Davidstea arranges $3-million private placement

Executive Summary

• Davidstea Inc. has secured a total of $5.7 million in new capital through a combination of a $3.0 million private placement and a $2.7 million revenue-linked financing agreement.
• The private placement involves the issuance of 3,333,334 units at $0.90 per unit, subscribed by Pembroke Heritage Fund Ltd., Pembroke Genesis Pooled Fund, and Jane Silverstone Segal (a related party).
• Proceeds from both financings are designated for opening new retail stores across Canada and supporting general working capital requirements.

Key Details

• Private Placement Structure:
  • Total Proceeds: $3,000,000.
  • Units Issued: 3,333,334 units.
  • Price Per Unit: $0.90 CAD.
  • Composition: Each unit consists of one common share and one-half of a common share purchase warrant.
  • Warrant Terms: Each full warrant entitles the holder to purchase one additional common share at $1.25 for one year from closing, and $1.50 for the subsequent year.
  • Warrant Expiry: Warrants may expire at the company's discretion if the share price closes at or above $2.00 for 20 consecutive trading days, with notice sent 30 days after the trigger date (available 4 months and 1 day post-closing).
  • Commissions: No commissions or fees were paid in connection with the private placement.
• Revenue-Linked Financing:
  • Amount: $2,700,000.
  • Nature: Non-dilutive financing provided by an institutional partner.
  • Use of Proceeds: Added to working capital to provide financial flexibility.
• Subscribers and Ownership:
  • Pembroke Entities: Pembroke Heritage Fund Ltd. and Pembroke Genesis Pooled Fund subscribed for 50% of the units ($1.5 million). They are at arm's length with Davidstea.
  • Related Party: Jane Silverstone Segal (Chair of the Board) subscribed for the remaining 50% ($1.5 million). She controls Rainy Day Investments Ltd., the principal shareholder. This constitutes a related-party transaction under Canadian Multilateral Instrument 61-101.
  • Post-Closing Ownership: Ms. Silverstone Segal’s control is expected to increase from 44.76% to 45.33% of outstanding shares. She will hold 833,333 warrants post-closing.
• Transaction Conditions and Timeline:
  • Closing Date: Expected on or before November 21, 2025.
  • Regulatory Approval: Subject to standard closing conditions and approval by the TSX Venture Exchange.
  • Resale Restrictions: Shares and warrants are restricted from resale for four months from the closing date.
  • Disclosure: A material change report will be filed with SEDAR+ after closing.
• Strategic Rationale:
  • CEO Sarah Segal stated the financing signals a shift from turnaround to growth, aiming to expand the retail footprint and deepen customer relationships.
  • CFO Frank Zitella noted the capital strengthens liquidity, allowing for accelerated execution of the store-led growth strategy while maintaining disciplined capital allocation.

Notable Quotes

• "This financing signals the next chapter in Davidstea's evolution from turnaround to growth. With a strengthened balance sheet and renewed momentum, we're ready to expand our retail footprint, deepen customer relationships and advance the wellness-focused shift toward specialty tea." — Sarah Segal, CEO and Chief Brand Officer
• "This combination of equity and revenue-linked financing strengthens our liquidity and financial flexibility. It provides the capital to accelerate the execution of our store-led growth strategy while maintaining a disciplined approach to capital allocation." — Frank Zitella, President and COO/CFO