TORONTO, June 4, 2020 /CNW/ - Mimi's Rock Corp.
(TSXV: MIMI) (the "Company"), an online dietary supplement and
wellness company, today announced its financial results for the
year ended December 31, 2019.
Recent Developments
- On February 24, 2020, the Company
announced that its common shares were approved for trading on the
OTCQB Venture Market (the "OTCQB") under the ticker symbol MIMNF.
The Company also received clearance from The Depositary Trust
Company for transfer eligibility. The Company expects that the U.S.
listing will increase the Company's exposure and accessibility to
the U.S. market, providing additional liquidity for shareholders,
and raising the awareness of the Company's brands to a much larger
audience.
- On April 7, 2020, the Company
provided an operational update regarding COVID-19 and its impact on
the business. While the proliferation of the coronavirus has forced
the world to adapt, the Company has so far been able to navigate
the consequential operational challenges. The Company has increased
inventory levels on-hand with its e-commerce channel partners to
help protect against the possibility of future supply chain
disruptions. The Company has been able to maintain growth in its
vitamins and supplements business. As well, the newly acquired skin
care business has performed as expected, with no material decline
in demand. At this time, management does not foresee any major
disruptions to the Company's business.
- On April 22, 2020, the Company
announced it would be relying on the 45-day extension period
provided under the blanket relief from the Canadian Securities
Administrators for the filing of its annual financial report for
the year ended December 31, 2019 and
the related management's discussion & analysis (collectively,
the "2019 Annual Financials").
"The latter half of 2019 was challenging, as Amazon sellers met
with significant changes within the platform. Frankly, we hit some
"speed bumps" in Q3 and Q4, although I am pleased to announce that
our team was responsive and effective in rapidly adapting and
instituting a new approach. By Q1 2020, we began seeing the benefit
of our operational adjustments. Further, the team's impressive
performance in integrating the All Natural Advice and Maritime
Naturals lines, as well as reacting to the increased demands
resulting from the COVID-19 pandemic, resulted in a strong Q1 and
an improved financial outlook for 2020, of which we are very proud.
We continue to launch new products and enter into new geographic
jurisdictions each and every quarter, with improved efficiencies
and operational performance. Our belief in the building of an
online focused health products platform is well aligned with the
current and future purchasing practices in the global marketplace.
We see these recent events as driving even more consumers away from
"bricks-and-mortar" retail and towards e-commerce, and we believe
that our positioning and deeper understanding of the e-commerce
world will allow us to continue to develop as a leader in in the
new economy" said David Kohler,
CEO.
Outlook for Q1 2020
The Company is establishing its initial outlook for fiscal 2020
and anticipates reported Q1 2020 results to be in the following
range:
- Expected Q1 2020 revenue of $10.3M – $10.6M
- Expected Q1 2020 adjusted EBITDA of $1.2M – $1.4M
Results in this range would represent an increase in revenue of
33% to 37% over Q4 2019 and would represent the highest quarterly
revenue level to date. While approximately half of this increase is
from the newly acquired skin care businesses, the Dr Tobias brand
also experienced a strong recovery in the first quarter of 2020.
Management has implemented a new advertising strategy, streamlined
processes and is focused on new market growth for the balance of
2020.
On May 29, 2020, the Company
provided an update on the status of its 2019 Annual Financials and
indicated that it would provide guidance on the timing to file its
2020 first quarter interim financial statements and related
management's discussion and analysis for the three months ended
March 31, 2020 (collectively the "Q1
2020 Financials") at the time of filing the 2019 Annual Financials.
The Company continues to rely on the exemption under Ontario
Instrument 51-502 – Temporary Exemption from Certain Corporate
Finance Requirements, which instrument became effective as of
March 23, 2020, in postponing the
filing of its Q1 2020 Financials and expects to issue the Q1
Financials on or before June 30,
2020. Until such time as the Q1 Financials are filed,
management and other insiders of the Company will be subject to an
insider trading black-out consistent with the principles in section
9 of National Policy 11-207 Failure-to-File Cease Trade Orders
and Revocations in Multiple Jurisdictions. The Company confirms
that, except as disclosed by the Company, there have been no
material business developments since May 29,
2020.
COVID-19
The Company is generally well positioned as a business to
sustain through the disruption as a result of the pandemic as our
products sales are all online. As we sell health and wellness
products, the demand during the current outbreak has remained
strong, particularly for certain immunity products. The initial
outbreak and requests to self-isolate caused a brief but
significant uptick in sales as consumers stocked-up on essentials.
While the initial surge was not long-lasting, sales have continued
to remain at levels at or above those seen prior to the
outbreak.
Based on current information, we remain confident that we can
continue to operate as the economy attempts to resume to normalcy.
For precautionary reasons, over the past ten weeks we have taken
the opportunity to increase our finished goods inventory on-hand
from the normal 25 days to approximately 75 days on average. While
this requires an additional investment in working capital,
increased inventory in the fulfillment centres reduces the risk of
delivery disruption. While the nature of the pandemic is such that
it is difficult to predict how long it will last, there is so far
no indication that the COVID-19 outbreak will have a negative
impact on the Company's business.
Results of Operations for the Year Ended December 31, 2019
For the year ended December 31,
2019, the Company incurred a net loss of $3,551,010 ($0.10
per share), compared to a net loss of $945,101 ($0.06 per
share) for the year ended December 31,
2018. EBITDA for the year ended December 31, 2019 was $828,758, compared to $897,042 for the year ended 2018. adjusted
EBITDA, which adds back (deducts) non-cash stock based
compensation, investment income, acquisition costs and listing
expenses, was $2,382,898 for the year
ended December 31, 2019, compared to
adjusted EBITDA of $2,736,093 for the
year ended December 31, 2018.
Revenues and Gross Margin
Revenues were $35,409,072 for the
year ended December 31, 2019 compared
to revenues of $17,754,166 for the
year ended December 31, 2018.
Revenues reported in the current and prior year primarily represent
revenues from the DTI business, which was acquired in July 13, 2018. While the Company's sales do not
experience significant seasonality, there is some fluctuation on a
quarterly basis due to natural demand fluctuation as well as
promotional impacts. Results of operations of the All Natural and
Maritime Naturals businesses were included from the date of
acquisition, however, had minimal impact due to their acquisition
in mid-December 2019. The Company
continues to adapt its brand strategy, advertising spend and
execution strategies as conditions in the online dietary
supplements market dictate. Beginning in Q2 2019, the Company began
to see considerable shifts in the marketplace, however, advertising
spend was adjusted and sales remained strong through the middle of
the third quarter. Despite increasing advertising spend, sales
continued to decline through Q4 2019.
Fourth quarter 2019 results reflected the full impact of the
decline, as revenues were $7,716,827
for the three months ended December 31,
2019 compared to revenues of $9,231,216 for the three months ended
December 31, 2018.
Management has made significant changes to its marketing
strategy. While customer loyalty remained strong throughout 2019,
new customer acquisition became increasingly difficult. The Dr
Tobias brand began to see many new competitors emerge in mid-late
2019. As a result, costs to direct customer traffic began to get
more expensive and less effective. Simultaneous with this market
activity increase, changes in the way products were displayed on
the Company's primary marketplace had the impact of reducing the
importance of rankings and reviews with a preference for paid
advertisements. Despite increasing advertising spend and making
investments in customer engagement, results did not show sufficient
improvement such that management made a decision to terminate its
relationship with its advertising partner. These changes seem to
have made an impact in the period since year end.
As a result, sales and revenues have recovered in the period
since December 31, 2019 to levels
similar to those in Q2 2019 and prior. Sales from its own
e-commerce site, drtobias.com, as well through additional online
retail outlets continued to grow, however, a majority of sales of
Dr Tobias products are generated through the Amazon.com sales
channel in the United States.
Gross margin for the year ended December
31, 2019 was $24,759,327 (70%)
compared to $11,963,253 (67%) for the
year ended December 31, 2018. Since
the acquisition of DTI, the Company has been able to improve
efficiency and obtain better pricing from its supplier. Gross
margin ratios have improved over the comparative period as a
result.
Selling and Marketing Expense
The Company incurred selling and marketing expenses of
$16,908,419, or 47.8% of revenue, for
the year ended December 31, 2019,
compared to $7,314,329, or
approximately 41.2% of revenue, for the year ended December 31, 2018. Sales and marketing expenses
for the period consist primarily of fulfillment costs related to
delivering products to customers, direct online advertising
placements, costs related to marketing the Dr. Tobias brand and
other promotional and awareness initiatives. In the fourth quarter
of 2019, the Company incurred selling and marketing expenses of
$4,867,462, or 63.1% of revenue,
compared to $4,013,384, or
approximately 41.2% of revenue, for the fourth quarter of 2018.
Advertising spend levels were considerably higher than originally
anticipated due to strategies implemented to ensure protection of
the brand and customer retention. Going forward, the Company
expects selling and marketing expenses to return to more normal
levels in the mid-40% range compared to revenue.
As the Company acquired the Dr Tobias brand in mid-2018, the
first two quarters of 2019 involved understanding the dynamics of
the Dr Tobias customer base as well as launching a new brand.
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. Despite
consistent investment, returns in the form of revenue growth did
not materialize. Organic growth began to decline until very late in
2019 as new strategies began to show results. The Company is
confident it has appropriately adapted its advertising strategies
in the near term as both efficiency and effectiveness of
advertising has improved in the period since December 31, 2019. 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 Expense
General and administrative expenses for the year ended
December 31, 2019 were $5,468,010, or 15.4% of revenue, compared to
$1,912,831, for the year ended 2018,
representing 10.8% of revenue. 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 due a full year of operations of the Dr Tobias
business as well as higher overall staff levels due to considerably
more operational activity. General and administrative expenses were
higher than considered typical in 2019, primarily due to certain
one-time legal costs, as well as some employee relocation
expenses.
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. Share based compensation expense for the year
ended December 31, 2019 was
$617,461 compared to $549,744 for the year ended December 31, 2018.
Listing expenses of $786,138 in
the year ended December 31, 2019 are
related to the acquisition and reverse takeover transaction in
connection with the Company's public listing in May 2019 and are $nil for the same period in the
prior year. Listing expenses include legal and professional fees,
as well as $385,487 in non-cash
charges related to the reverse takeover. Acquisition costs in the
year ended December 31, 2019 were
$99,788, incurred in connection with
the acquisitions of All Natural and Maritime Naturals in
December 2019. Acquisition costs of
$1,267,590 were incurred in the year
ended December 31, 2018 in connection
with the acquisition of DTI.
Foreign exchange losses of $64,332
were recorded in the year ended December 31,
2019, compared to $48,379 for
the year ended December 31, 2018,
primarily due to the movements in the value of the US dollar
relative to the Euro between the time that expenses were incurred
and the time that they were settled.
Interest and financing costs of $2,735,815 were incurred during the year ended
December 31, 2019, compared to
$919,142 for the year ended
December 31, 2018. Interest and
financing expenses in the 2019 period include approximately
$1,629,633 (2018: $354,755) in non-cash charges related to
amortization of expenses incurred in securing the Company's senior
secured loan. Both the non-cash and total amount of expense was
higher in 2019 due to the recognition of all unamortized costs
incurred on the Company's original senior secured debt upon
refinancing in December 2019.
Neither the TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in the policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or
accuracy of this news release.
About Mimi's Rock Corp.:
Mimi's Rock Corp. is an online 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 #1 selling Omega 3 Fish Oil on Amazon.com. Mimi's Rock
currently serves customers in the United
States and has rapid growth plans to expand into other
markets. For more information, visit https://mimisrock.com.
Forward-Looking Information
This news release contains forward-looking statements and
forward looking information within the meaning of applicable
securities laws. Often, but not always, forward-looking statements
can be identified by the use of words such as "plans", "expects",
or "does not expect", "is expected", "budget", "scheduled",
"estimates", "forecasts", "intends", "anticipates" or "does not
anticipate", or "believes", or describes a "goal", or variation of
such words and phrases or state that certain actions, events or
results "may", "could", "would", "might" or "will" be taken, occur
or be achieved. The forward looking statements in this press
release include, but are not limited to, statements
regarding the impact of the COVID-19 pandemic on the business
and operations of the Company, the anticipated timeline to file the
Q1 2020 Financials, the Company's expected revenues, the
expected increase in quarterly revenues, and the expected adjusted
EBITDA. Please refer to the 2019 Annual Financials for more details
on the Company's calculation of EBITDA and adjusted EBITDA.
All forward-looking statements reflect the Company's beliefs and
assumptions based on information available at the time the
statements were made. Actual results or events may differ from
those predicted in these forward-looking statements. All of the
Company's forward-looking statements are qualified by the
assumptions that are stated or inherent in such forward-looking
statements, including the assumptions listed below. Although the
Company believes that these assumptions are reasonable, this list
is not exhaustive of factors that may affect any of the
forward-looking statements.
Forward-looking statements involve known and unknown risks,
future events, conditions, uncertainties and other factors which
may cause the actual results, performance or achievements to be
materially different from any future results, prediction,
projection, forecast, performance or achievements expressed or
implied by the forward-looking statements, including risks relating
to: the Company's reliance on strength of reputation and
brands, third-party manufacturing, transportation and distribution,
the Company's ability to protect its intellectual property, the
Company's reliance on e-commerce sites, disruption or breaches in
information technology systems, the successful integration
subsequent to acquisitions, litigation, volatility in the market
price, the inability to successfully implement growth strategy on a
timely basis, difficulty expanding sales in targeted international
markets, changes in general economic conditions, the
Company's ability to service its debt obligations, management
of growth, reliance on management, conflicts of interest, local and
foreign tax matters, liquidity, currency and other financial risks,
potential product liability or other regulatory claims, product
recalls, the need to develop and innovate products, changes in
legal and regulatory standards, competition, operating risk and
insurance coverage, natural disasters, unusual weather and
geo-political events, the effect of COVID-19 on operations
and other risks relating to the business and industry of the
Company that are detailed from time to time in the Company's
filings with the Canadian provincial securities regulators.
Although the Company has attempted to identify important factors
that could cause actual actions, events or results to differ
materially from those described in forward-looking statements,
there may be other factors that cause actions, events or results
not to be as anticipated, estimated or intended. There can be no
assurance that forward-looking statements will prove to be
accurate, as actual results and future events could differ
materially from those anticipated in such statements. Accordingly,
readers should not place undue reliance on forward-looking
statements. All forward-looking information contained in this press
release is given as of the date hereof and is based upon the
opinions and estimates of management and information available to
management as at the date hereof. The Company disclaims any
intention or obligation to update or revise any forward-looking
statements whether as a result of new information, future events,
or otherwise, except in accordance with applicable securities
laws.
Please visit www.mimisrock.com or www.sedar.com for the
Company's recent filings.
SOURCE Mimi's Rock Corp.
