Kuuhubb Reports Fiscal Q1 2020 Financial Results

December 2, 2019

Toronto, Canada – November 28, 2019 - Kuuhubb Inc. (“Kuuhubb” or the “Company”) (TSX- V: KUU), a mobile game development and publishing company targeting the female audience with bespoke mobile experiences, has reported its unaudited financial results for the three-month period ended September 30, 2019. The Company’s unaudited consolidated financial statements as at, and for, the three months ended September 30, 2019 and related management’s discussion and analysis can be found on the Company's SEDAR profile at www.sedar.com. The Company’s financial year end is June 30.

Highlights for the Fiscal First Quarter Ended September 30, 2019:

  • Revenue for the three months ended September 30, 2019 was US$2.29 million (unaudited). This revenue was generated from sales of the Recolor app, the in-app sale of virtual goods from the My Hospital game and in-app ad revenue.
  • The non-GAAP adjusted EBITDA during the three months ended September 30, 2019 was calculated to be negative US$741,906 by adding back non-cash depreciation and amortization of US$209,552, non-cash share-based compensation of US$360,372 and net interest and accretion expenses of US$233,136, and deducting non-cash fair value change of derivative gain of US$189,696 and foreign exchange gain of US$81,131 to and from the net loss of US$1,274,139.
  • During the three months ended September 30, 2019, the Company incurred consulting and professional fees and office and general expenses of US$349,626 and US$1,068,949, respectively, compared to US$250,891 and US$840,848, respectively, during the three months ended September 30, 2018. The increase in expenses for the three months ended September 30, 2019, was due to higher development costs for the new apps associated with the expansion of the company’s product portfolio.
  • During the three months ended September 30, 2019, the Company incurred US$615,184 in sales and marketing expenses related to the promotion of the Recolor App and the My Hospital game, compared to US$1,591,872, during the three months ended September 30, 2018. The significant decrease is due to an effort to control expenditures while working to optimize product features.
  • During the three months ended September 30, 2019, the Company recorded a net loss of US$1,274,139, compared to a net loss of US$2,291,147 incurred during the three months ended September 30, 2018.
  • The authorized share capital of the Company consists of an unlimited number of common shares. The Company currently has outstanding 55,752,709 common shares and 7,425,000 stock options.

Financing Details (Fiscal Q1 2020):

  • In July 2019, the Company announced the closing of a non-dilutive debt financing of €1,080,000. The private placement financing consists of an unsecured credit-linked note with a two-year term, bearing an interest rate of 7.5% per annum, to be paid quarterly. The maturity date will be June 28th, 2021. There are no warrants or convertible features associated with this financing.
  • On September 4, 2019, Kuuhubb Oy received a €247,310 loan from Business Finland. The loan is unsecured and has a seven-year maturity period with an interest rate of 1%.

Additional Financial Details (Subsequent to Fiscal Q1 End):

Subsequent to the quarter ended September 30, 2019, the Company received the following additional financings and cash collections. These new financings are part of ongoing efforts to secure funding for more effective marketing, platform development and user acquisition for upcoming new products:

  • On October 23 2019, Kuuhubb Oy received €300,000 from Valiance UG as partial repayment for the outstanding loan receivable balances.
  • On October 23, 2019, Kuuhubb Oy completed a €605,000 private placement financing through the issuance of an unsecured loan payable in the principal amount of €605,000. The loan matures on June 28, 2021 and bears an interest rate of 7.5% per annum (payable at the end of each calendar quarter).

New Game Expansion, Commercialization and Growth Strategy:

Jouni Keränen, CEO of Kuuhubb Inc., commented, “With a challenging year now behind us, we are well positioned to move forward and focus on the execution of our key priorities and our new product roll-out strategy. With the commercial release of Recolor by Numbers, we believe that revenues will start to stabilize and return to sequential growth in calendar 2020 especially together with the release of our second-generation Match-3 games. The approximately US$1 million received subsequent to the end of fiscal Q1 provides initial resources for our marketing efforts as we exit calendar 2019.”

Kuuhubb is building a leading lifestyle game portfolio and is solidifying its position as an industry innovator, targeting the female demographic. As a mobile game development and publishing company focused on providing the female audience with creative interactive gaming experiences, the Company’s strategy is to use its experienced development teams located in Helsinki, Finland and Zagreb, Croatia to leverage its existing communities built through the Recolor franchise as well as its in-house developed game engines to enter popular gaming genres and commercialize new titles in the coming 12 to 24 months.

The Company’s well-established, first-generation gaming assets, Recolor and My Hospital, have generated revenues in excess of US$36M and the Company continues to work on improving the user experience, overall quality and monetization of those titles. After a 7-month soft launch period, the Company announced the successful global launch of its second colouring app title, Recolor by Numbers, in early November. Building on the popularity of their foundational colouring app Recolor, the release is a significant milestone as it is the Company’s first commercially launched new product in over two years.

The Company has announced that it will continue the diversification of its portfolio into the popular Match-3, or “tile matching”, gaming space and currently has two titles under development; Dance Talent and Tiles & Tales. Dance Talent was soft launched in 2018 and the Company anticipates its commercial launch sometime later this year. The second Match-3 title, Tiles & Tales, is the first game developed entirely in Kuuhubb’s Helsinki Game Studio using an in-house developed Match-3 engine. The Company intends to use that engine to develop other Match-3 games and expects that using the existing technology will significantly reduce the resources and time required to bring new titles to market. Tiles & Tales has an anticipated launch date during calendar H1 2020.

Kuuhubb further announced that, while still focused on the commercialization of its 2nd generation titles, Dance Talent and Tiles & Tales, the Company’s vision remains on product innovation through the exploration of new lifestyle trends. The Company believes that female gamers continue to be underserved in the gaming industry’s latest phenomenon, esports. The Company sees a significant opportunity in the casual, mobile esports game niche and plans to combine the immensely popular casual and Battle Royale, or multiplayer elimination, genres to create a unique portfolio of games for the female market.

EBITDA - Non-IFRS Measure

EBITDA is intended to provide additional information to investors and analysts. The Company calculated EBITDA as set out on page 1 of this press release. EBITDA does not have any standardized meaning prescribed by IFRS and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. Other companies may calculate EBITDA differently.