Kuuhubb Reports Third Quarter Financial Results

May 30, 2018

Revenue increased to US$6,671,448 during the quarter Kuuhubb Inc. (“Kuuhubb” or the “Company”) (TSXV: KUU) is pleased to announce its unaudited financial results for the three and nine month periods ended March 31, 2018. The Company’s unaudited interim consolidated financial statements as at and for the three and nine months ended March 31, 2018 and related management’s discussion and analysis can be found on the Company's SEDAR profile at www.sedar.com. References to "US$" are to United States dollars. The Company’s financial year end is June 30. Highlights for the Quarter Ended March 31, 2018:
  • Revenue increased to US$6,671,448 during the three months ended March 31, 2018, which represents an increase of 5% from the US$6,344,947 of revenue earned during the previous quarter ended December 31, 2017. This revenue was generated from sales of the Recolor app, the in-application sale of virtual goods from the My Hospital game and in-application ad revenue.
  • Net operating loss was US$3,450,060 for the three month period ended March 31, 2018, compared to the net operating loss of US$1,117,089 incurred during the previous quarter ended December 31, 2017. The net loss during the quarter ended March 31, 2018 includes impairment of goodwill of US$2,456,075, share-based compensation expense of US$835,682, depreciation and amortization of US$203,128 and foreign exchange gain of US$117,985. The non-GAAP adjusted EBITDA during the three month period ended March 31, 2018 was negative US$73,160, making this period’s adjusted EBITDA a near break-even quarter.
  • The development and launch of the Drone Wars mobile game has been delayed since its acquisition and Kemojo Kuuhubb Studios Inc. (the Company subsidiary holding the Drone Wars game) has ceased operations. During the three month period ended March 31, 2018, the Company decided to redevelop the game into a multiplayer player versus player (“PvP”) game and plans to launch the game upon successful redevelopment. Due to the delay and uncertainty of the ultimate outcome of the Drone Wars mobile game, the Company determined to write down US$2,456,075 of goodwill, being the preliminary estimate by management of the amount of goodwill related to the game.
  • The Company had shareholders’ equity of US$23,092,110 as at March 31, 2018, compared to shareholders’ equity of US$12,421,346 as at June 30, 2017.
  • In January 2018, the Company announced that it had signed an agreement with Receptiv, a leading mobile video advertising company, on collaborating to bring new brands to the Recolor digital coloring app.
  • In January 2018, the Company announced that it had signed a term sheet to acquire mobile esports platform developer Valiance UG (the acquisition is subject to the execution of the definitive documentation and receipt of TSX Venture Exchange acceptance). The Germany-based, Valiance esports platform is designed to support both mobile esports competitors and content creators and provides them with opportunities to monetise their involvement playing their favourite esports titles. In addition to the esports, Valiance has a development center in Zagreb (Croatia) with 20+ experienced and agile software developers.
  • In March 2018, the Company incorporated Recolor India Private Limited. This new subsidiary will carry on the business activities of the Incolour App, the Indian version of the Company’s Recolor App, with a local dedicated team of 4 people. Incolour is a stand-alone coloring community with global access which, through Kwan Entertainment’s contacts, is planned to utilize and work together with various Indian influencers and celebrities. In comparison to Recolor, it has a new user interface, and culturally relevant content and design. User experience is built around daily themes geared to stimulate daily engagement. In May 2018 Google Play India (Android) was launched and is planned to be followed by iOS version. The global roll-out of Android and iOS is expected to follow during summer 2018.
  • In April 2018, the Company announced that it will be commencing a creative crossmarketing collaboration with a global content leader Lionsgate. Under the agreement, Kuuhubb will create and market suites of digital coloring tasks around Lionsgate properties through Kuuhubb’s Recolor App, a leader in bringing brands and media properties to the art app universe. In addition, Lionsgate will support these campaigns by driving traffic through its marketing channels to Recolor.
  • In May 2018, the Company completed the acquisition of the full global rights and revenue to the My Hospital game. The purchase price of €2.6 million is to be paid in monthly instalments between May 2019 and June 2021. Additionally, after Kuuhubb has recouped the entire purchase price, Cherrypick Games (the vendor) is entitled to 25% net profit share. Cherrypick Games will continue the current game development and update efforts until June 2021.
Jouni Keränen, CEO of the Company, stated: “Kuuhubb experienced rapid growth and expansion during calendar year 2017, growing from 5 people to 70 (including Valiance acquisition in pipeline) and from zero revenue to over US$2 million in monthly revenue. During the first half of calendar year 2018, we are focusing on consolidating the past acquisitions and developing the current product portfolio. We have 3 commercially launched products (Recolor, Incolour and MyHospital) with an additional 3 products under development and expected to be launched within calendar year 2018. Recolor continues to be our flagship product and at the center of efforts with geographical expansion, brand partnerships and Android version together with new core product improvements as key success drivers. Recolor product development was transferred to Zagreb during January to March 2018 to enable tripling the size of the development team and supporting a global suite of coloring products. This transfer caused a short-term delay in implementation of our growth drivers but the investments are expected to produce results already in the second half of calendar year 2018. I would like to thank all our employees and partners for outstanding work and our shareholders for patience during the first half of 2018 when we will create the foundation for future growth.”