Mr. Andrew Barnes reports

COHO COLLECTIVE KITCHENS ANNOUNCES THE CLOSING OF ITS ACQUISITION OF PUREBREAD

Coho Collective Kitchens Inc. has closed the strategic acquisition of Purebread Bakery Inc., which was initially announced on May 29, 2023, along with concurrent debt and equity financing transactions. Purebread is one of Canada's most respected bakery and cafe businesses.

The final terms of the acquisition were most recently announced on Sept. 12, 2023. The purchase price was paid through a combination of $8.5-million cash on closing (subject to customary adjustments for indebtedness and working capital), a $1.5-million vendor-take-back note and the issuance of one million common shares of Coho to a vendor of Purebread.

Going forward, 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 their 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.

Coho's chief executive officer, Andrew Barnes, expressed his vision for the acquisition, stating: "With this strategic move, we are committed to enhancing Purebread's footprint across Canada. Leveraging Coho's well-established network, we aspire to propel Purebread to new heights. We recognize the remarkable efforts put in by the Purebread team in building both the brand and the business, and our goal now is to expand its influence further."

Paula Lamming, co-founder of Purebread, commented: "Purebread is excited to be part of the Coho family and about the opportunities that lay ahead for the combined company. We believe Coho's industry experience, relationships and access to potential new locations will help Purebread build on its historical success." Co-founder Mark Lamming added, "We're pleased that customers in new markets will have the chance to experience Purebread's high-quality baking as the business continues to expand under Coho's stewardship."

Acquisition summary

• In July, 2023, Purebread generated trailing-12-month (TTM) revenue of $11-million and TTM adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $1,932,000 (1).
• Purebread's newest location, at the Vancouver International Airport, has increased Purebread's revenue by 30 per cent.
• Purebread has maintained a record of profitable operations for over 15 years.
• The acquisition has allowed Coho to achieve its 2024 growth strategy ahead of schedule, with Coho becoming a cash-flow-positive business with healthy EBITDA results.
• The acquisition has been structured to ensure a smooth transition and alignment of long-term interests, with Ms. Lamming and Mr. Lamming entering into consulting agreements with Coho.

(1) This is a non-IFRS (international financial reporting standards) financial measure. For reconciliation of adjusted EBITDA to net income, see the section on non-IFRS financial measures.

Equity financing

Coho is also pleased to announce the closing of its previously announced brokered financing. Canaccord Genuity Corp. acted as the lead agent on the transaction, pursuant to which Coho issued an aggregate of 26,445,186 units at a price of 17 cents per unit for aggregate gross proceeds of $4,495,681.62.

Each unit consists of one common share and one-half of one common share purchase warrant of the company. Each warrant is exercisable to acquire one common share of the company at a price of 25 cents per warrant share for a period of 36 months following the date hereof.

The units were issued pursuant to the listed issuer financing exemption under Part 5A of National Instrument 45-106, Prospectus Exemptions. The securities offered under the listed issuer financing exemption will not be subject to a hold period, in accordance with applicable Canadian securities laws. Coho used net proceeds of the offering for completing the acquisition, and intends to use the balance for the expansion of operations as well as to provide general working capital to support its operations.

In connection with the offering, the company paid the agent: (i) a cash commission equal to 8 per cent of the gross proceeds of the offering (other than subscribers on the president's list for up to $2-million in respect of whom the cash commission was 4 per cent), payable in cash, units or a combination thereof, payable as follows: $118,973.71 in cash, 472,591 common shares of the company and 472,591 compensation warrants (as defined below); and (ii) 1,645,027 agent's warrants. Each agent's warrant is exercisable for a unit of the company, consisting of one common share and one-half of one common share purchase warrant of the company. Each compensation warrant is exercisable to acquire one common share of the company at a price of 25 cents per compensation warrant share for a period of 36 months following the date of issuance. The agent also earned a corporate finance fee, consisting of: (i) $50,000 (payable in cash); and (ii) 294,118 compensation units. The securities issued to the agents are subject to resale restrictions for four months and a day after the date hereof.

BMO credit facilities

To facilitate the acquisition, Coho Acquisition Corp. (the purchaser, Coho's wholly owned subsidiary, secured credit facilities from the Bank of Montreal (BMO), which will provide up to $5.9-million in senior secured credit facilities to the purchaser.

The facilities 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 were used to finance a portion of the cash purchase price paid in connection with the acquisition and will also be used for general corporate purposes.

The term facility and revolving facility bear interest at a rate of interest not to exceed prime plus 125 basis points. The term facility will amortize monthly beginning in the first full quarter following the closing date, 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. The facilities are secured by a first ranking security interest over all present and after-acquired personal property of the purchaser, which holds all of the issued and outstanding shares of Purebread following the acquisition.

The closing of the facilities occurred contemporaneously with the acquisition and the offering.

Finder's fee

In connection with the acquisition, Coho also paid a finder's fee to the agent on the closing date. The finder's fee consisted of 2.5 million common shares and 2.5 million common share purchase warrants. The finder's warrants are convertible into common shares, have an exercise price of 40 cents per finder's warrant and will expire three years from the closing date.

Advisers

Fasken Martineau DuMoulin LLP acted as legal adviser to Coho. Canaccord Genuity Corp. acted as agent in connection with the offering. DLA Piper (Canada) LLP acted as legal adviser to the agent. Borden Ladner Gervais LLP acted as legal adviser to BMO. Relay Transition Partners acted as financial adviser to Purebread while Clark Wilson LLP served as legal adviser to Purebread.

About Coho Collective Kitchens Inc.

Coho is a growing player in commercial real estate and food technology, operating fast-casual restaurants and shared-kitchen facilities. As Canada's largest shared-kitchen company, Coho is expanding its presence and services. Through their combined efforts, Coho and Purebread strive to positively impact the communities in which they operate.

Non-IFRS (international financial reporting standards) financial measures

The company reports its financial results in accordance with IFRS. This news release was prepared using results and financial information determined under IFRS. In addition to IFRS financial measures, this news release also contains non-IFRS financial measures, non-IFRS ratios, capital management measures and other supplementary financial measures used by management to assess the company's operational performance, including EBITDA and adjusted EBITDA.

These measures do not have a standardized meaning under IFRS. It is likely that the non-IFRS financial measures used by the company will not be comparable with similar measures reported by other issuers or those used by financial analysts as their measures may have different definitions. The measures used by the company are intended to provide additional information and should not be considered in isolation or as a substitute for IFRS financial performance measures.

Generally, a non-IFRS financial measure is a numerical measure of an entity's historical or future financial performance, financial position or cash flows that is neither calculated nor recognized under IFRS. Management believes that such non-IFRS financial measures are important as they provide readers with a better understanding of the results of the company's recurring operations and their related trends, while increasing transparency and clarity into the company's operating results. Management also believes these measures to be useful in assessing the company's capacity to fulfill its financial obligations.

EBITDA is defined as earnings before interest, income taxes, depreciation and amortization. Adjusted EBITDA adjusts EBITDA for one-time and incremental costs for new locations, provisions for operational and financial oversight, and certain other costs. A reconciliation of Purebread's adjusted EBITDA to net income determined in accordance with IFRS is provided in the attached table for the periods presented.

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