Candy Club (ASX: CLB) reaches over 1,000 retail (B2B) customers with 465 added in last quarter alone

Highlights

  • Candy Club now has over 1,000 retail (B2B) customers and 465 added in that last quarter alone.
  • Candy Club is providing existing investors only and supporters of the Company’s long-term vision, an opportunity to invest via a 1 for 3 non-renounceable pro-rata rights issue. The rights issue will allow you to apply for 1 new share for every 3 shares held at an issue price of $0.08.
  • The Company requires capital to execute on its B2B growth plans given the marked increase in its B2B customer base, coupled with key holidays and foot traffic surrounding Halloween, Thanksgiving and Christmas.

Quarterly Report

Effective 1 August, an executive decision has been made to reduce staff costs from USD $178K per month to USD $115K per month, with Keith (CEO), CFO and COO all taking cuts and converting this to equity – a sign of alignment in the business. This will lead to ~$1M AUD in net savings over the 12 months period, directly flowing to EBITDA;

Automation equipment is finally being installed this week which is expected to improve margins significantly across the entire product range – once again, leading to operating leverage; and

We see a pickup in the B2B in the 2nd half of 2019 and are confident that Keith and the team will drive revenue expansion across the entire business

With now over 1,000 retail (B2B) customers and 465 added in that last quarter alone, the decision was made to strengthen the company’s balance sheet. The board’s vision (and ours) is to see a large player acquire Candy Club on a revenue multiple. With funding in place post rights issue and execution on the second half of CY19, we feel the company is in a stronger position to realise this goal.

Rights Issue

Candy Club is providing existing investors only and supporters of the Company’s long-term vision, an opportunity to invest via a 1 for 3 non-renounceable pro-rata rights issue.

The rights issue will allow you to apply for 1 new share for every 3 shares held at an issue price of $0.08.

Each share subscribed for comes with 1 free attaching option with an exercise price of $0.10, 31 May 2023 expiry and is intended to be listed on the ASX. Black-Scholes valuation of the option is ~$0.03 (50% volatility). Effective entry price is therefore ~$0.05 for the rights issue.

The board of Candy Club intends to take up their full rights, with Kan Tang already committing USD $300,000 via a bridge loan. Zac Rosenberg has also committed to taking up his rights. Keith Cohn is taking a 1/3 pay cut to take up his full entitlement.

Further, a former Candy Club board member and well-known Australian investor, James Baillieu, has advanced AUD$356,000 to the Company under the Debt Raising (as defined in the Prospectus for the Rights Issue), which Mr Baillieu intends to apply towards his participation in the Rights Issue via the Debt Conversion Facility (as defined in the Prospectus for the Rights Issue).

Just a quick reminder that for the Rights offer closes this Monday, 29 July.

The Company requires capital to execute on its B2B growth plans given the marked increase in its B2B customer base, coupled with key holidays and foot traffic surrounding Halloween, Thanksgiving and Christmas. For these key USA holiday seasons, Candy Club requires seasonal themed product to sell to its growing retail customer base.

With significantly more retail customers than during this holiday period last year, management expects the second half of the year to be an exciting one.

The board is conscious of reducing cash burn and achieving profitability in the shortest timeframe possible, without impacting the top line.

It is great to see such an active board working exceptionally hard in the background to maximise shareholder value and we are confident that this investment will be a profitable one.

 

About Candy Club

Candy Club is a leading speciality market confectionery company which operates a wholesale business and a direct-to-consumer subscription business. Founded in 2015 by serial entrepreneur Keith Cohn, the Company is executing on an omnichannel strategy with a vision to become the world’s leading speciality market candy company. The Company is headquartered in Los Angeles, CA.

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