Kuuhubb Reports Fiscal Q3 2020 Financial Results

June 2, 2020

Kuuhubb Inc. (“Kuuhubb” or the “Company”) (TSXV: 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 and nine month periods ended March 31, 2020. The Company’s unaudited consolidated financial statements as at, and for, the three and nine months ended March 31, 2020 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 Third Quarter Ended March 31, 2020:

Revenue for the three and nine months ended March 31, 2020 was US$1.79 million and US$6.05 million, respectively (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 and nine months ended March 31, 2020 was negative US$1.33 million and US$2.61 million, respectively.
During the three and nine months ended March 31, 2020, the Company incurred US$1,007,453 and US$3,163,440, respectively, in sales and marketing expenses related to the promotion of the Recolor App and the My Hospital game, compared to US$366,470 and US$2,201,874, respectively, during the three and nine months ended March 31, 2019. The significant increase is due to increased user acquisition mainly in Recolor.
During the three-month period ended March 31, 2020, the Company recorded a net loss of US$1,243,295, compared to a net loss of US$3,924,029 incurred during the three-month period ended March 31, 2019. Net loss is lower mainly due to lower amortization of intangibles, which were written down significantly, and gains from lowered valuations of the derivative liabilities.
The Company had a cash position of US$2.26 million as at March 31, 2020.

Financing Details (Fiscal Q3 2020):

During the quarter ended March 31, 2020, the Company received the following financings and cash collections as part of ongoing efforts to secure funding for more effective marketing, platform development and user acquisition for upcoming new products:

In January 2020, the Company received $303,140 (€270,000) from Valiance UG as partial repayments for the outstanding loan receivable balances at December 31, 2019.
In February 2020, the Kuuhubb Oy closed a $2,292,785 (€2,000,000) private placement financing (the “Financing”) through the issuance of an unsecured convertible debenture (the “2020 Debenture”) in the principal amount of €2,000,000. The 2020 Debenture matures on January 13, 2023 and bears an annual interest rate of 10% (with the interest payable every quarter). The 2020 Debenture is convertible at the option of the holder at any time prior to the earlier of (a) the maturity date, and (b) the date that is five business days following the delivery of the notice of redemption to the holder, into common shares of Kuuhubb Inc. at a price of C$0.80 per share, provided that the holder converts the lesser of €1,000,000 or the remaining outstanding principal balance at the time of conversion. The € to C$ rate is also fixed at 1.4504 for conversion purpose. Kuuhubb Oy also has the option to convert the 2020 Debenture if at any time the closing price is C$1.50 per share.

Jouni Keränen, CEO of Kuuhubb Inc., commented, “The first generation apps in our portfolio continued to stabilize after a long period of decline. Our second-generation Match-3 games are progressing with the final polishing, fine-tuning, balancing and overall optimization typical to the soft launch phase in the mobile games industry. We are looking forward to delivering their full global commercialization and the expansion of in-app purchase features across both iOS and Android platforms through the end of this calendar year. We have taken measures to conserve cash during the Covid-19 era by implementing various cost saving measures which are expected to bring a total of around USD $1 million savings in the next 6 months. While Covid-19 has brought increased uncertainty globally, we believe Kuuhubb is well positioned to continue executing its strategy of female-focused games and apps and eventually returning to rapid growth.”

New Product Launch, Growth Strategy and COVID-19 Impact:

Kuuhubb is building a leading lifestyle game portfolio and is solidifying its position as an industry innovator, targeting the female demographic. The Company has focused on strengthening that position through the establishment of communities built around its apps.

On March 25, 2020, amidst the global outbreak of COVID-19, the Company announced that it was providing free access to “Recolor by Numbers”, its newest coloring app, in support of its gaming community and people coping with the increasing number of quarantines and self-isolation measures being implemented around the world.

During the Quarter ended March 31, 2020, the Company announced that its flagship coloring app, “Recolor”, reached the Top 10 in Apple’s Top App Charts in the United States and fourteen other countries across the globe. Recolor was featured in Apple’s Most Downloaded Free Entertainment iPad Apps category alongside apps such as Disney+, Netflix, Amazon Prime, Hulu, YouTube Kids, and TikTok.

The Company continued the diversification of its portfolio into the popular Match-3, or “tile matching”, gaming space, with the launch of its newest title, “Tiles & Tales”. The launch follows the release of its first Match-3 game, “Dance Talent”, commercially launched in the fourth quarter of 2019. While “Tiles & Tales” is the Company’s second Match-3 release, it is the first game developed entirely in Kuuhubb’s Helsinki Game Studio using an in-house developed Match-3 engine. The Company has stated that it 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. Currently in soft launch, “Tiles & Tales” is available for both iOS and Android devices in Finland, Croatia, the Netherlands, Philippines and Australia and has an anticipated commercial launch date during calendar H2 2020.

Subsequent Event:

In April 2020, Kuuhubb retained Integral Wealth Securities Limited ("Integral") to provide market making services in accordance with TSX Venture Exchange (“TSX-V”) policies. Under the market making services agreement (the “Agreement”), Integral will trade the securities of the Company on the TSX-V, or such other principle exchange on which the securities of the Company are listed, for the purpose of maintaining an orderly market. In consideration of the services provided by Integral, the Company will pay Integral a monthly cash fee of $7,500 for a minimum term of three months, and renewable thereafter. KuuHubb and Integral are unrelated and unaffiliated entities. Integral will not receive shares or options as compensation. The capital used for market making will be provided by Integral. Approval of the Agreement is subject to regulatory approval.