typically makes up more than 80% of the total cost of green coffee, while the quality differential typically accounts for less than 20%. Both the NY'C' price and the quality differential fluctuate in response to fundamental commodity factors that affect supply and demand.

CAPACITY TO DELIVER RESULTS

The following resources allow us to deliver on our business strategy:

• Chemical Free Production Lines - We have two production lines that produce chemical free decaffeinated coffee. Both lines are located in Delta, BC. The first line (Line 1) was commissioned in Q3 2020, and the second line (Line 2) was completed and started to produce coffee in Q3 2023. Our production assets provide opportunities to easily flex production capacity rates against fluctuations in demand. This flexibility allows us to optimize variable costs as demand for our services changes.
• Production Capacity - Our production assets are able to satisfy current demand and provide enough unused capacity to support our medium term growth ambitions.
• Branding - Our Consumer Branding as the Premium, 100% Chemical Free Method of Decaffeinating Green Coffee has proven to be a success. We've effectively positioned our brand as a leading, chemical-free processor of green decaffeinated coffee. The awareness among consumers and participants in the coffee trade regarding the value of the chemical-free Swiss Water® Process has been steadily growing, reinforced by its exceptional quality and taste. We are confident in the significant potential to further broaden consumer awareness, emphasizing the inherent benefits of the Swiss Water® Process.
• Established Customer Base - The Swiss Water® Process has an established customer base across North America and in many international markets. Our customers include some of North America's largest roasters, roaster-retailers and leading coffee brands.
• Broad Distribution Channels - Green coffee decaffeinated using the Swiss Water® Process is sold through the coffee market's key distribution channels: roaster retailers, commercial roasters and coffee importers. This diversity ensures that we access all key segments of the specialty coffee trade and consumer coffee markets.
• Working Capital and Expansion Capital - Between 2015 and 2022 we raised capital, which was used to fund the construction of our two production lines in Delta. The first production line in Delta was

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SWISS WATER DECAFFEINATED COFFEE INC.

Management Discussion and Analysis

For the year ended December 31, 2023

commissioned in 2020, and the second production line was commissioned during the third quarter of 2023. We expect future working capital investments to be financed by a combination of internally generated funds and external capital sources.

• Management Expertise - Swiss Water is highly regarded in the coffee industry for our senior management team's substantial experience, our close attention to consumer trends in the specialty coffee market, and our in-depth knowledge of green and roasted coffee. In particular, our intense focus on premium product quality and commitment to science-driven insight is well recognized. To maximize these strengths, we continue to invest resources to enhance our team's industry-related skills and talents. Going forward, we intend to leverage our exceptional experience with and knowledge of, the specialty coffee industry to continue to build our business.

SELECTED ANNUAL INFORMATION

In $000s except per share amounts	December 31,	December 31,	December 31,
(unaudited)	2023	2022	2021
Balance Sheet
Total assets	200,335	219,039	168,245
Total non-current liabilities	108,098	123,405	70,783
Income Statement
Revenue	166,277	176,935	125,076
Net income (loss)	(528)	2,387	496
Adjusted EBITDA1	13,354	16,659	10,533
Dividends paid	-	-	-
Per share, basic 2
Net income	(0.06)	0.26	0.05
Adjusted EBITDA1	1.45	1.82	1.15
Dividends declared	-	-	-
Per share, diluted 2
Net income	(0.06)	0.26	0.05
Adjusted EBITDA 1	1.45	1.82	1.15

1 Adjusted EBITDA is defined in the 'Non-IFRS Measures' section of this MD&A and is a "Non-GAAP Financial Measure" as defined by CSA Staff Notice

52-306.

2 Per-share calculations are based on the weighted average number of shares outstanding during the periods.

Our total assets and our total long-term liabilities increased in each of the last three years as we were building our new facility and the two production lines in Delta, BC.

KEY PERFORMANCE DRIVERS

The following key performance drivers are critical to the successful implementation of our strategy and ability to improve profitability and cash from operations:

Internal Factors

• Processing Volumes - Our decaffeination facility incurs fixed operating costs regardless of the volume of coffee processed. Accordingly, our profitability and cash flow from operations will increase as process volumes increase. Process volume is a key performance indicator ("KPI") that we monitor and track.
• Process Consistency - We manage our operations in order to reduce variability in production and drive continuous improvement. Production consistency results in improved product quality. We have developed a number of KPIs designed to monitor process consistency and have set targets for continuous process improvement.

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SWISS WATER DECAFFEINATED COFFEE INC.

Management Discussion and Analysis

For the year ended December 31, 2023

• Product Quality - Quality control is a key part of our operations. We operate under the Food Safety Systems Certification (FSSC) 22000, which manages our food safety, as well as HACCP (Hazard Analysis Critical Control Points) and quality assurance programs. All green coffees delivered to our processing facility are weighed and inspected and are subject to rigorous internal quality-control evaluations. Each lot of green coffee processed is monitored throughout the decaffeination process, and a certificate of analysis is prepared for each lot. A sample from each production lot is also roasted, brewed and cupped to ensure quality. In addition, our focus on reducing the size of production lots and increasing inventory turnover results in fresher coffee being provided to our customers. Production batch size and inventory turnover are two other KPIs that we monitor regularly.
• Order Fulfillment - Our integrated supply chain management strategy includes maintaining inventories of finished goods at various coffee warehouses throughout North America, and of raw goods for improved inventory replenishment times. Our order fulfillment rates are monitored regularly. An improved order fulfillment rate contributes to our volume growth and improved customer service levels.
• Employee Safety - We are focused on operating our business in a safe manner, and reducing the likelihood that employees will be injured at work. We track employee safety metrics by department, and our safety committee proactively seeks ways to reduce the risks inherent in our operating environment. While we cannot completely eliminate the risk of workplace incidents or accidents, we have significantly reduced the number of safety-related incidents over the past few years. We believe that ensuring employee safety leads to improved employee retention and morale, increased efficiency, and lower operating costs.
• Sustainability and Environmental Responsibility - The Swiss Water® Process, a 100% chemical-free decaffeination method, enables us to deliver premium-quality decaffeinated coffee to our customers. Our sustainability efforts focus on providing a fully chemical solvent free decaffeination method and facility, while also enhancing and innovating this process for greater efficiency and responsibly managing resources in a safe and environmentally conscious manner. In addition to optimizing our operations, we procure sustainably certified and organic coffees to ensure a sustainable coffee supply. We also engage in social sustainability initiatives, such as supporting programs like Grounds for Health, which promotes the well-being of women and their families in coffee-growing communities, and contributing to research- based approaches for advancing coffee cultivation through organizations like World Coffee Research.

External Factors

Coffee Futures Prices - We buy and sell coffees based on the NY'C' plus the quality differentials for specified coffees, both of which rise and fall in response to changes in supply and demand. We manage our exposure to changes in the NY'C' futures price on the value of our inventories through a commodity hedging program (discussed under 'Hedge Accounting' section) but cannot hedge our exposure to changes in quality differentials. In addition to the price risks associated with holding coffee inventories, our revenue and cost of sales are affected by changes in the underlying commodity price. Commodity price increases (decreases) raise (lower) the green coffee cost recovery revenue generated through our non-toll business, as well as the costs of green coffee sold to customers to generate sales.

Changes in the NY'C' also affect our statement of financial position and the amount of working capital we use in our business. When coffee prices rise (fall), our inventory values gradually increase (decrease) as we replace coffee at higher prices. Our accounts receivable and our accounts payable also rise and fall with the NY'C'. Finally, there is no open market to hedge the quality differential component of our green coffee cost. We sell coffee at replacement quality differentials, and as such, in a period of falling (rising) differentials, we will

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