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Monday, 07/18/2022 6:04:28 PM

Monday, July 18, 2022 6:04:28 PM

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Research notes KOMOF

For the three months ended April 30, 2022, we recorded wholesale sales of $146,973, representing 51% growth over the previous quarter.
Wholesale sales were 69% of total revenue. For the nine months ended April 30, 2022, wholesale sales were $296,889, representing 63% of total sales

Currently, our products are available through 300 distribution points across Canada including Nesters, Choices, IGA, Whole Foods, Your Independent Grocers, Thrifty Foods, Safeway, Metro, and other independent grocers.

Wholesale distribution expansion is the focus for the company in the short and long term.
For the three months ended April 30, 2022, we recorded DTC sales of $42,575, representing a decline of 20% over the previous quarter. DTC sales were 20% of total revenue. We attribute the decline in revenue for the three months ended April 30, 2022 to our strategic reallocation of funds and resources on the wholesale channel of the business. For the nine months ended April 30, 2022, DTC sales were $137,139, representing 29% of total sales

We are currently being carried by the following retail customers:
• Nesters (16 locations),
• Choices (10 locations),
• Nature’s Fare Market (7 locations),
• Fairway Market (10 locations)
• IGA (14 locations),
• Country Grocer (6 locations)
• Stong’s Market
• Fresh St Market (3 locations)
• Foodland (14 locations)
• Whole Foods Market (Western Canada locations)
• Your Independent Grocer Stores of Loblaws (33 locations)
• Thrifty Foods (7 locations)
• Safeway (5 locations)
• Metro (14 locations)

We aim to expand into the US market in 2022. The US market is a significantly larger market than Canada. We are also actively engaging with other potential US distribution and broker partners.
In March, we attended the Natural Product Expo West (NPEW) show, in Anaheim, California from March 10-12, 202, which is expected to gain valuable exposure for our products in the US wholesale distribution. Our Lasagna was a finalist for the NEXTY award in the Best New Frozen Product Category and was also recognized with the Best New Vegan Product Award by VegNews Magazine

In the next 12 months, we will continue to strengthen our sales channels and strategy, and onboard new distributors and brokers to expand our presence in the Eastern provinces of Canada and to the US market. We aim to grow our
distribution network to reach 1,000 distribution points by the end of 2022.
eCommerce will continue to be a key pillar of our omnichannel strategy and allow us to create a direct relationship with our consumers. However, our sales focus will be expansion through wholesale.
We will continue to follow an asset-light strategy and focus on developing co-packing partnerships to increase capacity and commercialize new products. We aim to hone our innovation process through our Komo Eats concept and local launches to validate new product ideas before scaling through co-manufacturing partners.

During the three months ended April 30, 2022, we recorded revenues of $213,405 and achieved 29% quarter-over- quarter growth, driven primarily by strong demand in the wholesale channels. We recorded total revenue of $473,713 during the nine months ended April 30, 2022.
All our sales are generated from the Canadian market as we build out our US distribution strategies.
Gross profit consists of product sales, less costs of manufacturing products and all other related expenses to make products ready for sale. For the three and nine months ended April 30, 2022, we generated gross profit of $82,530 and $179,281 respectively, representing 39% and 38% of revenue as compared to gross profit of $3,027 for the same periods of the prior year, representing 19% of revenue. The gross profit margins are consistent with management’s expectations.

We are authorized to issue an unlimited number of common shares. As at April 30, 2022, there were 97,070,939
common shares issued and outstanding. We also had 52,995,559 share purchase warrants with a weighted average exercise price of $0.33 and 16,848,000 stock options with a weighted average exercise price of $0.13.
As at April 30, 2022, we had convertible debt in the gross amount of $1,000,000 which consisted of 1,000 units at $1,000 per unit. Each unit consists of one unsecured convertible debenture (the “Debentures") and 7,000 common
share purchase warrants of the Company (the "Warrants"). The Debentures bear interest at a rate of 10% per annum on an accrual basis from issuance, calculated and payable semi-annually in arrears on January 31 and July 31 of each
year, with payment commencing on January 31, 2022 and with a redemption date that is 24 months from the date of issuance. The Debentures are convertible in full or in part, at the holders' option, into common shares in the
capital of the Company at a price of $0.14 per common share, at any time prior to their redemption. Each Warrant will entitle the holder thereof to acquire one common share of the Company at a price of $0.16 per share for a period of 36 months from the date of issue.

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