EMERGE Announces Signing of Definitive Agreement to Sell BattlBox for US$7.2M, and Acceleration of Debt Paydown

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• EMERGE has entered into a definitive agreement to sell BattlBox for US$7.2M, including US$6M in cash, and the assumption of US$1.2M in deferred consideration by the Buyer
• In conjunction, EMERGE plans to utilize C$7M to pay down its senior credit facility on closing. EMERGE now expects to reduce its credit facility to approximately C$15M by Q3, down from C$25M a year ago
• Interest expense savings from debt repayment expected to be C$1M annually, slightly exceeding the free cash flow generated from BattlBox Group in 2022
• Carnivore Club, a business originally acquired with BattlBox, will remain an EMERGE brand, and be housed under truLOCAL, with more impactful synergies expected
• Following the Transaction, EMERGE will retain 7 brands across 4 verticals, with an e-commerce portfolio approaching C$100M in Gross Merchandise Sales(1) ("GMS"), and a focus on 'recession-resilient', asset-light business models with strong EBITDA to cash flow conversion

TORONTO, April 3, 2023 /CNW/ - EMERGE Commerce Ltd. (TSXV: ECOM) ("EMERGE", or the "Company"), a diversified acquirer and operator of niche e-commerce brands, announces that Emerge US Holdings LLC (the "EMERGE US") and Battlbox LLC (the "BattlBox"), a direct and indirect subsidiary of the Company respectively, have entered into a membership interest purchase agreement (the "Agreement"), with Battlbrands Holdings, Inc. (the "Buyer"), pursuant to which EMERGE US intends to sell to the Buyer all of the issued and outstanding equity interests in the capital of BattlBox (the "Transaction"). BattlBox operates an e-commerce subscription business for survival and outdoor gear.

Ghassan Halazon, Founder and CEO of EMERGE commented, "The sale of BattlBox is, by all means, a transformative event for our Company, and our most significant step to date in our efforts to strengthen the balance sheet, a top priority in the near-term. We plan to deploy the majority of the transaction proceeds towards debt paydown, accelerating our previously stated amounts and timeline. As a result, we expect $1M in annual interest savings, exceeding free cash flow generated from BattlBox Group in 2022."

Pursuant to the Agreement and in consideration for the Transaction, the Buyer has agreed to pay to EMERGE US, cash consideration of US$6,008,666 on closing of the Transaction ("Closing"), subject to certain distribution and debt adjustments, and the Buyer has further agreed to assume an aggregate of US$1,161,537 in outstanding liabilities.

Following the transaction, EMERGE will no longer have any deferred payment obligations owed to BattlBox Group shareholders.

"While BattlBox remains a terrific brand, we factored in the increasingly complex supply-chain dynamics in today's volatile macro climate, necessitating large investments in inventory. Our decision here signifies that we plan to generally favor asset-light businesses with strong EBITDA to cash flow conversion for this next phase, while doubling down on what we characterize as 'recession-resilient' verticals, namely pets, grocery, golf and discounted experiences. The go-forward EMERGE portfolio, particularly our Canadian-based businesses, also has the inherent geographical advantage of shared resources, facilities and audiences." continued Halazon.

EMERGE originally acquired BattlBox Group in October 2021, which included both the BattlBox and Carnivore Club brands. Carnivore Club is not included in the Transaction, and will remain an EMERGE brand, working closely with truLOCAL.

"Carnivore Club has developed a reputable brand in the artisanal meat subscription space that we view as adjacent to truLOCAL's premium meat subscription service. Historically, Carnivore Club was managed under BattlBox leadership. Moving forward, it will be housed under truLOCAL, where we anticipate more impactful synergies," added Halazon.

Following the Transaction, EMERGE will retain 7 brands across 4 main verticals (Pets, Meat/ Grocery, Golf and Experiences) in Canada and the U.S., namely WholesalePet, truLOCAL, Carnivore Club, UnderPar, JustGolfStuff, WagJag and BeRightBack. EMERGE's go-forward e-commerce portfolio is expected to approach C$100M in GMS(1) annually, and remain profitable on an Adjusted EBITDA(1) basis.

With respect to the Company's credit facility, EMERGE now plans to reduce the debt to C$15M by Q3, down from C$25M a year ago, and from the Company's previously stated target of $19M. The Company anticipates the accelerated debt paydown to result in interest savings of $1M annually. Alongside the transaction, the Company's lender has also agreed to relax certain financial covenants to offer the Company additional operational flexibility. EMERGE remains in good standing with its existing lender, which it has worked with since November 2019.

No finder's fees are expected to be paid in connection with the Transaction.

Subject to the satisfaction of all conditions precedent to the completion of the Transaction, including TSXV approval, Closing is expected to occur on or prior to April 21, 2023 or such other date as the Seller, the Target and the Buyer may agree.

Certain current officers of BattlBox hold a controlling interest in the capital of the Buyer. Accordingly, the Transaction may be considered a "related party transaction" under the provisions of Multilateral Instrument 61- 101 – Protection of Minority Security Holders in Special Transactions ("MI 61-101") and a "reviewable transaction" with Non-Arm's Length Parties pursuant to TSX Venture Exchange ("TSXV") policies. MI 61-101 requires the Company to obtain a formal valuation of the Target and seek "minority approval" of the Transaction by disinterested shareholders, unless exemptions are available. The Company is relying on the exemption from the requirement to obtain a formal valuation under section 5.5(b) of MI 61-101 and the exemption from obtaining minority approval under section 5.7(e) of MI 61-101.

It is expected that the material change report for the Transaction will not be filed 21 days or more prior to closing, as the Company intends to close the Transaction as soon as practicable, so as to avail itself of the proceeds of the Transaction, and there was no material change that could be disclosed before the execution of the Agreement.

This news release does not constitute an offer to sell or a solicitation of an offer to sell any of securities in the United States. The securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act") or any state securities laws and may not be offered or sold within the United States or to U.S. Persons unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available. "United States" and "U.S. Person" are as defined in Regulation S under the U.S. Securities Act.

EMERGE is a diversified acquirer and operator of profitable niche e-commerce brands across North America. Our subscription and marketplace e-commerce properties provide our members with access to pet products, meat/grocery, golf and discounted experiences, among other categories. EMERGE was named one of Canada's Top Growing Companies by Globe and Mail in 2022 (and 2020), and one of the fastest growing companies in Canada by the Startup 50 in 2020.

To learn more visit https://www.emerge-commerce.com

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Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

This press release makes reference to certain non-GAAP measures. These non-GAAP measures are not recognized measures under IFRS, do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing a further understanding of results of operations from management's perspective. Accordingly, they should not be considered in isolation nor as a substitute for analysis of the financial information of the Company reported under IFRS. Gross Merchandise Sales ("GMS") and Adjusted EBITDA should not be construed as alternatives to revenue or net income/loss determined in accordance with IFRS. GMS and Adjusted EBITDA do not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other issuers.

GMS as defined by management is the total dollar value of customer purchases of goods and services, excluding applicable taxes and net of discounts and refunds. Management believes GMS provides a useful measure for the dollar volume of e-commerce transactions made through our platforms and an indicator for our business performance.

Adjusted EBITDA as defined by management means earnings before interest and financing costs, income taxes, depreciation and amortization, transaction costs, foreign exchange gains/losses, discontinued operations, unrealized gains/losses on contingent consideration and share-based compensation. Management believes that Adjusted EBITDA is a useful measure because it provides information about the operating and financial performance of EMERGE and its ability to generate ongoing operating cash flow to fund future working capital needs and fund future capital expenditures or acquisitions.

This press release may contain certain forward-looking information and statements ("forward-looking information") within the meaning of applicable Canadian securities legislation, that are not based on historical fact, including, without limitation, statements related to the closing of the Transaction and the timing thereof, the satisfaction of all conditions precedent to the closing of the Transaction, including, without limitation, TSXV approval in respect of the Transaction, the availability of certain exemptions from the requirements of MI 61- 101 in respect of the Transaction (which will be reaffirmed at closing of the Transaction), any benefit that may be derived by the Company from the Transaction, including, without limitation, any material benefit to the working capital or financial position of the Company as a result of the Transaction, as well as other statements containing the words "believes", "anticipates", "plans", "intends", "will", "should", "expects", "continue", "estimate", "forecasts" and other similar expressions. Readers are cautioned to not place undue reliance on forward-looking information. Actual results and developments may differ materially from those contemplated by these statements. There is no guarantee the Transaction will be completed as contemplated or at all, and the forward-looking information contained herein is based on the assumptions of management of the Company as of the date hereof including, without limitation, assumptions with respect to the financial position and working capital of the Company, the ability of the Company to obtain TSXV approval for the Transaction and the satisfaction of any other conditions thereto, and the conditions of the financial markets and the e-commerce markets generally, among others. The Company undertakes no obligation to comment on analyses, expectations or statements made by third-parties in respect of the Company, its securities, or financial or operating results (as applicable). Although the Company believes that the expectations reflected in forward-looking information in this press release are reasonable, such forward-looking information has been based on expectations, factors and assumptions concerning future events which may prove to be inaccurate and are subject to numerous risks and uncertainties, certain of which are beyond the Company's control, including risks related to the disposition of a operating business by the Company, risks that the benefits derived from the Transaction may not be as expected or that the Company may not see any benefit from the Transaction, risks that each party to the Agreement may not satisfy its obligations or covenants, risks that the Company may be subject to litigation as a result of the Transaction including allegations of misrepresentation or breach of conditions or covenants, risks that the TSXV may not approve the Transaction, as well as the risk factors discussed in the Company's MD&A, and most recent Annual Information Form which are available through SEDAR at www.sedar.com. The forward-looking information contained in this press release are expressly qualified by this cautionary statement and are made as of the date hereof. The Company disclaims any intention and has no obligation or responsibility, except as required by law, to update or revise any forward-looking information, whether as a result of new information, future events or otherwise.

On Behalf of the Board
Ghassan Halazon
Director, President, and CEO

SOURCE EMERGE Commerce Ltd.

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