edgeTI Announces Amended Line of Credit Facility with Lotus, Amended Promissory Note with Salem, and Amended Related Party Convertible Promissory Notes

Rhea-AI Summary

Edge Total Intelligence Inc. has amended its debt facilities to ease cash flow pressures. The company increased its line of credit from $1.74 million to $5.1 million, extending the maturity to January 20, 2026, with an interest rate rising to 8%. A partial repayment of $3 million was made on the existing note with Salem Investment Partners, which reduced its interest rate from 12% to 6% and extended the maturity to January 1, 2024. Additionally, amendments to convertible promissory notes with management extended the maturity to 2025 and reduced the interest rates. The overall changes are expected to reduce annual interest expenses by $313,000.

Positive

• Increased line of credit from $1.74 million to $5.1 million.
• Extended maturity date of the credit facility to January 20, 2026.
• Reduced annual interest expenses by approximately $313,000.

Negative

• Increased interest rate on the credit facility from 5% to 8%.
• Management's convertible notes maturity extended to 2025, indicating potential long-term debt burden.

Amended Debt Facilities Relieve Pressure on EdgeTI Cash Flows

(All amounts stated in US Dollars)

ARLINGTON, Va., Jan. 25, 2023 (GLOBE NEWSWIRE) -- Edge Total Intelligence Inc. (TSXV: CTRL, OTCQB: UNFYF, FSE: Q5i) (“edgeTI”, “We”, “Our” or the “Company”), announces that it has amended its line of credit facility with Lotus Domaine III, L.P. (“Lotus”), an investment fund which is also a significant shareholder of the Company. Likewise, the Company’s promissory note (the "Salem Promissory Note") with Salem Investment Partners IV, Limited Partnership (“Salem”) has been partially repaid and amended. Further, convertible promissory notes with certain management and directors of the Company (the "Related Party Notes") have also been amended.

“Our combined actions with lenders will relieve pressure on our cash flows,” said Jim Barrett, CEO of edgeTI. “We believe these actions combined with 2023 plans for product development and growth will establish sustainable cash flows and reduce our liabilities.”

Restated Line of Credit Facility with Lotus Domaine III, L.P.

The Company’s line of credit facility (the "Credit Facility"), that was entered into on June 1, 2022 had a maturity date of May 31, 2025, and bore interest at an annual rate of 5%. Subsequent to June 1, 2022, the amount of the loan was increased to $1.74 million of which the Company was fully drawn at December 31, 2022.

The following amendments were made to the Credit Facility:

• Increase in the principal amount from $1.74 million to $5.1 million
• Requirement to use $3.0 million partial repayment on the Company’s Promissory Note
• Extension of the maturity date of the Credit Facility from May 31, 2025 to January 20, 2026
• Increase in interest rate from 5% to 8% annual interest compounded monthly
• The establishment of sales targets and provisions to appoint an operational manager
• Additional monthly reporting requirements.

As required by the amended terms of the Credit Facility, the Company drew $3 million on the Credit Facility with Lotus and repaid $3 million on its $5.9 million Promissory Note with Salem.

Partial Loan Repayment and Amended Promissory Note with Salem Investment Partners

The Salem Promissory Note was amended as follows:

• Reduction of interest rate from 12% to 6% per annum payable monthly
• Extension of maturity date from June 30, 2023 to January 1, 2024
• The warrant held by Salem that allows for Salem to purchase 7% of all issued and outstanding equity of the Company may be repurchased by the Company on or prior to January 1, 2024 for $300 thousand, provided the Company has repaid all principal and interest owing to Salem
  

As a result of the partial loan repayment, the Salem Promissory Note has a principal amount owing near $3.0 million.

Related Party Convertible Promissory Notes

The Related Party Notes with principal amounts totaling $1.1 million held by certain management and directors of the Company (the "Convertible Note Holders") were amended as follows:

• The maturity date was extended from December 31, 2022 to December 31, 2025
• The interest rate was reduced from 10% to 8% per annum

As a result of the changes to its overall debt facilities, the Company has extended the maturity date of its debts and reduced interim principal payments. Additionally, the Company expects a reduction in annual interest expense of approximately $313 thousand. The Company expects to incur approximately $54 thousand in legal fees associated with the amended and restated agreements.

As a result of Lotus being a control person of the Company, the Credit Facility is considered a "related party transaction" under Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions ("MI 61-101"). The Company is relying on the exemptions from (i) the formal valuation provisions of MI 61-101 as set out in section 5.5(b) of MI 61-101 (Issuer Not Listed on Specified Markets) on the basis that the Company is a TSX Venture Exchange listed issuer and (ii) the minority approval provisions of MI 61-101 as set out in section 5.7(1)(a) of MI 61-101 (Fair Market Value Not More than 25% of Market Capitalization) on the basis that the fair market value of the Credit Facility, insofar as interested parties are involved, will not exceed 25% of the market capitalization of the Company. The disinterested directors of the Company approved the Credit Facility and no materially contrary view or abstention was expressed or made by any director of the Company in relation thereto.

As a result of the Convertible Notes Holders being management and directors of the Company, the amendments to the Related Party Notes are considered a "related party transaction" under MI 61-101. The Company is relying on the exemptions from (i) the formal valuation provisions of MI 61-101 as set out in section 5.5(b) of MI 61-101 (Issuer Not Listed on Specified Markets) on the basis that the Company is a TSX Venture Exchange listed issuer and (ii) the minority approval provisions of MI 61-101 as set out in section 5.7(1)(a) of MI 61-101 (Fair Market Value Not More than 25% of Market Capitalization) on the basis that the fair market value of the Related Party Notes, insofar as interested parties are involved, will not exceed 25% of the market capitalization of the Company. The disinterested directors of the Company approved the amendments to the Related Party Notes and no materially contrary view or abstention was expressed or made by any director of the Company in relation thereto.

About edgeTI

edgeTI helps customers sustain situational awareness and accelerate data-driven action with its real-time digital operations software, edgeCore™. Global enterprises, service providers, and governments are more profitable when insight and action are united to deliver fluid experiences via the platform's low-code development capability and compostable experiences. With edgeCore, customers improve their margins and agility by rapidly transforming siloed systems and data across evolving, complex situations in business, technology, and cross-domain operations — helping them achieve the impossible.

Website: https://edgeti.com
LinkedIn: www.linkedin.com/company/edgeti
YouTube: www.youtube.com/user/edgetechnologies
Twitter: @edge_suite

For further Information contact:

Nick Brigman
Phone: 888-771-3343
Email: ir@edgeti.com

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

Forward-Looking Information and Statements

Certain statements in this news release are forward-looking statements or information for the purposes of applicable Canadian and US securities law. Forward-looking statements consist of statements that are not purely historical, including any statements regarding beliefs, plans, expectations, or intentions regarding the future. Such information can generally be identified by the use of forwarding-looking wording such as "may", "expect", "estimate", "anticipate", "intend", "believe" and "continue" or the negative thereof or similar variations. The reader is cautioned that assumptions used in the preparation of any forward-looking information may prove to be incorrect. Events or circumstances may cause actual results to differ materially from those predicted, as a result of numerous known and unknown risks, uncertainties, and other factors, many of which are beyond the control of the Company, including but not limited to, completion of due diligence by lenders, business, economic and capital market conditions.

Such statements and information are based on numerous assumptions regarding present and future business strategies and the environment in which the Company will operate in the future, including the demand for its products, anticipated costs, and the ability to achieve goals. Factors that could cause the actual results to differ materially from those in forward-looking statements include, the continued availability of capital and financing, the impact of Covid-19 or other viruses and diseases on the Company's ability to operate, competition and general economic, market or business conditions, statements regarding Credit Facility terms including maturity date, that the Company will repay the Credit Facility as disclosed in the news release and that the net proceeds of the Credit Facility will be used as stated in this news release, statements regarding the Promissory Note, including the maturity date and the Company's ability to repay the Promissory Note, statements regarding a reduction of the Company's annual interest expenses, and the estimated legal fees associated with amendments and restated agreements. Forward-looking statements contained in this news release are expressly qualified by this cautionary statement. The reader is cautioned not to place undue reliance on any forward-looking information. The forward-looking statements contained in this news release are made as of the date of this news release. Except as required by law, the Company disclaims any intention and assumes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

FAQ

What amendments were made to EdgeTI's debt facilities on January 25, 2023?

EdgeTI amended its line of credit, increasing it to $5.1 million and extending the maturity to January 20, 2026, while also partially repaying its promissory note to Salem.

How much will EdgeTI save in annual interest expenses after the debt amendments?

EdgeTI expects to reduce its annual interest expenses by approximately $313,000.

What is the new interest rate for EdgeTI's line of credit after the amendment?

The interest rate for the line of credit has increased from 5% to 8%.

When is the new maturity date for EdgeTI's promissory note with Salem?

The maturity date for EdgeTI's promissory note with Salem has been extended to January 1, 2024.

What are the implications of the changes to EdgeTI's convertible promissory notes?

The maturity date for the convertible promissory notes held by management has been extended to 2025, which indicates a prolonged debt obligation.