Swiss Water Decaffeinated Coffee : 2024 First Quarter MD&A

SWISS WATER DECAFFEINATED COFFEE INC.

Management Discussion and Analysis

For the first quarter ended March 31, 2024

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 May 8, 2024, provides a review of the financial results for the three months ended March 31, 2024, relative to the comparable period of 2023. The three month period represents the first quarter ("Q1") of our 2024 fiscal year. This MD&A should be read in conjunction with Swiss Water's condensed consolidated interim financial statements for the three months ended March 31, 2024, the audited consolidated financial statements for the year ended December 31, 2023, and in conjunction with the Annual Information Form ("AIF"), which are available on SEDAR+. 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 first quarter ended March 31, 2024

EXECUTIVE SUMMARY

The following selected information, other than Adjusted EBITDA, was derived from the unaudited condensed consolidated interim financial statements for the three months ended March 31, 2024, prepared in accordance with IAS 34 as issued by the IASB. 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 March 31,
(unaudited)		2024		2023
Revenue	$	38,730	$	49,045
Gross profit		5,115		4,894
Operating income		1,364		1,424
Net (loss) income		(900)		(701)
Adjusted EBITDA1		2,788		4,982
Net (loss) income per share - basic2	$	(0.10)	$	(0.08)
Net (loss) income per share - diluted2	$	(0.10)	$	(0.08)

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.

We continued to see strong and growing demand for our chemical-free decaffeinated coffee offerings during the first quarter of this year. However, when comparing quarterly results for 2024 with the same periods last year, it is important to note that the distribution of quarterly sales volumes in 2023 did not follow normal seasonality patterns. In particular, Swiss Water reported much stronger than normal volume growth and financial results during the first and fourth quarters of 2023. In Q1 last year, this was mainly due to the front loading of customer sales orders in anticipation of the temporary production constraints resulting from our exit from our legacy Burnaby site during the second quarter, prior to the full commissioning of our second new decaffeination line at our Delta, BC facility. As our new Delta Line 2 ramped up over last summer and fall, and with all production now consolidated in one location, the order backlogs built up over the transition from Burnaby were processed and shipped during Q4 of 2023. With this context in mind, the year-over-year decline in first quarter volumes this year was fully expected when compared with the abnormally high volume we recorded in Q1 of last year.

Operational highlights

• During late Q3 of 2023, commercial decaffeination on our new second line in Delta, BC began. Production volumes and quality metrics on the new line continued to increase during the first quarter this year, enabling the delivery of forecast volumes and the successful accommodation of a scheduled 2-week maintenance shut-down on Delta Line 1.
• Total processing volume for the three months ended March 31, 2024 decreased by 18% when compared to the first quarter of 2023. The year-over-year difference was expected, as the volumes we reported in Q1 last year were elevated above normal levels due to the pro-active front loading of customer orders ahead of the anticipated capacity limitations we experienced during the second and third quarters. With all production consolidated in Delta and both decaffeination lines running 24/7, except for planned maintenance, we were not capacity constrained during the first quarter this year.

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SWISS WATER DECAFFEINATED COFFEE INC.

Management Discussion and Analysis

For the first quarter ended March 31, 2024

• Our largest geographical market by volume in Q1 was the United States, followed by Canada and international markets. By dollar value, 49% of our sales were to customers in the United States, 29% were to Canadian customers, and the remaining 22% were to international customers. Overall, we recorded sales of $38.7 million for the quarter, which represents a $10.3 million, or 21%, decrease from the 2023 level. The decrease was expected and was due to the front-loading of customer orders in Q1 last year.
• As expected, our inventory levels fell during the first quarter due to the consumption of the last remaining coffee inventories we built up to bridge the production constraints experienced during the transition from Burnaby and the consolidation of all processing in Delta. We remain focused on optimizing inventory levels and proactively managing our working capital commitments. We are currently well positioned with green coffee inventory and can react to short-term demand increases in most coffee origins. Although we saw a welcome reduction in the disruption to green coffee deliveries and supply chain bottlenecks during 2023, we are starting to see signs that rising coffee prices may negatively impact the efficient flow of coffee from growing regions.
• The NY'C' coffee commodity price for Arabica coffee remained relatively high during the first quarter.
  Spot availability of coffees continued to fall and pressure on the futures market intensified in late March of this year. Moving forward, the impact of this elevated coffee market will depend on the futures market remaining at, or below, the current level for a sustained period.
• The impact of last year's consolidation of operations at one location generated some efficiencies from reduced utilities consumption, staffing, and maintenance during the first quarter. However, we continued to experience persistent inflationary pressures within other components of our variable cost structure. These include higher costs for 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.

Financial highlights

• Revenue for the three months ended March 31, 2024, was $38.7 million, which represents a $10.3 million decrease when compared to the same period in 2023. The drop in revenue was expected and is the result of a normalization of order patterns, compared to a period of volume loading during Q1 of last year. As previously noted, many customers moved orders forward in anticipation of the capacity constraint caused by our transition of production out of Burnaby prior to the full commissioning of our Delta Line 2.
• In January of 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. The financial impact of the change in estimate was a one-time incremental depreciation expense of $2.1 million for Q1 of last year. There was no such change in estimate during the three months ended March 31, 2024.
• First quarter gross profit was $5.1 million, an increase of $0.2 million over Q1 of 2023. The increase was largely due to the cost savings and efficiencies generated from our consolidation of all Swiss Water production and other operations at one location. This has generated savings from reduced building maintenance, utilities consumption, staffing, and transportation between locations. The positive impact of the $2.1 million decrease in year-over-year depreciation expenses outlined above on gross profit was

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SWISS WATER DECAFFEINATED COFFEE INC.

Management Discussion and Analysis

For the first quarter ended March 31, 2024

largely offset by lower sales volume, and a decline in green coffee differential margin during the quarter when compared to Q1 of 2023.

• For the first quarter, we recorded a net loss of $0.9 million, compared to a net loss of $0.7 million in Q1 of last year. The increase in net loss was driven by higher interest expenses on our construction loans and increased mark-to-market losses on our risk management activities, as well as higher operating expenses, mainly due to increases in headcount and wages. These impacts were partially offset by the factors influencing gross profit, as described above, as well as reduced non-cash losses on the revaluation of the embedded option, and gains on foreign exchange.
• First quarter adjusted EBITDA1 was $2.8 million, a decrease of $2.2 million from the Q1 2023 result. The first quarter decrease was primarily driven by lower sale volumes and reduced green coffee differential margins, as described above.
• Inventory levels fell during the first quarter of 2024 primarily due to the consumption of the last remaining coffee inventories Swiss Water had built up to bridge the production constraints experienced during the transition from Burnaby and the consolidation of all processing in Delta. As a result, inventories closed the first quarter of this year at $25.4 million, down from $30.4 million at December 31, 2023. This provided an opportunity for Swiss Water to pay down debt and accumulate cash deposits while leaving adequate inventory on hand to support its 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/losses 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 three months ended March 31, 2024, was $2.8 million compared to $5.0 million for the same period in 2023. The decrease in Adjusted EBITDA was primarily driven by lower sales volumes and reduced green coffee differential margins, as described above.

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:

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 first quarter ended March 31, 2024

(In $000s)		3 months ended March 31,
(unaudited)		2024		2023
Operating income	$	1,364	$	1,424
Depreciation & amortization		1,716		3,582
Share-based compensation		535		493
(Gain) loss on risk management activities		(149)		111
Unrealized (gain) loss on foreign exchange forward		(38)		74
Impact of IFRS 16 - Leases	$	(640)	$	(702)
Adjusted EBITDA	$	2,788	$	4,982

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

In $000s			3 months ended March 31,
(unaudited)			2024		2023
Loss for the period		$	(900)	$	(701)
Income tax recovery			(224)		(216)
Loss before tax		$	(1,124)	$	(917)
Finance income			(460)		(437)
Finance expenses			2,288		1,837
Depreciation & amortization			1,716		3,582
Unrealized (gain) loss on foreign exchange forward			(38)		74
Loss on fair value of embedded option			891		968
(Gain) loss on foreign exchange			(380)		84
Share-based compensation			535		493
Impact of IFRS 16 - Leases			(640)		(702)
Adjusted EBITDA		$	2,788	$	4,982

OUTLOOK

Looking ahead, Swiss Water is well positioned with two modern processing lines, including our recently 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 have 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 during the first half of 2024.

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 and into the first quarter as roasters reset their inventories following a prolonged period of logistical challenges. Looking forward through the remainder of 2024, we are cautiously optimistic that the reset of the coffee supply chain is materially complete.

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SWISS WATER DECAFFEINATED COFFEE INC.

Management Discussion and Analysis

For the first quarter ended March 31, 2024

After a period of relatively stable pricing during the second half of 2023, the NY'C' started to increase sharply toward the end of the first quarter and has continued to climb even higher through April. Rapid increases in the NY'C' destabilize short-term demand for our decaffeinated coffees as roasters delay orders to reduce their working capital commitments. This effect is magnified with increased interest rates. In a balanced market, price is fundamentally driven by the availability of coffee. The arabica market is well positioned, however, the robusta market is seeing shortages. This had led to a rare scenario where the London robusta futures market is driving up the New York arabica market. If futures prices remain at elevated levels for a sustained period, this may have a negative effect on future demand and thus our growth rate.

During the second half of 2023, we made good progress in reducing our inventory levels and related working capital requirements. These movements enabled us to start reducing borrowings during the fourth quarter of last year. This positive trend continued during the first quarter. In the fourth quarter of this year, Swiss Water is scheduled to fully repay the Debenture with Warrants held by Mill Road Capital (MRC). This repayment will further reduce our overall debt. We anticipate that the repayment 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.

Despite the underlying strength of our business, uncertainty persists. Inflationary pressures and interest rates remain high. Furthermore, geopolitical tension across the world has increased over the last year and looks 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, we are optimistic that we will deliver volume growth and improved profitability in 2024.

The Swiss Water® Process is a chemical free method of decaffeinating coffee. It is worth noting that in March of this year, the State of California considered a proposal regarding the use of Methylene Chloride to decaffeinate coffee. Methylene Chloride, which is already banned for use in paint strippers and cosmetics, is the most common chemical method used by our competitors to make decaffeinated coffee. If passed, the bill would require any entity that offers for sale coffee that has been decaffeinated using Methylene Chloride, to label the final produce with a clear label stating "Methylene Chloride is used in the decaffeination of this product" beginning January 1, 2027.

Furthermore, in January 2024, the U.S. Food & Drug Administration filed a food additive petition and a colour additive petition that call on the agency to rescind its approvals for four carcinogens in food. Among these carcinogenic chemical additives being petitioned is methylene chloride, which is noted for its use in coffee decaffeination.

These actions have generated significant media coverage and are clear signals of growing consumer demand for greater transparency regarding the products they eat and drink. As a result, there is meaningful consumer attention on decaffeination, and the availability of chemical free alternatives, such as the Swiss Water® Process.

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SWISS WATER DECAFFEINATED COFFEE INC.

Management Discussion and Analysis

For the first quarter ended March 31, 2024

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 Supply Chain Solutions 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 coffee 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, 9,497,552 shares were issued and outstanding.

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.

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 first quarter ended March 31, 2024

The chart below shows the movement in the NY'C' for the last eight quarters:

NY'C Close (US$/lb)

Intercontinental Exchange

March 31, 2022 to March 31, 2024

$2.60

$2.40

$2.20

$2.00

$1.80

$1.60

$1.40

$1.20

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$0.80

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In the first quarter this year, the NY'C' averaged US$1.90/lb, compared to an average of US$1.74/lb in Q1 of 2023. The rise and fall of the NY'C' affects our volume of shipments, our revenues, our cost of sales, and our working capital requirements. In an upward trending market, our customers tend to consume their inventories rather than build them. When the NY'C' declines over a sustained period, our customers tend to add to their inventories.

The majority of our ("C$") revenues are generated in US dollars ("US$"), while a significant portion of our costs are paid in Canadian dollars. We, therefore, have exposure to changes in the US$/C$ exchange rates. This is managed, in part, through derivative financial instruments. All other factors being equal, our profitability and cash from operations will be higher when the US dollar appreciates relative to the Canadian dollar. A long-term depreciation of the Canadian dollar will improve our long-term profitability and cash generation.

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SWISS WATER DECAFFEINATED COFFEE INC.

Management Discussion and Analysis

For the first quarter ended March 31, 2024

The chart below shows the US$ to C$ exchange rates for the last eight quarters:

US Dollars to Canadian Dollars

Bank of Canada Noon Rates

March 31, 2022 to March 31, 2024

$1.40

$1.38

$1.36

$1.34

$1.32

$1.30

$1.28

$1.26

$1.24

$1.22

$1.20

30-Apr-22

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During the first quarter, the US$ averaged C$1.35, unchanged from an average of C$1.35 in Q1 of last year. When the US$ depreciates (appreciates), it decreases (increases) our gross profit on green coffee revenues.

OPERATING RESULTS

Revenue

We categorize our customers by the nature of their business: either coffee importers or roasters. Coffee importers act like grocery stores to roasters, sourcing and importing green coffee from various origins and carrying a selection of different origins and quality levels for roasters to choose from. Importers buy from us to resell our coffees to roasters when and where they need them. Roasters are in the business of roasting and packaging coffee for sale to consumers in their own coffee shops, or for home or office use. Roasters either buy directly from Swiss Water, or they buy from an importer. Roasters generally carry lower inventories, as they tend to take delivery of green coffee shortly before roasting it. As such, when comparing period to period, shipments to roasters are more stable than shipments to importers.

We also monitor and report our revenue in three categories. "Process revenue" represents the amount we charge our customers for decaffeinating green coffee, and it generally increases as our processing volumes increase. "Green coffee cost recovery revenue", or "Green revenue", is the amount we charge our customers for the green coffee we purchase for decaffeination. "Distribution revenue" consists of shipping, handling, and warehousing charges billed to our customers. It typically rises with our processing volumes and with the growth of Seaforth's business.

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SWISS WATER DECAFFEINATED COFFEE INC.

Management Discussion and Analysis

For the first quarter ended March 31, 2024

Our revenue by category for the indicated period was:

In $000s		3 months ended March 31,
(unaudited)		2024		2023
Process revenue	$	8,255	$	10,174
Green revenue		27,886		35,463
Distribution revenue		2,589		3,408
Total revenue	$	38,730	$	49,045

First quarter sales totaled $38.7 million, a decrease of $10.3 million, or 21%, compared to the same period in 2023. The comparative decrease was expected as customer orders were front-loaded in Q1 of last year, elevating sales volumes above normal levels in anticipation of capacity limitations during the second and third quarters.

By revenue category, our first quarter sales were as follows:

• Process revenue decreased by $1.9 million, or 19%, year-over-year. The decrease reflects the reduced processing volumes.
• Green revenue decreased by $7.6 million, or 21%. The decrease reflects the reduced green coffee sales volumes.
• Distribution revenue decreased by $0.8 million, or 24%. The decrease reflects lower shipment volumes and lower capacity utilization rates at our Seaforth subsidiary.

By geographical segment, our Q1 sales volume in the first quarter, was as follows:

• Sales volume in North America decreased by 19%;
• Sales volume in International markets decreased by 17%.

Cost of Sales

Cost of sales includes the cost of green coffee purchased for our regular business, plant labour, and other processing costs directly associated with our production facility. It also incorporates customer specific hedges and commodity hedges. The cost of sales includes an allocation of fixed overhead costs, incorporating depreciation of our production equipment and amortization of our proprietary process technology. In addition, cost of sales includes the costs of operating Seaforth's warehouse.

For the three months ended March 31, 2024, cost of sales totaled $33.6 million, a decrease of $10.5 million, or 24%, when compared to the first quarter of 2023. The reduction was primarily driven by lower sales volume, the $2.1 million decrease in depreciation expense mentioned above, and cost savings associated with the consolidation of operations at one location.

Gross Profit

First quarter gross profit totaled $5.1 million, an increase of $0.2 million or 5%, when compared to the same period in 2023. The increase was largely the result of cost savings and efficiencies generated from the consolidation of operations at a single location. By closing Burnaby and bringing all production into our Delta facility, we have reduced our costs for building maintenance, utilities, staffing, and transport between locations. The positive impact on first quarter gross profit of the $2.1 million decrease in year-over-year depreciation expenses outlined above was largely offset by lower sales volume and a reduced green coffee differential margin. In addition, inflationary pressures persist on some variable production costs.

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