April 13, 2022
CE Brands Announces $3,000,000 Convertible Note Financing
Calgary, Alberta, Canada – April 13, 2022 - CE Brands Inc. (TSXV:CEBI; CEBI.WT) (“CE Brands”, “we”, “our”, or the “Company”),a data-driven consumer-electronics company, is pleased to announce its intention to complete a private placement of senior secured convertible notes(the “Notes”) for up to $3,000,000(the “Offering”). Certain investment entities managed or advised by Vesta Wealth Partners Ltd. (“Vesta”), a leading Canadian investment firm have confirmed that they will purchase Notes having an aggregate principal amount of $1,000,000 under the terms of the Offering.
“We are very pleased to be able to announce this financing on the heels of improving sales trends and the revenue generating potential of our expanding portfolio of branded products,” said Craig Smith, CEO of CE Brands. “We believe that this financing will provide sufficient near-term working capital to allow us to build on the momentum of our most recent new product launches and to continue to progress towards our objective to launch an additional 3 new products by the middle of 2022” continued Mr. Smith.
“Vesta, through this latest financing, continues to be an active supporter of CE Brands and the long-term vision of CE Brands’ management,” said Adam Hoffman, President of Vesta. “The progress shown through the latest successful product launches provides evidence of CE Brands’ ability to utilize its proprietary technology to identify and develop compelling consumer electronics products” continued Mr. Hoffman.
The Offering
The Notes are expected to be issued on or about April 25, 2022 (the “Closing Date”)with an aggregate principal amount of $3,000,000to address the Company’s working capital needs, including for the purchase of inventory and for general corporate purposes. The Notes will bear interest at a rate of 15.0% per annum on outstanding principal amounts, payable on the first and second anniversary of the issue date, unless earlier redeemed or converted. Interest may be payable, at the option of the purchasers of the Notes(collectively, the “Holders” and each a “Holder”), either in cash or through the issuance of common shares of the Company based on the then market price of the Company’s common shares in accordance with the policies of the TSXV.
Vesta will act as collateral agent (in such capacity, the “Agent”) for and on behalf of the Holders. The Notes will be senior secured obligations of the Company and, through the Agent, shall be provided with security ranking pari passu with the holders of the existing senior secured convertible debentures (the “Existing Notes”) issued on November 12, 2021, having an aggregate principal amount of $4,000,000. The Notes will mature on the second anniversary of the issue date (the “Maturity Date”).Prior to maturity, the Notes are convertible into common shares of the Company, at the option of the Holders, at a conversion price per share of $1.50. The Notes are not redeemable by the Company prior to the first anniversary of the issue date.
The Holders of the Notes issued pursuant to the Offering will receive an aggregate of 1,500,000 common share purchase warrants (Warrants”).Each Warrant shall have an exercise price of $1.00 per share and being exercisable on or before the second anniversary of the issue date.
In connection with the Offering and in accordance with the policies of the TSXV, the Company will pay or issue to certain eligible finders a cash fee equal to 4.0% of the aggregate gross proceeds raised from an investor (other than Vesta) under the Offering.
The Offering is subject to customary closing conditions, including the approval of the TSXV and the listing of the Common Shares underlying the Notes and the Warrants by the TSXV. The Common Shares are currently listed on the TSX under the symbol “CEBI”. Neither the Notes nor the Warrants will be listed on the TSXV.
Required Disclosure under MI 61-101
Mr. Jared Wolk is a director of the Company and the Chief Investment Officer of Vesta, the lead investor in the Offering. In such capacity, Mr. Wolk has certain discretionary control overinvestment decisions of Vesta and certain investment entities managed or advised by Vesta, including with respect to their respective participation in the Offering. The Company’s board of directors (the “Board”) has therefore determined that (i) Vesta is a “related party” of the Company pursuant to Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions (“MI61-101”), and (ii) the Offering constitutes a “related party transaction” for the purposes of MI 61-101, as it will involve the Company issuing securities to and borrowing money from entities over which Vesta exercises certain discretionary control.
In connection with negotiating and reviewing the terms of the Offering, three independent and disinterested members (the “Independent Directors”)of the Board considered and reviewed a variety of matters, including an assessment of the Company’s liquidity position, financial outlook and financing alternatives reasonably available to the Company, and consulted with the legal advisors. In addition, in connection with its review of the Offering, the Board also considered Vesta’s existing option to purchase an additional $2,000,000 of the Existing Notes and that such option will be waived in connection with Vesta’s participation in the Offering. Following their deliberations in respect of the Offering, the Independent Directors determined that the Offering is in the best interests of the Company and recommended that the Board approve the Offering. After considering the recommendation of, and the factors considered by, the Independent Directors, the Board (with Mr. Wolk abstaining)unanimously approved the Offering.
While the Board has determined that the Offering is a “related party transaction”, the Offering will be exempt from both the formal valuation requirements and minority approval requirements of MI61-101 for related party transactions by virtue of Sections 5.5(g) and 5.7(e)of MI 61-101 which provides that a “related party transaction” is exempt from each of the formal valuation and minority shareholder approval requirements of MI 61-101 if the issuer is in serious financial difficulty and the transaction is designed to improve the financial position of the issuer (among other criteria), and in respect of the minority shareholder approval requirement, there is no other requirement, corporate or otherwise, to hold a meeting to obtain any approval of the holders of any class of affected securities.
As part of their deliberations in respect of the Offering, the Independent Directors considered the liquidity and financial and position of the Company, the objectives of the Offering, and the criteria and conditions with respect to the financial hardship exemptions described above, and in this regard unanimously determined that: (i) the Company is in serious financial difficulty; (ii) the Offering is designed to improve the financial position of the Company; and (iii) the terms of the Offering are reasonable in the circumstances of the Company.
A further discussion and description of the review and approval process adopted by the Independent Directors and other information required by MI 61-101 in connection with the Offering will be set forth in the Company’s material change report to be filed following the closing of the Offering under the Company’s SEDAR profile at www.sedar.com.
The Company anticipates closing of the Offering will take place prior to the anticipated filing of the Company’s material change report. In the context of the Company’s liquidity and working capital constraints, it is necessary for the Company to close the Offering on an expedited basis to improve the Company’s financial position and as such, it was not possible to delay closing of the Offering.
All securities issued in connection with the Offering will be subject to statutory hold periods in accordance with applicable securities legislation.
This press release shall not constitute an offer to sell or the solicitation of an offer to buy securities of the Company in the United States nor shall there be any sale of securities of the Company in any jurisdiction in which such offer, solicitation or sale would be unlawful. The securities described herein have not been, and will not be, registered under the United States Securities Act of1933, as amended, or the securities laws of any state of the United States. Accordingly, any of the securities described herein may not be offered or sold in the United States or to U.S. persons unless an exemption from registration is available.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacyor accuracy of this release.
For more information, please visit www.cebrands.ca.
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About CE Brands
CE Brands Inc. develops products with leading manufacturers and iconic brand licensors by utilizing proprietary data that identifies key market opportunities. With sales today in over 70 countries, our innovative, highlyrepeatable process, which we call the “CE Method”, has created an optimal growth path for CE Brands to be the premier global licensed brand manufacturer.
Forward-Looking Information
This press release contains forward-looking information within the meaning of applicable securities laws. In general, forward-looking information refers to disclosure about future conditions, courses of action, and events. The use of any of the words “anticipates”, “believes”, “expects”, “intends”, “plans”, “will”, “would”, and similar expressions are intended to identify forward-looking information. More particularly and without limitation, this press release includes forward-looking information with respect to the revenue generating potential of the Company’s expanding portfolio of branded products, expectations with respect to near-term working capital, upcoming product launches, completion of the Offering, the potential benefits and effects of the Offering, the timing for the completion of the Offering and related matters, the conditions to closing of the Offering, the anticipated use of the proceeds from the Offering and the receipt of any required regulatory and TSXV approvals for the Offering.
The forward-looking information is based on certain key expectations and assumptions, including the receipt of all regulatory and related approvals for the Offering and the Company’s ability to manage supply chain and inventory constraints, including the timing of product shipments and deliveries.
There can be no assurance that the Company will be able to successfully complete the Offering on the terms contemplated, in a timely manner or at all. If the Company fails to complete the Offering or otherwise fails to secure additional financing, then the Company may have insufficient liquidity and capital resources to operate its business resulting in material uncertainty regarding the Company’s ability to meet its financial obligations as they become due and continue as a going concern.
Although CE Brands believes that the expectations and assumptions on which such forward-looking information is based are reasonable, undue reliance should not be placed on the forward-looking information because CE Brands cannot give any assurance that they will prove to be accurate. By its nature, forward-looking information is subject to various risks and uncertainties, which could cause the actual results and expectations to differ materially from the anticipated results or expectations expressed in this press release. Such risks and uncertainties include, among others, the impact of the evolving Covid-19 pandemic on the Company’s business, operations and sales; reliance on third party manufacturers and suppliers; the Company’s ability to stabilize its business and secure sufficient capital, including the contemplated Offering, which may not be completed in a timely manner or at all; the Company’s available liquidity being insufficient to operate its business and meet its financial commitments, which could result in the Company having to refinance or restructure its debt, sell assets or seek to raise additional capital, which may be on unfavorable terms; the inability to implement the Company’s objectives and priorities for 2022 and beyond, which could result in financial strain on the Company and continued pressure on the Company’s business; risks associated with developing and launching new products; increased indebtedness and leverage; the fact that historical and projected financial information may not be representative of the Company’s future results; the inability to position the Company for long-term growth; risks associated with issuing new equity including the possible dilution of the Company’s outstanding common shares; the value of existing equity following the completion of any financing transaction; the Company defaulting on its obligations, which could result in the Company having to file for bankruptcy or undertake a restructuring proceeding; the Company being put into a bankruptcy or restructuring proceeding; and the risk factors included in CE Brand’s continuous disclosure documents available on www.sedar.com. Readers are cautioned not to place undue reliance on this forward-looking information, which is given as of the date of this press release, and to not use such forward-looking information other than for its intended purpose. CE Brands undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events, or otherwise, except as required by applicable securities legislation.
Further Information
For further information about CE Brands or its principal operating subsidiary, eBuyNow eCommerce Ltd., please contact:
Rob Knowles
Manager, Investor Relations
403-472-6382
IR@cebrands.ca