CE Brands Reports Third Quarter 2022 Financial Results and Announces Shareholder Update Call

CALGARY, Alberta, Feb. 24, 2022 (GLOBE NEWSWIRE) -- CE Brands Inc. (TSXV: CEBI; CEBI.WT) (“CE Brands”, “we”, “our”, or the “Company”), a data-driven consumer-electronics company, today announced its financial results for the three-month and nine-month periods ended December 31, 2021 (“Q3 2022”) ⁽¹⁾. The related condensed interim consolidated financial statements and Management’s Discussion and Analysis for Q3 2022 are available on SEDAR at www.sedar.com and on CE Brands’ website at www.cebrands.ca.

Q3 2022 Highlights

• Total Revenue in Q3 2022 was $1.5 million representing the third consecutive quarter of increasing revenue (Q2 2022 - $1.4 million and Q1 2022 - $1.1 million). The quarter over quarter increases in revenue from Q2 2022 were primarily a result of increased sales of baby monitors and initial sales of the recently launched moto watch 100.
  
  
• Total Revenue of $1.5 million in Q3 2022 from $3.0 million in Q3 2021, representing a decrease of 50%. Total revenue of $4.0 million in the nine month period ended December 31, 2021 (“YTD 2022”) from $8.0 million in the nine month period ended December 31, 2020 (“YTD 2021”), representing a decrease of 50%. The decrease in revenue for the three month period was primarily attributable to ongoing global supply chain issues affecting the Company, which resulted in further delays in the procurement of inventory for sale combined with a reduction in Moto360 sales as the Company focused procurement efforts for the launch of the moto watch 100 in the quarter. The decrease in revenue for the nine month period was primarily attributable to constrained working capital within Q1 2022, prior to the Qualifying Transaction, which resulted in the inability to procure inventory for sale, combined with the aforementioned supply chain constraints as well as a reduction in Moto360 sales as the Company prepared for the moto watch 100 launch.
  
  
• Gross profit in Q3 2022 was $0.26 million from $0.45 million in Q2 2022, representing a decrease of 44%. The quarter over quarter decrease in gross profit was due primarily to increases in cost of products and services associated with increased sales volumes in the quarter at discounted prices as a result of promotional events during the period such as Black Friday, Cyber Monday and Boxing Day. Further contributing to the increase in cost of products and services were changes in accounting provisions recorded for inventory refurbishment.
  
  
• Gross profit of $0.26 million in Q3 2022 from $0.26 million in Q3 2021, representing a decrease of 3%. Gross profit of $0.8 million in YTD 2022 from $1.6 million in YTD 2021, representing a decrease of 47%. This was due primarily to lower sales in the current year periods, offset in part by an increase in the proportion of total sales coming from the KODAK baby product line and moto watch 100 at higher gross margins.
  
  
• Net loss in Q3 2022 was $2.6 million from a net loss of $2.1 million in Q2 2022, representing an increase in net loss of 26%. The quarter over quarter increase in net loss was primarily attributable to increased cost of products and services, increased selling and distribution expenses and increased interest expense. Refer to discussion on gross profit above for primary factors driving the increase in cost of products and services. The increase in selling and distribution expenses was related to increased sales volumes in the quarter as well as increased outbound shipping costs associated with global supply chain issues. The increase in interest expense over the previous quarter is a result of the November 12, 2021 convertible debt financing. The increase in cost of products and services, selling and distribution and interest expense has more than offset the operating expense reductions that the Company has achieved quarter over quarter in wages and contractors expenses, professional fees and general and administrative expenses.
  
  
• Net loss of $2.6 million in Q3 2022 from $3.6 million in Q3 2021, representing a decrease of 28%. Net loss of $7.4 million in YTD 2022 from $10.9 million in YTD 2021, representing a decrease of 32%. The decrease in net loss in the three month period was primarily due to the Company’s focus on controlling expenses and resulted in reductions in marketing, selling and distribution, professional fees and general and administrative fees, in addition to reduced finance costs associated with the repayment of outstanding debt as part of the June 18, 2021 initial public offering. This was offset in part by increased royalties and license fees. The decrease in net loss in the nine month period was primarily due to the factors mentioned above, as well as fair value gains on financial instruments in the three month period ended September 30, 2021. This was offset in part in the nine month period by the listing expense on the reverse acquisition and an increase in royalties and license fees.
  
  
• On November 12, 2021, the Company closed a non-brokered private placement financing comprised of (i) a debt financing of senior secured convertible notes for aggregate committed capital of $4,000,000, with a potential upsize in the amount of $2,000,000, and (ii) an equity financing for aggregate gross proceeds of $1,400,000 at a price of $0.56 per common share. As at February 22, 2022, the $4,000,000 in committed capital has been fully drawn.
  
  
• On November 16, 2021, the Company announced the launch of its latest smartwatch, the moto watch 100, which was developed with its strategic brand partner Motorola.

“Despite the third quarter continuing to be challenging operationally for CE Brands with ongoing production, logistical and supply chain disruptions; we were able to achieve quarter over quarter sales growth in our smart home product line, driven by increased sales in baby monitors. Further, we successfully closed a financing which enabled us to launch our latest two products, the moto watch 100 and the KODAK Infinio F882 Outdoor Security Camera and we are pleased with the initial market uptake of both of these products,” said Craig Smith, Chief Executive Officer of CE Brands. “We are currently seeing improvements in supply chain constraints and we remain confident that CE Brands will achieve our stated planned product releases; however, the duration of the disruptions have been more prolonged than anticipated and the resulting delay in new product launches has required us to reduce our 2022 calendar revenue targets to approximately $30-$40 million. We see this as a short term timing revision and do not believe that this impedes us from our ability to raise additional capital or deliver on our long-term growth strategy,” continued Mr. Smith.

Post Q3 Fiscal 2022 Updates/Highlights

• On January 20, 2022, the Company announced the launch of the KODAK Infinio F882 Outdoor Security Camera with its strategic brand partner Kodak Eastman Company. The KODAK Infinio F882 is the fifth product developed by the Company under the KODAK Smart Home brand, which includes a line of Baby Monitors, Air Purifiers and Security Cameras.
  
  
• On January 28, 2022, the Company announced the expansion of its global distribution capabilities into the Central American, South American and the Caribbean markets through strategic distribution agreements with Smile Market Inc., DPC DO Brazil and LUXAMERICA S.A.

Outlook

Following the launch of moto watch 100, which was announced in mid-November 2021, and the KODAK Infinio F882 Outdoor Security Camera (announced in mid-January 2022) the Company anticipates launching an additional three new products in the first half of 2022, including two additional mid-level smart watches and an outdoor security video doorbell.

Continuing supply chain disruptions, labour shortages and the ongoing direct and indirect effects COVID-19, and delays to the originally planned launch dates of both the moto watch 100 and the KODAK Infinio F882 are expected to result in revenues for the three months ending March 31, 2022 being in the $3-$4 million range which is below the October 21, 2021 forecast of approximately $8-$9 million. The Company expects that this revenue shortfall resulting from product delays will be captured in the subsequent quarters in 2022 and into calendar year 2023. As a result of the aforementioned factors, the Company now expects to generate total revenue for calendar year 2022 in the $30-$40 million range revised downward from the previously announced $50-$60 million forecast. See “Forward-Looking Information”.

The Company continues to take steps in an attempt to mitigate the impacts of the ongoing supply chain disruptions through supply-chain improvements, reductions in SG&A and strategically prioritizing the Company’s product portfolio to conserve cash and improve near-term profitability. The Company continues to believe it is in the early stages of improved sales momentum through improving product deliveries and sales.

The Company anticipates that it will require additional financing to address the Company’s working capital and other financing needs and support the Company’s product launches and sales. See “Forward-Looking Information”.

Select Financial Information

⁽¹⁾ References in this press release to the “Company” refer to eBuyNow eCommerce Ltd. (“EBN”) and its direct or indirect subsidiaries for information provided in respect of any period prior to June 18, 2021, which is the date on which the Qualifying Transaction (as defined below) was completed pursuant to which the business of EBN became the business of CE Brands. Subsequent to June 18, 2021, the “Company” refers to the consolidated operations of CE Brands Inc. and its direct or indirect subsidiaries and the historical operations of EBN and its direct or indirect subsidiaries.

For more information, please see CE Brands’ corporate presentation, which is available on CE Brands’ website at www.cebrands.ca/investors.

Shareholder Call Information

CE Brands will host a virtual-only shareholder update call on Tuesday, March 1, 2022, from 9-10am PST (12-1pm EST). The shareholder update call will be facilitated by Craig Smith, CEO and Kalvie Legat, CFO, who will review the Company’s Q3 2022 results and related financial performance.

The Company will answer pre-submitted questions at the conclusion of prepared remarks. Investors are asked to submit their questions in advance to ir@cebrands.ca.

You can join the shareholder update call via this link: CE Brands Q3 2022 Shareholder Update Call

Or by telephone in:

• Canada: +1 647 558 0588 or +1 778 907 2071
• US: +1 646 558 8656 or +1 669 900 9128
• International numbers available: https://us02web.zoom.us/u/k2Qdp1G06

Webinar ID: 851 2042 1526
Passcode: 223690

A recording of the shareholder update call will be posted on the Company’s website.

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.

Neither the TSX Venture Exchange nor its regulation services provider (as defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this press release.

Numerical Amounts

The reporting and the functional currency of the Company is the Canadian dollar.

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 Company’s intention to pursue additional financing opportunities, including the expected timing and successful completion thereof, the Company’s production targets and related expectations around product launches, the Company’s ability to meet its revenue forecasts and anticipated product sales and the Company’s ability to manage manufacturing, supply chain and inventory constraints and continue to operate its business in the ordinary course.

Additionally, this press release includes forward-looking statements within the meaning of applicable securities laws, including with respect to, among other things, the Company’s expectation that (i) revenues for the three-month period ending March 31, 2022 will be approximately $3-$4 million, and (ii) revenues for the 12 month period ending December 31, 2022 will be approximately $30-$40 million.

The forward-looking information is based on certain key expectations and assumptions, including 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 ability of the Company to secure additional sources of financing in 2022. There can be no assurance that any such financing will be available on reasonable terms or capable of being consummated in a timely manner or at all.

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; 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 reasonable possibility that the Company's existing cash and cash equivalents, along with cash generated from its operations, may not be sufficient to fund its current and planned operations through the next 12 months, which raises substantial doubt about the Company's ability to continue as a going concern; 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: