Mr. Andrew Barnes reports

COHO COLLECTIVE KITCHENS ANNOUNCES AGREEMENT TO ACQUIRE PUREBREAD, BMO CREDIT FACILITIES, AND EQUITY FINANCING TRANSACTION

Coho Collective Kitchens Inc. has entered into a definitive purchase agreement dated May 28, 2023, with Twin Lakes Investments Inc., Paula Lamming, Mark Lamming, Jack Lamming (collectively, the vendors), Purebread Bakery Inc. (Purebread) and Coho Acquisition Corp. for the purchase of Purebread.

Under the purchase agreement, Coho Acquisition, Coho's wholly owned subsidiary, will acquire all of the issued and outstanding securities of Purebread from the vendors. The purchase agreement provides for cash consideration of $10-million (subject to customary adjustments) and the issuance of one million common shares of Coho with an aggregate value of approximately $220,000 based on the closing price of the common shares (22 cents) on the TSX Venture Exchange on May 26, 2023. The purchase price will be paid to each of the vendors based on the pro rata ownership of Purebread immediately prior to closing. Purebread and the vendors are arm's-length parties to Coho.

About Purebread

Purebread is one of Canada's fastest growing and most respected independent bakery and cafe businesses. Purebread's existing team currently operates six locations and will work with Coho following the closing of the acquisition. Following closing, it is expected that Purebread's existing team will continue to operate the brand under its current name, with plans to expand operations nationally. Purebread is currently generating annual revenue of over $10-million, with a strong profit margin and clear path to scale. A new location at the Vancouver International Airport is expected to open in June, 2023, and it is expected this location could increase Purebread's annual revenue by as much as $3.5-million.

Andrew Barnes, Coho chief executive officer, commented: "Through this acquisition, we will strive to expand Purebread's brand presence throughout Canada, leveraging Coho's established network to propel Purebread forward. We acknowledge the incredible work undertaken by the Purebread team to establish the brand and the business, and now we aim to grow its reach."

Coho sees the acquisition as an opportunity for Purebread and Coho to leverage their resources, infrastructure and expertise to accelerate their combined growth and profitability.

Following closing, Purebread will operate as a wholly owned subsidiary of Coho, with its own operational and management teams. However, Coho will provide marketing, sales and financing support to Purebread, helping Purebread increase market penetration, develop new markets and ultimately deliver its exceptional baked goods to more happy customers. Coho will also leverage its growing shared kitchen footprint to rapidly scale Purebread's growth through a hub-and-spoke model.

Ms. Lamming, co-founder of Purebread, commented: "Purebread is extremely excited for this new phase given Coho's potential to provide Purebread with the resources and capital for expansion into a broader market. Coho shares our high standards for quality products and service." Mark Lamming, co-founder, added: "Coho's experience in the food service industry will enable Purebread to expand its footprint to grow our customer base nationwide. We are also excited about the future growth opportunities this transaction will create for our team."

The acquisition marks a major milestone for Coho, which has experienced rapid growth since its founding in 2018. Coho is Canada's largest shared kitchen space operator, supporting over 100 local food businesses in British Columbia.

Acquisition summary

Under the terms of the purchase agreement, Coho will acquire all issued and outstanding securities of Purebread in exchange for the purchase price. The consideration shares forming part of the purchase price will be subject to a 12-month lock-up, during which time the vendors agree that they will not, directly or indirectly, sell or agree to sell any of the consideration shares, or securities exchangeable or exercisable for consideration shares.

On closing, Ms. Lamming and Mark Lamming, co-founders of Purebread, will enter into consulting agreements with Coho.

Coho will also pay a finder's fee to Canaccord Genuity Corp. on closing. Subject to the approval of the TSX-V, the finder's fee will consist of 2.5 million common shares and 2.5 million common share purchase warrants. The finder's warrants have an exercise price of 40 cents and will expire three years from the date of closing.

Closing of the acquisition is expected to occur on or before July 31, 2023. Closing of the acquisition is subject to certain conditions, including, but not limited to: (i) the closing of the equity financing (defined below); (ii) the closing of the facilities (defined below); (iii) the receipt of all necessary consents, regulatory approvals and authorizations (including the approval of the TSX-V); and (iv) all other conditions which are customary for a transaction of this nature. Closing of the acquisition is expected to occur contemporaneously with the closing of the equity financing and the facilities. Coho expects to provide additional details regarding the acquisition in a forthcoming news release and corporate presentation.

BMO credit facilities

In order to complete the acquisition, Coho Acquisition has entered into a letter of agreement with the Bank of Montreal setting out the terms under which BMO will provide up to $5.9-million in senior secured credit facilities. The facilities will consist of a $5.5-million non-revolving term facility, a $300,000 revolving facility and a $100,000 corporate credit card facility. The term facility and revolving facility are intended to be used to finance a portion of the cash purchase price and for general corporate purposes. The term facility and revolving facility will bear interest at a rate not to exceed prime plus 125 basis points. The term facility will amortize monthly beginning the first full quarter following closing, with repayments of the term facility made over an 84-month period. The revolving facility is repayable on demand. Interest on the facilities will be payable monthly in arrears. On closing, it is expected that the facilities will be secured by a first-ranking security interest over all present and after-acquired personal property of Coho Acquisition, which entity will hold all of the issued and outstanding shares of Purebread on closing.

The closing of the facilities is expected to occur contemporaneously with, or prior to, the acquisition and will be subject to customary closing conditions, including, but not limited to, the receipt of certain third party consents and the approval of the TSX-V.

Financing for the acquisition

Contemporaneously with, or prior to, the acquisition, Coho expects to complete a marketed equity financing to raise proceeds that are intended to be used to finance a portion of the cash purchase price and for general corporate purposes.

The equity financing is expected to be subject to customary closing conditions, including, but not limited to, the receipt of all necessary regulatory and stock exchange approvals, including the approval of the TSX-V and the applicable securities regulatory authorities. Further details regarding the equity financing will be announced once the final terms of the equity financing have been determined.

Advisers

Relay Transition Partners is acting as financial adviser to Purebread, while Clark Wilson LLP is serving as legal counsel to Purebread. Fasken Martineau DuMoulin LLP is acting as legal adviser to Coho.

About Coho Collective Kitchens Inc.

Coho is a growth-stage, community-driven, commercial real estate and food technology company that provides private and shared kitchen and production space to food companies from start-ups to restaurant groups seeking turnkey solutions and business services. Each of the company's customers, called members, are revenue-generating companies that have signed a membership agreement with Coho for an agreed-upon term. The concept falls in line with a rapidly growing trend in the food-delivery industry creating a market for delivery-only and/or virtual restaurant concepts.

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