Avant Brands : MD&A - Q2 - May 31, 2022

AVANT

July 13, 2022

Management Discussion &Analysis

Three and Six Months Ending May 31, 2022

WWW.AVANTBRANDS.CA AVNT @AVANT-BRANDS @AVANTBRANDS

AVANT BRANDS INC.

Management Discussion and Analysis

This Management's Discussion and Analysis ("MD&A") of the Financial Condition and Results of the Operations of Avant Brands Inc. (formerly GTEC Holdings Ltd.) ("Avant" or the "Company") is for the period ended May 31, 2022. This MD&A should be read in conjunction with the unaudited condensed interim consolidated financial statements (the "Financial Statements") for the periods ended May 31, 2022 and May 31 2021, together with the notes thereto and the audited annual consolidated financial statements of the Company for the years ended November 30, 2021 and 2020, together with the notes thereto. The Company's Financial Statements are prepared in accordance with International Financial Reporting Standards ("IFRS"), as issued by the International Accounting Standards Board.

This MD&A has been prepared in compliance with the requirements of National Instrument 51-102 - Continuous Disclosure Obligations. This MD&A, the Financial Statements, and other disclosures have been filed on SEDAR at www.sedar.com. Additional information can also be found on the Company's website at www.avantbrands.ca.

All financial information in this MD&A has been prepared in accordance with IFRS and all dollar amounts are expressed in thousands of Canadian dollars ("$"), except for share and per share calculations, references to $ millions, per gram ("g") or kilogram ("kg") of dried flower, unless otherwise stated.

This MD&A contains "forward-looking information" within the meaning of applicable securities laws, and the use of certain non-IFRS measures. Refer to "Cautionary Statement Regarding Forward-Looking Information" and "Cautionary Statement Regarding Certain non-IFRS Performance Measures" in this MD&A.

This MD&A is prepared as of July 13, 2022.

COMPANY OVERVIEW

Avant is an innovative leading producer of high-quality, handcrafted cannabis products. Avant has multiple licensed and operational production facilities across Canada, which produce Avant's premium consumer brands. Avant's recreational brand portfolio includes BLK MKT™, Tenzo™, Cognōscente™, Treehugger TM and Pristine™ Seeds, which are produced from unique cultivars, and sold in British Columbia, Ontario, Saskatchewan, Manitoba, Yukon, Newfoundland and Labrador, Prince Edward Island, and New Brunswick. These markets represent approximately 65% of the total Canadian recreational cannabis market. Avant's medical cannabis brand, GreenTec™, is distributed nationwide, directly to qualified patients through its online portal and licensed partners.

Avant is a publicly traded corporation, listed on the Toronto Stock Exchange (TSX: AVNT), and trades on the OTCQX Best Market (OTCQX:

AVTBF) and Frankfurt Stock Exchange (FRA: 1BU0). The Company is headquartered in Kelowna, British Columbia and has operations in British Columbia, Alberta and Ontario.

Avant is focused on creating long-term value for its shareholders and establishing itself as a premier craft cannabis company. As such, the Company has established the following key strategic areas of focus:

1. Continue growing market share by increasing production, refining prices and packaging, maintaining superior product quality, and increasing overall brand awareness.
2. New product innovation to maintain the Company's competitive edge as a top producer of premium cannabis products.
3. Further expansion into international cannabis export markets.
4. Operate in a cost-efficient manner to ensure efficiency and maximize output.
5. Actively pursue acquisitions, internal expansion, or outsourced manufacturing opportunities to fulfill consumers demand in Canada and internationally.

FISCAL 2022 HIGHLIGHTS

Key Corporate Highlights

Following a successful corporate and financial restructuring in Fiscal 2021, Avant has continued to build positive momentum, achieving record gross and net revenues for the six-month period ended May 31, 2022. As at May 31, 2022, the Company maintained a strong financial position consisting of $8.9 million in cash, $21.0 million in working capital and no long-term debt obligations. Key highlights for the six-month period ended include:

• Successfully continued global cannabis exports, with sales totalling over 556kg of dried cannabis as at May 31, 2022.
• After launching on-line medical sales in February 2021, the Company has experienced an increase of 162% in business-to- consumer medical clients from May 31, 2021 to May 31, 2022, while expanding the range of products by adding new cultivars and product formats. Further, in June 2022 the Company achieved its highest monthly medical sales since going live in February 2021.
• Enhanced the Company's portfolio of unique cultivars, with the addition of approximately 50 cultivars, most of which are not currently available within the Canadian recreational market. The Company launched 7 new cultivars under its recreational cannabis brands in Q2 of this year and additional products are expected to launch throughout the remainder of Fiscal 2022.
• The Company entered the concentrates market with the launch of new products in the live rosin and vape segments, leveraging the
  Company's cultivation expertise and brand equity.
• The Company successfully executed the first production volumes under the Motif and Final Bell agreements, providing the Company with alternative revenue streams to further utilize production capacity.
• Continued ramp-up in production at the 3PL Ventures Inc ("3PL") facility, with 1,305kg of cannabis produced as at May 31, 2022.
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AVANT BRANDS INC.

Management Discussion and Analysis

Key Sales and Market Highlights

• Production at the Company's 100%-owned facilities decreased by 23% to 1,251kg of cannabis for the six-month period ended May 31, 2022, compared to 1,615kg in the prior year period. Including the Company-managed 3PL facility, production increased by 58% to 2,556kg for the six-month period. As at May 31, 2022, the Company had 1,132kg of harvested flower and 798kg of harvested trim in inventory.
• The Company sold a total of 1,846kg of cannabis in the six-month period ended May 31, 2022, generating gross revenue of $9.0 million. This represents an increase of 1,100kg, or 151% in volume, and $4.0 million, or 77% in gross revenue, compared to the prior year period.
• Recreational cannabis sales accounted for 64% of gross sales during the six-month period ended May 31, 2022, with bulk cannabis sales comprising 25% of gross revenue and the remainder coming from medical sales and consulting fees. This compares to 87% for recreational sales in the prior year period, with the remainder coming from bulk sales.
• Overall weighted average selling price of flower decreased by 25% to $5.11 per gram (with recreational cannabis average being $7.13, including excise tax) for the six-month period ended May 31, 2022, compared to $6.81 per gram ($7.43 for recreational cannabis) in the prior year period. This decrease was primarily due to increased activity within the export market in the current year period.

Key Financial Highlights

• The Company's cash outflow from operating activities before working capital was $0.5 million for the six-month period ended May 31, 2022, compared to operating cash inflow of $0.2 million in the prior year period. The cash outflow from operating activities after working capital movements was $3.7 million compared to $3.6 million in the prior year period. This decrease was the result of the
  Company's investment into new product development, packaging and other initiatives that were implemented in the current year period.
• Gross margin before fair value adjustments was $1.9 million, or 23% of net revenue in the six-month period ended May 31, 2022, compared to $1.8 million, or 40% of net revenue in the prior period. This decrease was due to the product mix weighting for the current year period, which was weighted more towards export and other lower-margin revenue streams than the prior year period.
• Operating expenses from continuing operations increased by $1.0 million or 46% for the six-month period ended May 31, 2022, compared to the prior year period (excluding non-cash items such as depreciation, amortization, and share-based payments). The increase in operating expenses in the current year period was primarily from an increase in salaries and wages relating to higher headcount and an increase in directors' fees, as well as increases in consulting fees and inflationary cost increases.
• Net loss from operations was $5.5 million for the six-month period ended May 31, 2022, compared to net income from operations of $0.2 million for the prior year period. Comprehensive loss for the current year period was $4.3 million, compared to a comprehensive loss of $0.9 million for the prior year period. This decrease was attributed to share-based compensation and depreciation (in relation to the license intangible asset). In addition, the current year period does not include the Canadian emergency wage subsidy ("CEWS") or income from discontinued operations, whereas the prior year period included $0.9 million of CEWS and $0.4 million of income from discontinued operations in other income.
• Adjusted EBITDA loss for the six-month period ended May 31, 2022 was $0.5 million, compared to adjusted EBITDA loss of $0.2 million in the prior year period. (Note: Adjusted EBITDA is a non-IFRS performance measure. Refer to "Cautionary Statement
  Regarding Certain Non-IFRS Performance Measures" for further details).

CORPORATE OUTLOOK

The Company achieved gross revenues of $9.0 million and net revenues of $8.3 million in the six-month period ended May 31, 2022, an increase from the prior year period of 77% and 87%, respectively. The primary driver of sales continues to be the Canadian recreational cannabis market, accounting for 64% of gross revenue for the six-month period, and therefore remains the Company's primary focus. Significant quarter-over-quarter volatility exists in the Canadian recreational cannabis market due to a variety of factors, including changes in Canadian provincial board listings, retail listings, pack formats and cultivars, making this a highly complex channel. However, Avant is confident that its high-quality flower, innovative marketing and entrepreneurial culture will enable it to adapt to, and capitalize on, the industry dynamics and trends. Accordingly, the Company continues to enjoy strong demand for its recreational cannabis products and, due to this demand, intermittently experiences temporary challenges filling orders for certain unique cultivars and innovative products.

Avant continues to fulfill export shipments to international clients, which accounted for 24% of gross revenue in the six-month period ended May 31, 2022. While the Company's medical sales launched during last year, this market is still emerging and accounted for 1% of gross revenue in the six-month period ended May 31, 2022.

The Company was successful in activating numerous growth catalysts in Fiscal 2021. Most notably, the licensing of the 3PL facility resulted in a significant increase in the Company's cultivation capacity. Assuming a continuation of the Company's current capacity utilization (approximately 66% in the six-month period ended May 31, 2022 at the Company's existing facilities), this is expected to translate into a significant increase in total output continuing through Fiscal 2022. The Company also anticipates that the recent expansion of its genetics library (from approximately 30 cultivars to approximately 80 cultivars) will facilitate increases in both sales, through the launch of leading-edge strains, and output, through the introduction of strains that excel in terms of yield, cannabinoids, terpenes and 'bag appeal'.

The Company focuses on a three-channel strategy (recreational, medical and export) to maximize sales and customer diversification. For the recreational market, Avant is highly focused on brand development and product innovation, driven by customer demand, market research and

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AVANT BRANDS INC.

Management Discussion and Analysis

consumer insights. The Company has also leveraged its cultivation expertise and brand equity by signing co-pack agreements with selected extraction companies. Concurrent with these efforts, the Company continues to seek ways to expand into new provincial markets, with a view to increase market penetration above the current level of 65% (being the approximate share of the total Canadian market represented by the Company's current recreational cannabis markets).

The Company's export shipments demonstrate its ability to acquire the necessary accreditation (ICANNGAP via IQC) and develop the necessary export processes. More importantly, it illustrates that the competitive advantage generated by the Company's premium flower has potential to drive success in both domestic and international markets. The Company executed and fulfilled significant sales to Israel and Australia in the six-month period ended May 31, 2022, and is preparing to fulfill further orders with existing export clients in addition to discussions with additional potential export clients.

The Company launched its GreenTec Medical Cannabis e-commerce site in February 2021. In doing so, the Company sought to differentiate itself from existing medical cannabis businesses through several strategies, including premium products, competitive pricing, low overhead costs and eschewing reliance on cannabis clinics as a source of clients. To date, this strategy has proven successful, as reflected by steady growth in client count and revenues. The Company is now seeking to accelerate this growth by expanding its product offerings (currently 30 cultivars and 9 package format-size variants) and adding select products from other Canadian licensed producers that complement the existing product selection. In May 2022, the company received a license amendment from Health Canada for Avant Craft Cannabis to facilitate the sale of concentrate products through both medical and recreational channels.

Based on the continuing demand for Avant's cannabis products and the expansion of its cultivation facilities, any increases in inventory tend to be temporary in nature. The Company has also experienced short-termbuild-up of inventory as it ramps up production of certain products. While the Canadian cannabis industry is highly competitive and suffers from significant excess supply, Avant remains optimistic in its ability to fully utilize its cannabis output, while generating positive gross margins.

The Company's operating cash outflow before working capital movements was $0.5 million ($3.7 million after working capital items). This was lower than the prior year period, primarily due to the Company's significant investment in new product development, packaging and other initiatives, and lower margins related to the sales product mix weighting of the current period. Continuing through Fiscal 2022, the Company anticipates that these investments will result in generating positive operating cash flows.

Overall, the Company is confident that the business developments outlined above will drive positive cash flow from operations going forward. Furthermore, the activation of the 3PL facility provides Avant with an opportunity to increase cash flows by increasing sales at a rate that exceeds any increases in corporate overhead.

FINANCIAL INFORMATION

Financial Highlights

		H1 2022		H1 2021	% Change
Revenue	$	9,070	$	5,133	77%
Excise tax		(799)		(705)	(13%)
Net Revenue		8,271		4,428	87%
Recreational revenue		5,641		3,911	44%
B2B revenue		2,276		468	386%
Medical revenue		102		49	108%
Management fees and other revenue		252		-	N/A
Gross margin before fair value adjustments (1)		1,889		1,771	7%
Gross margin % before fair value adjustments (1)		23%		40%	(43%)
Gross margin		1,545		3,067	(50%)
Operating expenses		7,068		2,821	151%
Other income (expenses)		1,184		(1,535)	177%
Net loss before income tax		(4,339)		(1,289)	(237%)
Adjusted EBITDA (2)		(541)		(227)	(138%)
Kilograms of cannabis flower sold		1,846		736	151%
Kilograms of cannabis produced - 100%-owned facilities		1,251		1,615	(23%)
Kilograms of cannabis produced - including 3PL facility		2,556		1,615	58%
Average recreational gross pricing per gram (3)		7.13		7.43	(4%)
Weighted average gross pricing per gram (3)		5.11		6.81	(25%)

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AVANT BRANDS INC.

Management Discussion and Analysis

1. Gross margin before fair value adjustments is a non-IFRS performance measure. Refer to "Cautionary Statement Regarding Certain Non-IFRS Performance
   Measures" for further details. Management determined that the exclusion of the fair value adjustment is an alternative representation of performance. The fair value adjustment is a non-cash gain (loss) and is based on fair market value less cost to sell.
2. Adjusted EBITDA is a non-IFRS performance measure. Refer to 'Cautionary Statement Regarding Certain Non-IFRS Performance Measures" for further details.
3. Average recreational gross pricing per gram is a Non-IFRS performance measure and is calculated by determining the total recreational sales divided by the total number of recreational grams sold. The weighted average gross pricing per gram is calculated by determining the total flower sales divided by the total number of flower grams sold. Refer to "Cautionary Statement Regarding Certain Non-IFRS Performance Measures" for further details.

Management continually reviews and analyzes various financial metrics, including financial ratios such as Current Ratio, Quick Ratio, Inventory Turnover Ratio, and consolidated models such as the Altman Z-Score. As of May 31, 2022, the Company maintains a Current Ratio of 7.1, a Quick Ratio of 4.2, and an Inventory Turnover Ratio of 1.8.

BRAND PORTFOLIO AND PRODUCT STRATEGY

Avant's portfolio of brands caters to a variety of cannabis consumer preferences, meeting ever-evolving tastes, trends and price points across targeted consumer segments. The Company endeavours to help drive the cannabis industry forward through intelligent, innovative and transparent brand and product development. Examples of the Company's strategy include being the first premium brand to package in glass bottles in Canada, development and introduction of Canada's first legal blunt, and being the first premium recreational brand to include terpene profiles on product packaging.

BRANDS

BLK MKT™

• Designed to resonate with legacy consumers - experienced connoisseurs who consume only top-shelf flower.
• 26 SKUs available at July 13, 2022.
• Products include: Dried flower, pre-rolls, BLNT, concentrates, with a plan to launch vapes for the second half of Fiscal 2022.

Tenzo™

• Offers a diverse variety of bold cultivars that feature pungent aromas and exceptional terpene profiles.
• 10 SKUs available at July 13, 2022.
• Products include: Dried flower, pre-rolls, vapes, with a plan to launch concentrates for the second half of Fiscal 2022.

cognōscente™

• Rare, limited-edition exclusives elevating the consumer experience with curated offerings.
• 0 SKUs available at July 13, 2022, with additional products planned for the second half of Fiscal 2022
• Products include: Craft tasting flight

Treehugger™

• Premium and certified organic flower for the environmentally conscious cannabis consumer.
• 1 SKU available at July 13, 2022.
• Products includes: Pre-rolls

Pristine™ Seeds

• Providing a variety of quality seeds to help Canadians grow cannabis at home, in a fun, informative way.
• 4 SKUs available at July 13, 2022.

GreenTec™

• Avant's medical cannabis brand, providing easy access to premium craft cannabis directly to qualified patients across Canada.
• 49 SKUs available at July 13, 2022.
• Products include: Dried flower, pre-rolls, oils/extracts, edibles

DISTRIBUTION STRATEGY

Avant is currently distributing cannabis through the following four distinct and complementary channels:

Recreational

The core of the Company's business is its domestic recreational cannabis business. Avant currently sells via provincial liquor boards into the provinces of Ontario, British Columbia, Saskatchewan, Manitoba, New Brunswick, Newfoundland and Labrador, Prince Edward Island, and the Yukon. These markets currently represent approximately 65% of the Canadian recreational cannabis market. The Company is actively pursuing listings for its products in additional provincial and territorial markets.

Medical

The medical channel bypasses the high markups and risks associated with selling through provincial liquor boards by selling direct to consumer. In February 2021, the Company launched its GreenTec Medical portal to facilitate direct sales to medical patients and it has enjoyed steady growth in new clients since that time. Several competing on-line medical cannabis portals ceased operations in late 2021 and early 2022, enhancing the Company's ability to build its medical client base. Furthermore, the Company is confident that it has key competitive advantages over most of its existing on-line competitors, including vertical integration, reputable brands, fresh products and low overheads.

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