Kuuhubb Reports Fiscal Q1 2021 Financial Results

December 1, 2020

 Kuuhubb Inc. (“Kuuhubb” or the “Company”) (TSXV: KUU), a mobile game development and publishing company focused on providing the female audience with creative interactive gaming experiences, has reported its unaudited consolidated financial results for the three-month period ended September 30, 2020. The results have been filed with the Canadian Securities Administrators and are now available on the Company’s issuer profile at www.sedar.com. The Company’s financial year end is June 30.

* Revenues of US$1,485,348 on a combined basis for the three months period ended September 30, 2020.
* Recolor recognized revenue of US$1,305,859 for the three months period ended September 30, 2020.
* Ongoing efforts of sale of assets such as Recolor to fund next-generation game commercialization initiatives under consideration.

CEO’s Message:

Jouni Keränen, CEO of Kuuhubb Inc., commented, “I am happy to announce that our flagship next generation game, Tiles & Tales, continues to show progress and in November 2020 the soft launch was expanded to the US and Canada. Commercial and full global launch is estimated during calendar year 2021. We continue to engage in ongoing discussions for the potential divestment of Recolor and we remain committed to obtaining the best possible long-term outcome for our Company and its shareholders in any decision that is ultimately made. Recolor is an attractive addition to a number of gaming portfolios and as such, we have received indications of interest from multiple parties that require thorough investigation. COVID-19 restrictions continue to slow the due diligence process but the strategic review is progressing. While we would like to emphasize that there are no guarantees that the strategic review process will result in any change or outcome, we can state that any decision will be made in the best interest of our Company’s future and our shareholders. Finally, in order to better manage the cash situation in these challenging times, the company is in the process of implementing a new cost reduction program which aims to achieve over USD 1 million in additional savings annually.”

Financial Results for the Three Months Period Ended September 30, 2020:

* The Company generated a total of US$1,485,348 revenues for the three months period ended September 30, 2020. Recolor Oy recognized revenue of US$1,305,859 for the three months period ended September 30, 2020 and the Recolor revenue was classified as part of the discontinued operations(1).
* The Company also recognized revenue of US$179,489 for the three months period ended September 30, 2020 from its continuing operations. This revenue was generated mainly from the subscriptions to, in-application sale of virtual goods from its “My Hospital” game and related advertising revenue.
* The Company incurred cost of sales of US$130,045 during the three months ended September 30, 2020 in its continuing operations. The cost of sales is predominantly related to the application marketplace (such as Apple App Store and Google Play) fees and other third-party direct costs.
The Company incurred consulting and professional fees of US$162,441 during the three months ended September 30, 2020. These fees were related to Kuuhubb’s audit fees, general legal counsel and other professional services.
* The Company’s Recolor Oy showed EBITDA of US$7,428 by adjusting the net income before tax from discontinued operations of US$3,096 with the following items:

Add back of:

- non-cash depreciation and amortization of US$1,301;
- net interest and accretion expenses of US$3,030;

* The Company showed EBITDA of negative US$831,920 by adjusting the net loss before tax from continuing operations of US$1,358,244 with the following items:

Add back of:

- non-cash depreciation and amortization of US$4,533;
- non-cash share-based compensation of US$153,536;
- net interest and accretion expenses of US$260,340;
- non-cash fair value change of loan receivable from Valiance UG of US$19,900;
- foreign exchange loss of US$108,486

and deduct:

- the fair value change of derivative liability of US$20,470;
* The authorized share capital of the Company consists of an unlimited number of common shares. As at November 30, 2020, the Company had outstanding 55,752,709 common shares, 7,100,000 stock options and 2,200,000 warrants.
* The Company also has two convertible debentures with face value of €2,000,000 each. The debentures can be converted to approximately 6,408,727 common shares upon conversion.

(1) Classification of Recolor Oy as held for sale and discontinued operations

As part of the efforts to meet the Company’s obligations and build growth, the Company announced it is exploring multiple strategic alternatives, including the divestiture of Company-owned assets such as shares of Recolor Oy. This may be completed within twelve months and as such the associated assets and liabilities within Recolor Oy are presented as held for sale and the net income attributable as discontinued operations in the consolidated financial statements. Unless otherwise indicated, the analysis and discussions herein are based on the Company’s continuing operations consist of the Company’s “My Hospital” operation.

Closing of Non-Convertible Debenture Financing:

As previously announced, on September 30, 2020 the Company closed a non-convertible debenture financing (the “Offering”) for aggregate gross proceeds of US$1,300,000 on a non-brokered basis. The Offering is composed of secured debentures (“Debenture”), each of which has a face value of US$29,500, a Maturity Date twenty-four months from the date of closing, and bears interest at a rate of 12% per annum.The Company will use the proceeds from the Offering for business development and general working capital purposes. Full details of the Offering are available in the Company’s news release dated September 23, 2020 and filed under Kuuhubb’s profile at www.sedar.com.

Settlement Agreement with Cherrypick Games:

On October 7, 2020, the Company announced that further to its news release issued on August 19, 2020, it had agreed to settlement terms (the “Agreement”) with Cherrypick Games S.A. (“Cherrypick”). Terms of the Agreement provide for a lower total payment amount from Kuuhubb to Cherrypick in connection of acquisition of “My Hospital” game by €450,000 and the complete transfer of the “My Hospital” game from Cherrypick to Kuuhubb. The Agreement also sets out a payment schedule that is to be fulfilled by May 31, 2021, at which point Cherrypick will hand over to Kuuhubb the development and maintenance responsibilities for “My Hospital”.Further details on the arbitration award to Cherrypick and Kuuhubb’s Agreement with Cherrypick can be found in the Company’s consolidated financial statements for the year ended June 30, 2020 and news release dated August 19, 2020, under the Company’s profile at www.sedar.com.

Exploration of Strategic Alternatives to Enhance Shareholder Value

On September 30, 2020, the Company announced that it has been conducting a process to explore strategic alternatives, including the potential divestiture of certain Company-owned assets, including the sale of Recolor Oy within the next twelve months. The Company together with Ernst & Young, had identified potential buyers and negotiations are presently at an advanced stage. Management noted that, while they remain committed to their stated objective of creating sustainable shareholder value through the acquisition of proven, yet under-appreciated assets with long-term growth potential, they do have an obligation to their stakeholders to carefully consider and review any options that may enhance shareholder value, including the possible benefits of realizing that future value now. There can be no assurance that the strategic alternatives review process will result in any strategic change or outcome and the Company does not know the exact timetable for the conclusion of its review of strategic alternatives.

EBITDA - Non-IFRS Measure

EBITDA is intended to provide additional information to investors and analysts. The Company calculated EBITDA as set out on page 2 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.