“It is widely known that the consumer electronics industry is experiencing worse than expected production, logistical and supply chain challenges. While this has hampered the timing of our anticipated sales growth and led us to reassess our near-term financial and operational priorities, we remain encouraged by the operational momentum we have recently experienced, and are confident in the growth potential of our business.” said
“In response to the logistical challenges, we have launched a series of initiatives to stabilize our business, including supply-chain improvements, reductions in SG&A and strategically prioritizing our product portfolio to conserve cash and improve near-term profitability. I believe we are in the early stages of recapturing momentum with our product deliveries and sales. The recent additions to our senior operations team in
Operations Update
The COVID-19 pandemic has had far-reaching impacts on the manufacturing and production of consumer electronics in Asia. For
Despite these challenges related to the COVID-19 pandemic, the Company anticipates achieving its target of eight unique products in four different product categories in the market by the end of
- The Company currently has the following products in the market: Kodak Baby Monitors and Air Purifiers and Motorola entry-level Smart Watches.
- The following products are expected to launch by the end of
December 2021 : Kodak Battery-powered Outdoor Security Cameras - In addition, the following products are expected to launch by the end
March 2022 : Kodak Air Purifiers (new model), Motorola mid-level Smart Watches (two new models).
As part of refocusing the Company’s product portfolio, the Company has determined to delay the launch of the following products: Kodak Premium Tier Baby Monitor (new product) and Air Conditioners/Dehumidifiers and new Smart Lighting products.
Once the Company’s business stabilizes and the headwinds dissipate, the Company anticipates resuming new product development and launches with a continued focus on products with the ability to generate average revenues of approximately
The Company is proactively working with its manufacturing partners to improve production and minimize further disruptions. The recently announced hiring of
The Company has implemented a 50% reduction in corporate salaries for the board of directors and executive management team and a 28% reduction for the non-executive employees. In addition, the Company has implemented headcount reductions, including the departure of
The following are examples of the supply chain challenges currently being faced by the Company:
- Due to COVID-19 restrictions recently imposed by the Vietnamese government, limitations have been instituted for many companies regarding workforce numbers and shipping and logistics related matters. Consequently, the manufacturing of several products in Vietnamese factories was moved back to
China , which has directly impacted manufacturing lead times. - Silicon chip manufacturing has also fallen behind current demand resulting in a global shortage of semiconductors. This has filtered down through global supply chains in many industries, but has been especially impactful on consumer electronic components. Wherever possible, the Company is focusing on products that are least impacted by semiconductor production issues.
China is experiencing severe energy shortages and rolling power disruptions resulting in down time for factories.- Shipping delays due to COVID-19 restrictions at shipping ports have impacted products leaving
China and arriving inNorth America and increased the costs of all types of cargo freight.
Financial Update and Revised Outlook
On a preliminary basis, the Company expects revenue for the three-month period ended
As at
- Cash on hand of approximately
$1.0 million . - Finished goods on order valued at approximately
$4.6 million . Sale of finished goods on order goods are expected to generate revenue in the range of 2-2.5 times the inventory value. - Current outstanding debt of approximately $3.1 million, comprised of:
- Founder loans in aggregate of
$1.6 million bearing a 4.5% interest rate with staggered maturities occurring beforeMarch 2023 ; and US$1.25 million drawn on the facility with Choco Up with a maturity inMay 2022 .
- Founder loans in aggregate of
As global supply chain issues have increasingly constrained the Company’s working capital, recent share price declines also resulted in the Company having to repay outstanding convertible notes in cash (rather than issuing shares on maturity) and in warrants expiring out of the money (with no proceeds being paid to the Company). As of the date hereof, the Company has 22,713,055 common shares issued and outstanding and 30,548,648 common shares outstanding on a fully diluted basis.
The Company is currently evaluating a number of potential financing alternatives that are intended to address the Company’s working capital and other financing needs and support the Company’s product launches and sales. See “Forward-Looking Statements”.
Long Term Growth Strategy
Since the completion of its public listing in
- Executed a 6-year contract extension with Kodak to continue to build out the Kodak Smart Home line of products. This agreement outlines the future development plans for new products to be developed by
CE Brands which will be sold globally under the Kodak Smart Home brand.- Our best-selling product, the Kodak Cherish C525 smart baby monitor has been enhanced with additional features and is back in stock in our best-selling region(s) just this week.
- Our next new product, the Kodak Infinio F882, a new, battery powered Smart Home outdoor security camera is scheduled to begin production in
November 2021 .
- Signed 1 year contract extension with Motorola, currently expires
December 2025 .- Our newest smartwatch, the Moto Watch 100, which is designed for an entry level price point, is scheduled to begin mass production in
November 2021 . With several major retailers in line for initial orders to test the product, we believe the Motorola brand coupled with an affordable premium feeling smartwatch has the potential to be a truly disruptive product.
- Our newest smartwatch, the Moto Watch 100, which is designed for an entry level price point, is scheduled to begin mass production in
- Signed term sheet agreement with
LifeQ, Inc. for Bio Age services, LifeQ brand including revenue sharing for premium services for LifeQ connected devices. - Executed a master supply agreement with
Shenzhen Aoni Electronic Co., Ltd (“Aoni”). Based inShenzhen, China , Aoni is one of the world’s leading manufacturers of wireless cameras and operates its own state-of-the-art factory including sophisticated facilities such asCloud Service Lab , SMT machines and professional manufacturing workshops. TheShenzhen factory will initially be utilized to advance production of the additional Smart Home video security product lines.
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About
Neither the
Presentation of Financial Information
All figures indicated above with respect to the three-month period ended
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 ability to manage manufacturing, supply chain and inventory constraints and continue to operate its business in the ordinary course; the Company’s intention to raise additional working capital financing in the amount of approximately
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 ended
The forward-looking information is based on certain key expectations and assumptions, including the timing of the resumption of manufacturing operations at the Company’s partner factories in
There can be no assurance that the Company will be able to successfully complete any financing on reasonable terms, in a timely manner or at all. If the Company 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
Further Information | |
For further information about | |
Kalvie Legat | |
Chief Financial Officer | Manager, Investor Relations |
778-771-0901 | 403-472-6382 |
ir@cebrands.ca | rob.knowles@cebrands.ca |
Source:
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