STEER Announces a Proposed Transaction for an $18 Million Direct Investment Involving its Digital Restaurant Supply Business (B2B Marketplace)

STEER Technologies Inc. (“STEER” or the “Company”) (TSXV: STER) (OTCQX: STEEF), an integrated ESG technology platform, is pleased to announce that on January 16, 2023 it entered into a non-binding term sheet (the “Term Sheet”) contemplating the sale (the “Proposed Transaction”) of approximately 37.5% of its digital restaurant supply business (the “Restaurant Supply Business”), which is currently indirectly held through STEER’s wholly-owned subsidiary Food Hwy Canada Inc. (“Food Hwy”), to a syndicate of strategic investors (the “Investor Group”) at a post-money valuation of approximately $48 million.

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STEER Announces a Proposed Transaction for an $18 Million Direct Investment Involving its Digital Restaurant Supply Business (Photo: Business Wire)

The Proposed Transaction will be structured by rolling out the Restaurant Supply Business, currently a division of Food Hwy, into a separate newly-formed company (“Newco”) valued at approximately $48 million post-transaction. The Term Sheet contemplates that STEER, Food Hwy and the Investor Group will negotiate and enter into definitive agreements in respect of the Proposed Transaction, pursuant to which it is anticipated that the Investor Group will invest a total of $18 million in cash as part of the Proposed Transaction, with $6 million expected to be received by Food Hwy and $12 million expected to be injected directly into Newco to assist with scaling up operations and growth in regards to the Restaurant Supply Business. Following the completion of the Proposed Transaction, STEER is expected to indirectly retain approximately 62.5% ownership of Newco. It is intended that the $6 million in proceeds that is expected to be received by Food Hwy in connection with the Proposed Transaction will be applied by STEER and Food Hwy to further grow and develop their Subscription-Based and On-Demand service offerings.

It is anticipated that a portion of the financing will come from certain members of the Restaurant Supply Business’s existing management team as part of the Investor Group. In the Company’s view, the Proposed Transaction underscores STEER’s belief in the Restaurant Supply Business and its ability to further grow in 2023, while facilitating continued alignment with STEER’s other products and service offerings. The group of Investors participating in the Proposed Transaction is expected to be comprised of the following: (i) four members of the current management group of Food Hwy (11.73% of total transaction value, with Di Han’s share accounting for 4.8% of total transaction value); (ii) eight non-management employees of Food Hwy (0.77% of total transaction value); (iii) strategic arms-length investors.

Food Hwy’s platform was expanded in 2021 to include the Restaurant Supply Business (also known as the B2B Marketplace) which involves the sale and delivery of various restaurant-industry supply items on a business-to-business basis. This merchandise inventory is procured, owned and warehoused by Food Hwy and then, once purchased by a restaurant or similar business utilizing a feature found in STEER’s app, the merchandise is delivered by Food Hwy to its business customer. The Restaurant Supply Business provides for the sale and delivery of just-in-time supplies to restaurants so that they can not only reduce their inventory and storage costs, but also choose from among Food Hwy’s environmentally conscious supply options. By offering a wide selection of environmentally-friendly restaurant supply items, the Restaurant Supply Business aims to contribute to the efforts of the Canadian government to remove single-use plastics from the market.

As reported in STEER’s press release dated January 4, 2023, the Restaurant Supply Business under the STEER Umbrella of ESG-focused, technology-driven companies had demonstrated a 122% year-over-year growth between Q3 2021 and Q3 2022, and continues a strong growth trajectory in terms of users, SKUs and revenues. Over the past year, the platform has grown to serve nearly one in five independently owned restaurants in Ontario, translating to market penetration of over 20%. STEER’s Restaurant Supply Business aims to differentiate itself from the competition by offering transparent competitive pricing, eliminating middle layer markups by establishing direct upstream relationships, and focusing heavily on service automation and introducing robotics and AI into the warehouse operations.

“The confidence of the strategic investors in our Restaurant Supply Business model is very encouraging. The intended significant direct investment into the Company is expected to speed up the growth and expansion of our Restaurant Supply Business, as well as support STEER’s business objective of disrupting the current way most restaurant owners procure the critical supplies required to run their businesses. Ultimately, our team is working towards a more sustainable restaurant supply industry with reduced plastic pollution and less GHG emissions, and with the upcoming completion of this planned direct investment this goal will become a step closer,” said Suman Pushparajah, CEO of STEER.

“We believe that takings steps to bring on well-aligned strategic and financial partners into our Restaurant Supply Business could be a great strategic benefit for STEER, which we anticipate will allow us to accelerate further growth and enter into untapped markets where our unique business model is expected to achieve tight product-market fit,” said Di Han, head of STEER’s Restaurant Supply Business.

In connection with the Proposed Transaction, it is contemplated that Food Hwy and the Investor Group will enter into a Unanimous Shareholders Agreement with Newco (the “Newco USA”), which will address corporate governance matters and contain other terms that are customarily found in this type of agreement, and may also potentially include a provision whereby Di Han would be appointed proxyholder for the Newco Shares owned by Food Hwy for a period of three years from the date of formation of Newco. Although the aforementioned provision is currently under discussion and remains subject to agreement by the parties, if such provision is included in the final structure of the Proposed Transaction, its three-year term would be subject to Di Han remaining a shareholder of Newco and the Restaurant Supply Business achieving certain milestones relating to revenue. The Term Sheet also contemplates that the Investor Group may obtain a call option to acquire 7,500 additional Newco shares after two years from the date of formation of Newco, subject to a number of conditions which are currently being negotiated and remain subject to agreement by the parties.

The completion of the Proposed Transaction is currently targeted to close in approximately 30 days of the date hereof, subject to a number of terms and conditions, including and without limitation the following: negotiation and execution of the definitive agreements in respect of the Proposed Transaction; there being no material adverse changes in respect of either STEER or Food Hwy; the parties obtaining all necessary consents, orders, regulatory and shareholder approvals, including the review and approval of the TSX Venture Exchange (the “TSXV”); completion of a thorough business, legal and financial review by each party of the other party; and other standard conditions of closing for the transactions comprising the Proposed Transaction. STEER is currently negotiating the aforementioned definitive agreements with the Investor Group and their independent legal counsel. These definitive agreements will include all of the necessary terms and conditions for the intended transactions. Although a detailed non-binding Term Sheet has been agreed to that provides a framework for the intended transactions and deal structure, there can be no assurance that STEER and the counterparties will be able to complete these definitive agreements on terms and conditions that will be acceptable to STEER and the various counterparties. The definitive agreements include: (i) a Share Purchase and Sale Agreement whereby Food Hwy will sell Newco Shares to the Investor Group; (ii) a Subscription Agreement for a private placement by Newco; (iii) the Newco USA; (iv) Employment Agreements for Di Han (who is expected to become the CEO of Newco) and other key employees of Newco; and (v) other related agreements that are consistent with a transaction of this nature. If STEER is unable to complete these negotiations and close the transactions, and/or if the parties are unable to perform their obligations under the agreements, then this may have a material adverse effect on STEER’s expected future financial position and its expected results of operations. There can be no assurance that all of the necessary regulatory and shareholder approvals will be obtained or that all conditions of closing will be met.

The Proposed Transaction is expected to constitute a “Reviewable Transaction” as defined in TSXV Policy 5.3 – Acquisitions and Dispositions of Non-Cash Assets and is therefore subject to the prior approval of the TSXV. No finder’s fee is expected to be payable in connection with the Proposed Transaction.

Due to the inclusion of Di Han (head of the Restaurant Supply Business and the expected CEO of Newco), Jungyang Xie (Operations Manager), Yang Song (Warehouse Manager) and Che Wang (Procurement and Sales Manager) amongst the Investor Group, the Proposed Transaction will constitute a Non-Arm’s Length Transaction (as such term is defined in the policies of the TSXV) and a “related party transaction” by STEER in accordance with Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions (“MI 61-101”). However, the Proposed Transaction will be exempt from the formal valuation and the minority shareholder approval requirements of MI 61-101 because no securities of STEER are listed or quoted on any of the specified markets listed in section 5.5(b) of MI 61-101 and, at the time the transaction was agreed to, neither the fair market value of the subject matter of, nor the fair market value of the consideration for, the transaction, insofar as it involves interested parties, exceeded 25% of STEER’s market capitalization.

All currency references used in this press release are in Canadian currency unless otherwise noted.

Further details about the Proposed Transaction will be provided in a comprehensive press release when the parties enter into the aforementioned definitive agreements.

About the Company

STEER is an integrated ESG technology platform that moves people and delivers things through subscription and on-demand services. The Company’s goal is to build a one-of-a-kind ecosystem that aggregates conscientious users, through a series of connected offerings, and enables them to buy, sell, or invest with the same platform, STEER. The Company’s offerings generally fall into two categories: subscription-based offerings led by its flagship electric vehicle subscription business, STEER EV, and on-demand services incorporating delivery, Restaurant Supply Business, Delivery-as-a-Service (DaaS) and rideshare businesses. The Company’s platform is also powered by EcoCRED, its big data, analytics and machine learning engine which seeks to capture, analyze, parse and report on key data points in ways that measure the Company’s impact on carbon reductions and offsets.

For more about the Company, visit www.steeresg.com.

Suman Pushparajah, CEO

[email protected]

STEER

100 Consilium Pl, Unit 400

Scarborough, ON

Canada M1H 3E3

www.steeresg.com

Forward-Looking Information

Certain information in this press release contains forward-looking information, including with respect to the Company’s business, operations and condition, management’s objectives, strategies, beliefs and intentions. This information is based on management’s reasonable assumptions and beliefs in light of the information currently available to us and are made as of the date of this press release. Actual results and the timing of events, such as those pertaining to the relevant parties’ ability to negotiate and execute the aforementioned definitive agreements, the terms of the Newco USA (including the aforementioned proxyholder provision), the aforementioned call option , the anticipated size of the investment into the Restaurant Supply Business, the composition of the Investor Group, the Company’s ability to raise a sufficient amount of capital from the Investor Group in order to proceed with the Proposed Transaction, and the Company’s ability to obtain TSXV approval for the Proposed Transaction, may differ materially from those anticipated in the forward-looking information as a result of various factors. Information regarding our expectations of future results, performance, achievements, prospects or opportunities or the markets in which we operate is forward-looking information. Statements containing forward-looking information are not facts but instead represent management’s expectations, estimates and projections regarding future events or circumstances. Many factors could cause our actual results, level of activity, performance or achievements or future events or developments to differ materially from those expressed or implied by the forward-looking statements. In particular, statements pertaining to the timing, terms and completion of the Proposed Transaction constitute forward-looking information.

See “Forward-Looking Information” and “Risk Factors” in the Company’s Annual Management Discussion & Analysis (MD&A) for the year ended December 31, 2021 (filed on SEDAR on May 2, 2022) and its interim MD&A for the period ended March 31, 2022, June 30, 2022, September 30,2022 (filed on SEDAR on May 30, 2022, August 29, 2022 and November 29, 2022 respectively) for a discussion of the uncertainties, risks and assumptions associated with these statements and other risks. Readers are urged to consider the uncertainties, risks and assumptions carefully in evaluating the forward-looking information and are cautioned not to place undue reliance on such information. We have no intention and undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable securities legislation and regulatory requirements.

The TSXV has in no way passed upon the merits of the Proposed Transaction and has neither approved nor disapproved the contents of this press release. Neither the TSXV nor its Regulation Services Provider (as that term is defined in the policies of the TSXV) accepts responsibility for the adequacy or accuracy of this release.

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