Ashley Black: Advised on a $10 million financing with a two-month execution timeline

Louis Garoz-Ferguson: I think maybe getting a little bit of background on the transaction, the company, and just a general overview to start off with, I think that would be a great place to start. And again, thank you very much for doing this. Appreciate you taking your time to speak with us today.

Brandy Hipp: Sure. Yeah. So we sell consumer products. They're actually Class I medical devices, but we sell them direct to consumers, online, on our website. Because we have to actually manufacture our products in China about four months in advance of sales, we need something in the neighborhood of 25% to 35% of working capital to be able to comfortably grow. We had dipped down to about 18%, and so we needed at least another 10 right now, and predicted needing somewhere close to $20 million by the end of the year, early Q1. So my ask to Kadenwood was to find us something that was at least $10 million on good terms, preferably with interest only for a period of time, and with someone capable of going up to 20, so we didn't have to go through a whole new series of underwriting.

Louis Garoz-Ferguson: Wonderful.

Ruben Schwagermann: Understood. In the process of choosing an advisor to work with, what would you say made you feel comfortable to move forward with us?

Brandy Hipp: So we tend to go with people that have an introduction from someone that we both respect from a business perspective, and then also someone who doesn't sugarcoat. There are certain people that you meet in business that will just refer everyone, and then there's people that are a bit more thoughtful in the introductions that they'll make. So we were introduced to Kadenwood through someone that we've known on a business and personal level for several years. And she's very keen. She's a good detector for who is actually capable and who just seems like they are on the surface.

Louis Garoz-Ferguson: That's great to hear. Is there anything that stood out in particular with respect to our process, the way that we work, the way that we dealt with you, or the way that we've interfaced with investors and lenders on your behalf? If you could speak to the process...

Brandy Hipp: Yeah.

Louis Garoz-Ferguson: ...with a little bit of detail, that would be lovely.

Brandy Hipp: So, specifically with working with Ruben, one of the things I conveyed to him up front is that we're a small team, we're doing a lot of things, and I, in particular, am stretched very thin. And this is a very important thing that needed to get accomplished, but I also, at the same time, did not have much time to spend doing a lot of introductory calls. And so I asked him to be thoughtful about who he brought to the table, and to the best he possibly could, to take initial calls and kind of weed out who might say that they're interested but just wanted to see the deal, and in the end wasn't really going to make an offer, so that my time could be better protected and spent growing the business. I've asked this, frankly, of any broker of any kind that we've ever dealt with, to really kind of make sure that they're only bringing us things that are viable. That's never been the case. Everybody just brings everyone and convinces you that everything's a great opportunity.

Brandy Hipp: Ruben not only did not bring a bunch of unnecessary calls, but actually managed to get a term sheet offer before we even did the first call. Which... we're not the easiest business to pitch and sell. You have to explain not only we do consumer products, and then they kind of look at us, and they don't know what a fascia device is most of the time. We're in a category of our own. And so consumer products is hard; we're even harder. And so to be able to take the calls and get all the way to even an initial offer, I was very impressed with that, and specifically with working with Kadenwood. One of the other teams that was brought in, it's kind of the opposite experience, where they did the same thing that other teams have done: just bring me people that I know aren't going to be a good fit, or are going to be kind of a waste of time.

Ruben Schwagermann: Glad to hear it. Question on that. Throughout the process of me and the team taking initial calls, and you being more in the background and working on the business, how would you describe our communication and responsiveness on keeping you in the loop and updated on the process?

Brandy Hipp: No, you're very communicative. I knew basically which people were at least far enough in the pipeline to be of interest. And your daily, sometimes multiple times a day, updating on WhatsApp, which is really nice. And flexible. I know we probably started off in email, and I asked for WhatsApp because it's easier. Email gets ridiculous. So no, the communication part is good.

Louis Garoz-Ferguson: Yeah.

Ruben Schwagermann: Understood.

Louis Garoz-Ferguson: 100%. So I'd love to talk about what's on the table right now, what we were able to bring to the table. I know that we're not 100% finished yet. I know there's some groups that we're still speaking to. I believe there's a term sheet that we should be expecting in the next day or so. As we always look to create competitive tension, as you're always going to get a better price if there's multiple people that are in contention. So I'd love to talk about where we are right now, what you see the future holding for our business relationship. I know that there's additional debt advisory that you're going to be in need of. There's been talks of potentially raising some equity, which we'd love to help you out with as well. If you could touch on what we've brought to the table tangibly, what the next steps are. It seems as though this is going to be done in the next couple of weeks, month. So I'd love to just go through all of that.

Brandy Hipp: Yeah. So kind of the details of the offer that's on the table?

Louis Garoz-Ferguson: Sure. If you're comfortable with that.

Brandy Hipp: Yeah, it's fine. […] And that's the piece that can accordion. So it's a little bit more expensive than the fixed term loan, but also...

Louis Garoz-Ferguson: Yeah.

Brandy Hipp: ...it doesn't require any payments or maintenance or anything until the re-up of it. I like the concept, because our need for debt financing is directly related to the sales. So the fact that this can accordion up with the sales is great. I am less enamored with the one-to-one EBITDA to total debt load ratio, just because it limits maybe some of the things we might do on the business side.

Louis Garoz-Ferguson: Yeah.

Brandy Hipp: If you are very strictly trying to hold to a certain EBITDA level... It's not a crazy ratio. It's one to one. It's not something that would be...

Louis Garoz-Ferguson: It's not egregious.

Brandy Hipp: ...difficult at this point. But if we had a huge opportunity to, say, do a retail deal, which is iffy on the EBITDA side, then I might really think twice about that. We'll just have to be thoughtful about what kind of deals we do.

Louis Garoz-Ferguson: This may be a little bit off topic, but if there was ever a circumstance where you were in a situation like the one that you just suggested, I think there's probably a way where we could come up with an amicable solution.

Brandy Hipp: With them. Yeah.

Louis Garoz-Ferguson: Yeah.

Brandy Hipp: No, they seem...

Louis Garoz-Ferguson: They're good guys.

Brandy Hipp: ...so far, they seem amenable to, as long as we are doing business the way that we say we're going to, and we don't just decide to stop and sell pizzas all of a sudden, I think we could have a business discussion. That's one of the things: spent a couple of hours with Heather. She really thinks about business the way that I do. We look at the risk profile of doing certain things, and profitability, and all of that very similarly. And it was a very nice breath of fresh air, because she talked about how much they really like consumer products, because at the end of the day, that is what still drives the vast majority of our economy.

Brandy Hipp: But we always feel like a red-headed stepchild, because everybody wants B2B SaaS, or now they want data centers or AI companies. Everybody wants something that you don't have to manufacture. And while I sympathize with that, it is hard to manufacture something and sell it. That is where most of the money comes in as well. You can't ignore that consumer products is a really good business, and we've been around 10-plus years doing this ourselves with no safety net whatsoever.

Brandy Hipp: So if you're going to bet on a consumer products company, it should be one that has stood the test of time. So I feel good about our ability to really discuss things with them, just because I got to hear her perspective for a long time. And she said she's worked with Kevin for, I think, 20 years or something. So it's not a new firm, and they're not new with this. This is what they do, so that's always good.

Louis Garoz-Ferguson: Good.

Brandy Hipp: The times we've gotten in the most trouble from a financing perspective is dealing with new companies, fintechs that have only been around for a couple of years. They don't really understand their business model, their pricing yet. It's tough. So the fact that they've been around a long time is very comforting.

Ruben Schwagermann: Absolutely. Maybe a final question to wrap this up, for anyone that might be watching. What would you tell another founder or CFO who is considering working with Kadenwood?

Brandy Hipp: So I would tell them that I was doubtful, because I've been doing this for a lot of years. When you said that you could take some calls and make sure that I was only going to talk to the people I should talk to, I was doubtful, because everybody kind of says that. But I would give you that warm intro that we got to you guys, 100%. And hopefully we can... We never talked about equity or anything. Hopefully, we can continue the relationship as we get to the next phase as well.

Louis Garoz-Ferguson: We would love to.

Brandy Hipp: Yeah.

Louis Garoz-Ferguson: That's the way that we love working, is you have a very good initial transaction that you work on, something usually smaller, and that will lead to subsequent business that we can do. We've had clients that we are working with since inception that we've done five, six transactions with. So I think that, based off of how this is going, I think that's going to be the case. We love what you're doing. We believe in the management team and the model, and obviously, the market's responding very well to it. So we're excited to see what the future holds.

Brandy Hipp: Great.

Louis Garoz-Ferguson: Beautiful. Well, again, thank you very much for your time...