CE Brands Announces the Closing of its Secured Convertible Note Restructuring and Restructuring of the Vesta Loan Facility into Secured Notes
CALGARY, Alberta, Jan. 16, 2023 (GLOBE NEWSWIRE) — CE Brands Inc. (TSXV: CEBI; CEBI.WT) (“CE Brands”, “we”, “our”, or the “Company”), a data-driven consumer-electronics company, is pleased to announce it has completed its previously announced restructuring of senior secured convertible notes (the “Secured Note Restructuring”) as well as the restructuring into senior secured notes of its US$2,000,000 senior secured facility (the “Vesta Loan Facility”) granted by Vesta Global Stability Fund (“Vesta Fund”) first announced on June 23, 2022 (the “Vesta Loan Facility Restructuring”, and together with the Secured Note Restructuring, the “Secured Debt Restructuring Transactions”).
Secured Note Restructuring
Further to its news release dated January 9, 2023, the Company, Vesta Wealth Partners Ltd. (“Vesta”) and the holders of the $4,000,000 of senior secured notes originally issued on November 13, 2021 and the $1,000,000 of senior secured notes originally issued on May 25, 2022 (collectively, the “Notes”) agreed to the Secured Note Restructuring in order to remove the holders’ rights to convert the Notes into common shares, to remove the option of the holders to request that interest be payable in common shares, and to extend the maturity date of the November 13, 2021 senior secured notes from November 13, 2023 to April 30, 2024 (collectively, the “Revised Notes”). All other material terms of the Notes have remained unchanged in the Revised Notes including that the Revised Notes bear interest at a rate of 15% per annum on outstanding principal amounts, payable on the first and second anniversary of the issue date, and the Revised Notes mature on the second anniversary of the issue date.
Vesta Loan Facility Restructuring
In addition, further to its news releases dated June 23, 2022 and January 9, 2023, the Company restructured its US$2,000,000 Vesta Loan Facility advanced by Vesta Global Stability Fund (“Vesta Fund”) into a senior secured note (the “US$2MM Note”) with terms similar to the Revised Notes, other than the US$2MM Note is payable on demand after 60 days prior written notice with no maturity date, and the interest rate of the US$2MM Note is 18% and payable semi-annually in arrears, rather than 15% and payable annually in arrears for the Revised Notes. The Company believes that Vesta Loan Facility Restructuring improves the Company’s financial position as: (i) it extends the 30 day callable feature under the Vesta Loan Facility to 60 days due to the notice period under the US$2MM Note; and (ii) interest is payable semi-annually in arrears under the US$2MM Note rather than monthly in arrears under the Vesta Loan Facility.
In consideration for the for the Vesta Loan Facility Restructuring, Vesta Fund and its affiliates have received 2,000,000 Common Share purchase warrants (“Warrants”) with each Warrant having an exercise price of $0.10 per share and being exercisable on or before January 13, 2025. The Warrants issued in connection with the Vesta Loan Facility Restructuring are subject to statutory hold periods in accordance with applicable securities legislation. The Warrants will not be listed on the TSXV.
The Revised Notes and the US$2MM Note are secured by general security agreements over all of the Company’s present and after-acquired property excluding (i) future receivables, monthly deposits, processor split settlements and bank split settlements as defined in the factoring agreement dated July 21, 2021 among the Company and Happy CP Company Limited and (ii) goods, chattel paper, investment property, documents of title, instruments, money and intangibles located outside of Canada.
There can be no assurance that the Company will be able to secure additional financing in the future and/or access funding under the terms of its current credit arrangements or credit facilities. If the Company fails to secure additional financing and/or access funding under the terms of its current credit arrangements or credit facilities, then the Company will have insufficient liquidity and capital resources to operate its business and meet its financial obligations as they become due and to continue as a going concern.
Required Disclosure under Ml 61-101
Mr. Jared Wolk, a director of the Company, is also the Chief Investment Officer of Vesta. In such capacity, Mr. Wolk has certain discretionary control over investment decisions of Vesta and the holders of the Notes, which are investment entities managed or advised by Vesta. As such, the board of directors of the Company (the “Board“) determined that the Secured Note Restructuring constitutes a “related party transaction” for the purposes of Multilateral Instrument 61-101 — Protection of Minority Security Holders in Special Transactions (“MI 61-101“), as the Secured Note Restructuring amended the terms of the Notes pursuant to which the Company borrowed money from certain entities over which Vesta, a “related party” of the Company pursuant to MI 61-101, exercises certain discretionary control. The Board determined that the Secured Note Restructuring is exempt from both the formal valuation requirements and minority approval requirements of MI 61-101 for related party transactions by virtue of Sections 5.5(g) and 5.7(e) of MI 61-101. Similarly, the Board determined that the Vesta Loan Facility Restructuring, including the issuance of the Warrants, constitutes a “related party transaction” for the purposes of MI 61-101, as the Company has borrowed money from Vesta Fund, over which Vesta exercises certain discretionary control. The Board determined that the Vesta Loan Facility Restructuring is exempt from both the formal valuation requirements and minority approval requirements of MI 61-101 for related party transactions by virtue of Sections 5.5(g) and 5.7(e) of MI 61-101. Further discussion and a description of the review and approval process adopted by the independent members of the Board (the “Independent Directors“) and other information required by MI 61-101 in connection with the Secured Debt Restructuring Transactions will be set forth in the Company’s material change report to be filed under the Company’s SEDAR profile at www.sedar.com. The material change report to be filed in relation to the closing of the Secured Debt Restructuring Transactions will not be not filed at least 21 days prior to the completion of the Secured Debt Restructuring Transactions as contemplated by MI 61-101. The Company believes that this shorter period is reasonable and necessary in the circumstances, given the Company’s liquidity and working capital constraints, and as the closing of the Secured Debt Restructuring Transactions has occured shortly before the issuance of such material change report in relation to the Secured Debt Restructuring Transactions.
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 adequacy or accuracy of this release.
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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, highly repeatable process, which we call the “CE Method “, has created an optimal growth path for CE Brands to be the premier global licensed brand manufacturer.
This news 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 news release includes forward-looking information with respect to the Secured Debt Restructuring Transactions, the potential benefits and effects of the Secured Debt Restructuring Transactions and the ability of the company to secure additional financing in the future and/or access funding under the terms of its current credit arrangements or credit facilities.
The forward-looking information is based on certain key expectations and assumptions, including the ability of the Company to secure additional sources of financing in 2023, the continuance of manufacturing operations at the Company’s partner factories in Asia, the timing of product launches, shipments and deliveries, forecast sales price and sales volume of the Company’s products and the Company’s current business operations, prospects and projections.
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 it 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 news release. Such risks and uncertainties include, among others: general business, economic, competitive, political and social uncertainties; general capital market conditions and market prices for securities; delay or failure to receive board of directors, third party or regulatory approvals; the actual results of CE Brands’ future operations; competition; changes in legislation affecting CE Brands; the timing and availability of external financing on acceptable terms; lack of qualified, skilled labour or loss of key individuals; 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 funding under various credit facilities or other financing arrangements, which may not be available 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, if available at all; the inability to implement the Company’s objectives and priorities for 2023 and beyond, which could result in financial strain on the Company and continued pressure on the Company’s business; delay in anticipated product launches and commercial partnerships; 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; and the Company being put into a bankruptcy or restructuring proceeding. A description of additional risk factors that may cause actual results to differ materially from forward-looking information can be found in CE Brands’ disclosure documents on the SEDAR website at www.sedar.com. Although CE Brands has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. Readers are cautioned that the foregoing list of factors is not exhaustive. Readers are further cautioned not to place undue reliance on forward-looking information as there can be no assurance that the plans, intentions or expectations upon which they are placed will occur. Forward-looking information contained in this news release is expressly qualified by this cautionary statement. The forward-looking information contained in this news release represents the expectations of CE Brands as of the date of this news release and, accordingly, is subject to change after such date. However, CE Brands expressly disclaims any intention or obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as expressly required by applicable securities law.
For further information about CE Brands or its principal operating subsidiary, eBuyNow eCommerce Ltd., please contact:
EVP Corporate Development