Mr. Dave Kohler reports
MIMI'S ROCK CORP. ANNOUNCES Q3 2019 RESULTS
Mimi's Rock Corp. has released its financial results for the quarter ended Sept. 30, 2019.
On Sept. 5, 2019, the company announced it had entered into binding agreements to acquire two additional businesses. Agreements to acquire All Natural Advice Ltd. and Maritime Naturals Ltd. are expected to be completed shortly. All Natural is the No. 1 skin care seller on Amazon Canada for the past four years. Mimi's Rock will acquire all of the issued and outstanding shares of each of All Natural and Maritime Naturals for an aggregate purchase price of approximately $9.6-million. The acquisition of these accretive businesses will add approximately $5.5-million of combined revenue and $1.6-million of EBITDA (earnings before interest, taxes, depreciation and amortization). Closing for both acquisitions is scheduled for Dec. 10, 2019.
On Sept. 24, 2019, the company announced (further to the joint venture announcement of July 8, 2019) the execution of a definitive agreement with three-time world heavyweight champion Lennox Lewis to develop and commercialize a new line of branded nutritional supplements. The co-branded supplements will focus on men's health and wellness and will feature products such as a Men's Multipack Vitamin. Products will be sold exclusively on-line.
On Nov. 13, 2019, the company announced the launch of its Dr. Tobias line of dietary supplements in Canada. Initially, Dr. Tobias will be launching the brand's top-rated omega-3 fish oil, known to support cardiovascular health, cognitive health and brain function; and its multivitamin, a product which promotes eye, skin, membrane and immune function and fosters strong bones and teeth. These product launches have been made available on Amazon Canada and on the Dr. Tobias e-commerce platform.
On Nov. 27, 2019, the company announced that the TSX Venture Exchange has accepted the company's notice to implement a normal course issuer bid (NCIB) to purchase, for cancellation, up to 3,029,109 of its common shares, representing approximately 10 per cent of the company's public float. Management of the company believes that the shares have been trading in a price range which does not adequately reflect their value and that the purchase of the shares under the NCIB is in the best interests of the company, a desirable use of its available cash and will enhance shareholder value in general.
Dave Kohler, chief executive officer of Mimi's Rock, commented: "We are excited to be launching multiple new products and categories in new markets. These, coupled with the pending acquisition of All Natural and Maritime Naturals, give us access to new revenue streams and offer diversification from the single-market roots of the organization. As we continue to execute our strategies, these markets should contribute significantly to our growth."
Results of operations
For the three months ended Sept. 30, 2019, the company incurred a net loss of $243,156, compared with a net loss of $759,537 for the three months ended Sept. 30, 2018. For the three months ended Sept. 30, 2019, EBITDA was $626,540, compared with EBITDA of $216,887 for the three months ended Sept. 30, 2018. Adjusted EBITDA, which excludes non-cash share-based compensation expense, investment income, listing expenses and acquisition costs, was $902,776, compared with adjusted EBITDA of $1,530,973 for the same period in the prior year. For the nine months ended Sept. 30, 2019, the company incurred a net loss of $1,091,290 (three cents per share), compared with a net loss of $759,537 (five cents per share) for the nine-month period ended Sept. 30, 2018. EBITDA for the nine months ended Sept. 30, 2019, was $2,184,461, compared with $216,887 EBITDA for the same period in the prior year. Adjusted EBITDA was $3,603,413 for the nine months ended Sept. 30, 2019, compared with $1,530,973 for the same period in 2018.
The company reported a net loss for the three and nine months ended Sept. 30, 2019, primarily due to one-time costs related to its reverse takeover and public listing expenses as part of the qualifying transaction completed in May, 2019, as well as non-cash share-based compensation expense. Tax expense in the nine-month period was also higher than normal due to derecognition of tax loss carryforwards in Germany as a result of the reverse acquisition.
Revenues for the three months ended Sept. 30, 2019, were $8,755,114, compared with revenues of $8,522,950 for the three-month period ended Sept. 30, 2018. Revenues represent sales of nutraceutical products in the U.S. market. Gross margin for the three months ended Sept. 30, 2019, was $6,114,962 (70 per cent), compared with $5,553,930 (65 per cent) for the three-month period ended Sept. 30, 2018. Gross margin ratios have improved over the comparative period as the company works with its supplier to obtain better pricing and efficiencies. Revenues were $27,692,245 for the nine months ended Sept. 30, 2019, compared with revenues of $8,522,950 for the nine months ended Sept. 30, 2018. Revenues reported in the current and prior year primarily represent revenues from the DTI business, which began to accrue to the company from July 13, 2018, the date of acquisition. Revenues from the core business have remained strong with some seasonality. The company has begun to add additional sales channels through the launch of its own e-commerce site and sales to other e-commerce outlets. Going forward, growth is expected to come from launch of product sales in additional geographic regions, as well as other on-line portals.
The company continues to adapt and further its brand strategy. On-line advertising in the period was increased with a focus on brand awareness and customer loyalty. Sales from its own e-commerce site, as well through additional on-line retail outlets, continued to grow; however, a majority of revenue continues to be generated on the Amazon U.S. platform.
The company incurred selling and marketing expenses of $4,014,971, or approximately 46 per cent of revenue, for the three months ended Sept. 30, 2019, compared with $3,300,945, or 39 per cent of revenue, for the three months ended Sept. 30, 2018. Advertising spend in the third quarter of 2019 was increased with a deliberate focus on attracting longer-term repeat customers. While the brand continues to generate strong repeat sales, investments are also being made attract new-to-brand customers. While this type of ad spend does not necessarily translate to immediate revenue, it is important to the overall brand growth strategy. Sales and marketing expenses for the period consist primarily of fulfilment costs related to delivering products to customers, direct on-line advertising placements, costs related to marketing the Dr. Tobias brand, and other promotional and awareness initiatives. The company will continue to actively monitor its selling and marketing expenses, particularly those directly related to advertising and expects that these will vary in relation to sales revenues going forward as advertising spend is optimized relative to competitive conditions.
General and administrative expenses for the three months ended Sept. 30, 2019, were $1,197,215, compared with $722,012 for the same period in 2018. General and administrative expenses consist primarily of salaries and benefits, professional fees, occupancy costs, and insurance. General and administrative expenses in the 2019 period are higher than the same period in 2018 primarily due to higher overall staff levels and considerably more operational activity. Share-based compensation expense for the three months ended Sept. 30, 2019, was $123,747, compared with $326,685 for the three months ended Sept. 30, 2018. Share-based compensation expense in 2018 was considerably higher due to initial vesting of original employee grants. Share-based compensation expense relates to awards under the company's incentive stock option plan and is based on the estimated number of awards that will eventually vest using the Black-Scholes option pricing model.
On May 27, 2019, the company completed its qualifying transaction pursuant to an amalgamation agreement between the company and Mimi's Rock. The qualifying transaction constituted a reverse takeover (RTO) for accounting purposes, as former MRI shareholders hold a majority of outstanding shares in the company, the board of directors comprises MRI board members and the senior management of MRI became senior management of the company. Listing expenses related to the acquisition and reverse takeover transaction were $786,138, compared with nil for the same period in the prior year. Listing expenses consist primarily of legal, accounting and other professional fees associated with the reverse takeover and amalgamation, as well as non-cash costs related to equity instruments issued for the acquisition.
Interest and financing costs of $426,409 were incurred during the three months ended Sept. 30, 2019, compared with $447,076 for the three months ended Sept. 30, 2018. Interest and financing expenses in the 2019 period include approximately $183,543 (2018 -- $137,106) in non-cash charges related to amortization of expenses incurred in securing the company's senior secured loan.
About Mimi's Rock Corp.
Mimi's Rock is an on-line dietary supplement and wellness company operating under the Dr. Tobias brand. The brand features over 30 products, including the top-selling colon-cleansing product and the No. 1 selling omega-3 fish oil on Amazon U.S. Mimi's Rock currently serves customers in the United States and has rapid growth plans to expand into other markets.
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