Smart Employee Benefits Inc.
TSX VENTURE : SEB

Smart Employee Benefits Inc.

February 18, 2016 11:22 ET

SEB Amends Previously Closed $2,000,000 Convertible Note Offering

MISSISSAUGA, ONTARIO--(Marketwired - Feb. 18, 2016) - Smart Employee Benefits Inc. ("SEB" or the "Company") (TSX VENTURE:SEB) previously announced in a press release on February 12, 2014 that it had closed a $2,000,000 convertible note offering. The $2,000,000 of convertible notes (the "Notes") of the Company were issued at a price of $1.00 per $1.00 principal of the Notes (the "Offering") and had a two (2) year term maturing on February 12, 2016 (the "Maturity Date"). The Notes currently bear interest at an annual rate of 8% and are convertible into common shares in the capital of SEB ("Common Shares") at $0.60 per Common Share until the last business day prior to the Maturity Date.

Subject to acceptance by the TSX Venture Exchange, the Company intends to amend $1,950,000 of the Notes ($50,000 of the Notes have been converted; $1,530,000 of the Notes have agreed in writing to the amendment and $420,000 have verbally agreed to the amendment and to execute the extension agreement this week) to extend the Maturity Date until August 12, 2016 (the "Extended Maturity Date") and to increase the interest rate from 8% to 10% per annum during the extension period, with a bonus payment equivalent to 1% of the principal amount of each outstanding Note to be paid on the Extended Maturity Date. The Company would also grant a security interest over its assets for any amounts owing under the outstanding Notes. The conversion price of the Notes would remain unchanged, subject to the conversion privilege being valid until the Extended Maturity Date.

The securities offered in the Offering have not been and will not be registered under the United States Securities Act of 1933 as amended, or any state securities laws, and may not be offered or sold in the United States absent registration or an applicable exemption from such registration requirements. This press release shall not constitute an offer to sell, or the solicitation of an offer to buy the securities in the United States or in any jurisdiction in which such offer, sale or solicitation would be unlawful.

Debt Refinancing in Process

SEB has engaged a U.S.-based Investment banker to assist in refinancing SEB's consolidated debt. Term sheets have been received and negotiations are ongoing with multiple lenders. SEB Management believes that SEB has now reached a point of sustainable positive cash flow where the refinancing is of interest to multiple senior debt lenders in both Canada and the U.S. The purpose of the refinancing is to consolidate all debt with a small number of senior lenders and to reduce interest costs. SEB intends to use a portion of the proceeds from the refinancing to repay the outstanding Notes on the Extended Maturity Date.

Corporate Update

SEB's global infrastructure is comprised of two Divisions: Technology and Benefits. The Technology Division currently serves corporate and government clients across Canada and internationally. The core expertise of SEB's Technology Division is building and operating fully integrated data processing and business process solutions. The Technology Division is a strong and growing business, generating strong cash flow.

The Benefits Division delivers SaaS and BPO processing solutions to both corporate and government -funded health benefit environments. The Technology Division is a critical competitive advantage in supporting the implementation and operation of SEB's benefits processing solutions environments. The Benefits Division is managed as a "Client" of the Technology Division, where the infrastructure and expertise of the Technology Division allows SEB to provide end-to-end total processing solutions, all managed in one technology environment.

Currently, the Technology Division represents approximately 86% of total revenues. The Benefits Division represents approximately 14%. Both Divisions have strong growth trajectories and have reached the point of sustainable positive cash flow, with consolidated backlog and expected renewals in excess of $350.0 million, based on signed contracts and historical patterns of contract renewal.

The growth prospects in 2016 for the Technology Division are focused on organic initiatives, supported by a strong backlog. The Benefits Division focus in 2016 includes both acquisition and organic initiatives. The Benefits Division has significantly higher profit margins and is expected to represent a materially larger part of the consolidated revenues by the end of fiscal 2016. Acquisition initiatives in 2016 will emphasize the Benefits Division.

SEB consolidated proforma trailing revenues for fiscal 2015 (assuming SEB owned Maplesoft for the full fiscal year) exceeded $100.0 million with a positive EBITDA.

For further information about SEB, please visit www.seb-inc.com.

Disclaimer in Regards to Forward-looking Statements

The statements made in this release that are not historical facts contain forward-looking information that involves risks and uncertainties. All statements, including statements regarding the Company's areas of focus, other than statements of historical facts, which address the Company's expectations, should be considered as forward-looking statements and therefore subject to various risks and uncertainties. The words "may", "will", "could", "should", "would", "suspect", "outlook", "believe", "plan", "anticipate", "estimate", "expect", "intend", "forecast", "objective", "hope" and "continue" (or the negative thereof), and words and expressions of similar import, are intended to identify forward-looking statements.

Such forward-looking statements are based on knowledge of the environment in which the Company currently operates, but because of the factors listed herein, as well as other factors beyond the Company's control, actual results may differ materially from the expectations expressed in the forward-looking statements. Investors are cautioned not to put undue reliance on forward-looking statements. The Company undertakes no obligation, and does not intend, to update, revise or otherwise publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date hereof, or to reflect the occurrence of any unanticipated events, other than as required by applicable law.

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.

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