CE Brands Reports Second Quarter 2024 Financial Results

CALGARY, AB, Nov. 28, 2023 /CNW/ - CE Brands Inc. (TSXV: CEBI) (TSXV: CEBI.WT) ("CE Brands", "we", "our", or the "Company"), a data-driven consumer-electronics company, today announced its financial results for the six-months ("Q2 2024") ended September 30, 2023. The related financial statements and accompanying notes, and Management's Discussion and Analysis ("MD&A") for Q2 2024 are available on SEDAR+ at www.sedarplus.ca and on CE Brands' website at www.cebrands.ca.

Except as otherwise indicated, all amounts in the press release are expressed in Canadian dollars.

Q22024 Highlights

• Operating loss of $2.45 million during the six-months ending September 30, 2023 was 35% lower than the prior period loss of $3.77 million, as a result of reduced operational spending, in excess of the $0.52 million reduction in gross profit.
  
  
• Operating cash outflows of $1.72 million during the six-months ended September 30, 2023 were 55%, or $2.11 million, lower than the prior period outflows of $3.83 million, as a result of reduced operational spending, conversion of working capital into cash, and certain re-organization activities.
  
  
• Net Income of approximately $6.62 million in the six-months ended September 30, 2023, is an improvement of 242% compared with $(4.46) million net loss in Fiscal 2023. The increase in net income was due to a gain on deconsolidation of $10.45 million and lower operating expenditures due to bankruptcy of eBuyNow eCommerce Limited. The bankruptcy removed $11.03 million in current liabilities from the Company's books.

"The second quarter of fiscal 2024 was challenging for CE Brands as management is worked through the re-organization of the business, but these efforts are being realized in the third quarter" said Kalvie Legat, Interim Chief Executive Officer of CE Brands. "Subsequent to this reporting period the Company has cleaned up the balance sheet, re-affirmed key partnerships, and launched a prospectus offering to re-capitalize the business for execution in the coming year".

Outlook

The Company continues to take steps to mitigate the impacts of the ongoing supply constraints on semiconductor chip manufacturing and global supply chain disruptions through supply-chain improvements and strategically prioritizing the Company's product portfolio to conserve cash and improve near-term as well as long-term profitability. In order to continue to meet customer demand, the Company anticipates pursuing additional financing for working capital and general corporate purposes, principally to ensure the Company has sufficient financing on hand for the purchase of inventory.

Due to the working capital and liquidity constraints that the Company has faced and a slower than anticipated return to full operations in our partner factories, the Company withdraws all previously disclosed financial guidance due to the uncertainty in forecasting operating results.

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 Motorola and Vitalist product launches and sales described below. See "Forward-Looking Information", "Going Concern" and "Other Risk Factors" sections of the MD&A.

Selected Financial Information

References in this press release to the "Company" refer to CEBI and all its direct & indirect subsidiaries till June 27, 2023. As mentioned above with effect from June 27, 2023, CEBI lost control over the assets & liabilities of its wholly owned subsidiary EBN and hence the same has been deconsolidated from the books of CEBI. The assets and liabilities presented as on June 30, 2023 are those of CE Brands Inc. and CE Brands International only.

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

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 in over 59 countries, our innovative, highly repeatable process, 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.

Forward-Looking Information

This MD&A contains "forward-looking information" within the meaning of applicable Canadian securities laws. In general, forward-looking information is disclosure about future conditions, courses of action, and events, including information about prospective financial performance or financial position. The use of any of the words "anticipates", "believes", "expects", "intends", "plans", "will", "would", and similar expressions are intended to identify forward-looking information. Forward-looking statements included or incorporated by reference in this MD&A include, without limitation, with respect to:

• the ability of the Company to continue as a going concern;
• the impact on the Company of the voluntary bankruptcy of eBuyNow eCommerce Ltd. ("EBN");
• the effects of COVID-19 on the Company;
• the effects of global supply constraints on the Company;
• the plans of the Company for the Motorola product category, the status of the Motorola product category relative to those plans, and the anticipated timing and costs to advance the Motorola product category;
• the plans of the Company for the Vitalist product category, the status of the Vitalist product category relative to those plans, and the anticipated timing and costs to advance the Vitalist product category;
• the plans of the Company to terminate certain product lines and product categories;
• the strategies of the Company for customer retention and growth;
• anticipated demand for the products and services of the Company, and its ability to meet that demand;
• the plans of the Company to maintain a flexible capital structure;
• the ability of the Company to generate sufficient cash to maintain its capacity and fund its growth and development;
• fluctuations in the liquidity of the Company;
• the ability of the Company to meet its obligations as they become due;
• the plans of the Company for remedying its working capital deficiency;
• potential sources of financing for the Company to meet its commitments for expenditures;
• capital expenditures not yet committed, but required, to maintain the capacity of the Company and fund its growth and development;
• fluctuations in the capital resources of the Company;
• the sources of financing that the Company has arranged, but not yet used; and
• the plans of the Company to reduce general and administrative expenses.

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 volumes of the Company's products and the ability of the Company to secure additional sources of financing in 2023 and 2024.

There can be no assurance that the Company will be able to secure additional financing in the future in a timely manner or at all. If the Company fails to secure additional financing, 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.

By its nature, forward-looking information is subject to various risks, which could cause the actual results and expectations to differ materially from the anticipated results or expectations expressed in this document. Some of these risks include the following:

• due to the EBN bankruptcy, contracts between EBN and its subsidiaries and certain licensors, distributors, and manufacturers may be terminated as part of the bankruptcy;
• there is the potential for litigation to arise from creditors in connection with the EBN bankruptcy resulting in contingent liabilities and additional legal costs;
• certain liabilities of EBN and its wholly-owned subsidiaries may not be extinguished in connection with the EBN bankruptcy;
• upon completion of the EBN bankruptcy, the Company will require additional funds by way of debt or equity financings to continue to fund its operating, investing, and financing activities in the foreseeable future;
• the Company may continue to experience negative impacts of the COVID-19 restrictions;
• the Company may continue to experience negative impacts of global supply constraints;
• the Company has limited financial resources and will require additional funds to continue operations;
• the Company is at risk of not being able to settle its debt obligations and the Company may not be able to extend, replace, or refinance its existing debt obligations on terms reasonably acceptable to the Company, or at all;
• the Company has global operations and sales and, as such, has exposure to global credit and financial factors on consumers in its areas of operations;
• the Company has a working capital deficiency;
• the Company has a history of negative cash flow, including negative cash flow from operating activities;
• the Company relies on third party manufacturing and from time to time there may be product defects caused by the manufacturing process, assembly, or engineering;
• the Company relies heavily on manufacturing in China but at times may use factories in, Vietnam, Taiwan, or Malaysia, as such products may be subject to changing tariffs applied by selling countries to the countries of origin with little or no warning;
• the Company's revenues may vary over time and with seasonality;
• The Company may not generate sufficient revenue to sustain operations;
• The Company may not be able to successfully negotiate contracts to source, develop, manufacture, pack, ship, distribute, or sell products economically, if at all;
• the Company relies on major components to be manufactured on an OEM basis;
• Demand for international sales may not grow as expected or at all, and there is no assurance that the Company will succeed in expanding into new markets;
• the ability of the Company to successfully enter new markets is subject to uncertainties;
• there can be no assurance that the business and growth strategy of the Company will enable the Company to be profitable;
• the Company relies on licenses from third parties;
• the future growth and profitability of the Company will be dependent in part on the effectiveness and efficiency of its sales and marketing expenditures;
• the Company may be exposed to product liability claims in the use of its products;
• the market for the Company's products is characterized by rapidly changing technology, evolving industry standards, and customer requirements. The expected length of product lives may not be the same as actual, which may impact volumes sold;
• the Company may not be able to develop new market relevant products in a timely manner;
• the precise segment of the market that is targeted by the Company is characterized by rapid technological change, evolving industry standards, frequent new product introductions, and short product life cycles;
• the ability of the Company to generate revenue will largely depend upon the effectiveness of its sales and marketing efforts, both domestically and internationally;
• the success of the Company is largely dependent on the performance of its key directors, officers, and employees;
• the commercial success of the Company is reliant on the ability to develop new or improved technologies, manufacture products, and to successfully obtain patents or other proprietary or statutory protection for these technologies and products in Canada and other jurisdictions;
• the Company could become subject to a wide variety of cyberattacks on its networks and systems;
• the Company is engaged in an industry that is highly competitive and rapidly evolving;
• the new products provided by the competitors of the Company may render the existing products of the Company less competitive;
• the Company uses contract manufacturers to manufacture its products and products under development;
• the management of the Company has limited experience operating public companies;
• the Company may become party to litigation, mediation, or arbitration from time to time in the ordinary course of business;
• any future acquisitions may result in significant transaction expenses and may present additional risks associated with entering new markets, offering new products, and integrating the acquired companies;
• the business plan of the Company anticipates rapid growth, and the Company will need to continue to attract, hire, and retain highly skilled and motivated officers and employees;
• the computer infrastructure of the Company may potentially be vulnerable to physical or electronic computer break-ins, viruses, and similar disruptive problems and security breaches;
• the Company may not be able to enhance its current products or develop new products at competitive prices or in a timely manner;
• the Company is subject to taxes in Canada and other foreign jurisdictions;
• a customer of the Company or counterparty to a financial instrument of the Company may fail to meet its contractual obligations to the Company;
• there are a number of risks inherent in the international activities of the Company, including unexpected changes in governmental policies or project locations concerning the import and export of goods, services, and technology;
• the ability of the Company to manage growth effectively will require it to continue to implement and improve its operational and financial systems;
• the forecasts and models of the Company could be inaccurate;
• the accounting estimates and judgments of the Company could be incorrect;
• the Company may fail to develop or maintain effective controls on financial reporting; and
• there is no assurance that insurance will be consistently available to the Company on economic terms, if at all.

Readers are cautioned not to place undue reliance on this forward-looking information, which is given as of the date of this MD&A, and to not use such forward-looking information other than for its intended purpose. CEBI 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 law.

SOURCE CE Brands Inc.

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