Simply Better Brands Corp. ("
SBBC" or the
"
Company") (TSX Venture: SBBC) announces its
financial results for the quarter ended June 30, 2021. All amounts
are expressed in United States dollars unless otherwise noted.
Certain metrics, including those expressed on an adjusted basis,
are non-IFRS measures, see "Non-IFRS Measures" below.
Corporate Developments
Purekana, LLC ("Purekana"), a subsidiary of the
Company, entered into a partnership with Chemesis International
Inc. ("Chemesis") - On April 13, 2021, Purekana entered into a
brand partnership with Chemesis, a leading cannabis and CBD
retailer, under which Purekana’s industry-leading CBD products will
become available at hundreds of proprietary Chemesis kiosks
throughout the United States.
Acquisition of Nirvana Group LLC ("Nirvana") -
On April 28, 2021, the Company completed the acquisition of
Nirvana, a Florida-based company specializing in the development,
manufacturing, and distribution of all-natural pet wellness
products and which includes the BudaPets brand.
Corporate Name Change - On May 3, 2021, the
Company changed its name to "Simply Better Brands Corp." and
adopted "SBBC" as its new trading symbol for its common shares.
Financing - On May 4, 2021, the Company issued a
promissory note for cash proceeds of $630,000. The promissory note
bears interest at 9% per annum and matures on May 4, 2022. At the
maturity date, the note holder may convert the promissory note to
the common shares of the Company at the price of the volume weighed
average price ("VWAP") of the Company’s common shares on the TSX
Venture Exchange (the "Exchange") during the 15 days trading days
immediately preceding the maturity date.
Acquisition of Tru Brands Inc. ("TRU Brands") -
On March 3, 2021, the Company entered into a binding term sheet
(the "Tru Brands LOI") to acquire 100% of the issued and
outstanding shares of Tru Brands. TRU Brands products are available
at Costco Canada East locations in Ontario, Quebec, Nova Scotia,
New Brunswick, and Newfoundland and Labrador. Tru Brands also plans
to expand the sales channels, including the expansion commitments
into approximately 800 Shoppers Drug Mart locations and Rexall,
Metro, and Loblaws locations.
On August 17, 2021 (the "Tru Brands Closing
Date"), the Company completed the acquisition. Under the terms of
the acquisition, the Company acquired 24,586,477 shares of common
stock with $0.001 par value per share of Tru Brands and 25,000,000
shares of Series A preferred stock with $0.001 par value per share
of Tru Brands, and satisfied certain outstanding indebtedness of
Tru Brands for an aggregate purchase consideration of $7,500,000,
paid in the form of issuance of the Company’s shares to the
shareholders and debtholders of Tru Brands, calculated on the basis
of the VWAP of the Company’s shares on the Exchange determined
based on the 10 trading days immediately preceding the Tru Brands
Closing Date. In connection with the acquisition, the Company
issued 89,462 common shares as finder’s fee.
The Company’s stock option, restricted share
unit ("RSU") and deferred share unit (the "DSU") plan (the
"Incentive Plan") - The Incentive Plan was approved at the
Company's annual general and special shareholder meeting held on
July 15, 2021.
Acquisition of Crisp Management Group Inc.
("CMG"). On August 20, 2021, the Company entered into a non-binding
term sheet (the "CMG Term Sheet") to acquire 60% of CMG to focus on
the sale and distribution of CBD and Hemp products through
Breakaway Music Festivals in North America as well as through
E-commerce. Pursuant to the terms of the CMG Term Sheet, the
Company will acquire 60% of the outstanding shares of CMG for
USD$500,000, to be satisfied through the issuance of common shares
of the Company at a price per share equal to the ten (10) trading
day VWAP of the shares on the Exchange in the ten (10) trading days
immediately prior to the closing date of the transaction. It is
expected that the share consideration will be subject to escrow,
with 15% releasable every four months in the first 20-month after
the closing date, and the remaining 25% releasable 24 months from
the closing date.
RESULTS OF OPERATIONS
|
For the six months ended |
expressed in millions except for |
June 30, 2021 |
|
June 30, 2020 |
|
earnings (loss) per share |
$ |
|
$ |
|
Revenue |
5.6 |
|
7.8 |
|
Gross margin (in $) |
3.4 |
|
5.0 |
|
Gross margin (in %) |
61% |
|
64% |
|
Operating expenses |
4.9 |
|
4.6 |
|
Other income (expenses) |
(0.4 |
) |
- |
|
Net income (loss) |
(1.9 |
) |
0.5 |
|
Earnings (loss) per share |
|
|
- Basic |
(0.1 |
) |
1.2 |
|
- Diluted |
(0.1 |
) |
1.2 |
|
|
|
|
expressed in millions except for |
June 30, 2021 |
|
December 31, 2020 |
|
dividend per share |
$ |
|
$ |
|
Total assets |
21.2 |
|
12.1 |
|
Total non-current financial
liabilities |
25.1 |
|
21.3 |
|
Dividend per share |
- |
|
- |
|
The net loss for the second quarter of 2021 was
$1.3 million compared to a net income of $0.3 million for the
second quarter of 2020.
The net loss for the six months ended June 30,
2021 was $1.9 million compared to a net income of $0.5 million
during the six months ended June 30, 2020.
Revenue
|
For the three months ended |
|
|
|
June 30, 2021 |
June 30, 2020 |
Change in |
expressed in millions |
$ |
% |
|
$ |
% |
|
$ |
% |
|
Direct to consumer |
2.9 |
94% |
|
3.6 |
90% |
|
(0.7 |
) |
-19% |
|
Business to
business |
0.2 |
6% |
|
0.4 |
10% |
|
(0.2 |
) |
-50% |
|
|
3.1 |
100% |
|
4.0 |
100% |
|
(0.9 |
) |
-23% |
|
|
For the six months ended |
|
|
|
June 30, 2021 |
June 30, 2020 |
Change in |
expressed in millions |
$ |
% |
|
$ |
% |
|
$ |
% |
|
Direct to consumer |
5.2 |
93% |
|
7.2 |
92% |
|
(2.0 |
) |
-28% |
|
Business to
business |
0.4 |
7% |
|
0.6 |
8% |
|
(0.2 |
) |
-33% |
|
|
5.6 |
100% |
|
7.8 |
100% |
|
(2.2 |
) |
-28% |
|
The Company’s revenue is generated by two
segments, Direct to Consumer ("DTC") and Business to Business
("B2B").
Revenue for the second quarter of 2021 was $3.1
million, of which $2.9 million (94%) and $0.2 million (6%) was
generated from the DTC and B2B, respectively, compared to $4.0
million, of which $3.6 million (90%) and $0.4 million (10%) was
generated from the DTC and B2B, in the second quarter of 2020.
Gross revenue excludes sales discount for the second quarter of
2021 and 2020 was $3.2 million and $4.1 million, respectively. The
Company’s discount was increased to an average of 31% in the second
quarter of 2021 compared to 24% in the second quarter of 2020
reflecting the increased competition the Company experienced in the
CBD market.
Revenue for the six months ended June 30, 2021
was $5.6 million, of which $5.2 million (93%) and $0.4 million (7%)
was generated from the DTC and B2B, respectively, compared to $7.8
million, of which $7.2 million (92%) and $0.6 million (8%) was
generated from the DTC and B2B, during the six months ended June
30, 2020. Gross revenue excludes sales discount for the second
quarter of 2021 and 2020 was $7.6 million and $9.8 million,
respectively. The Company’s discount was increased to an average of
26% during the six months ended June 30, 2021 compared to 20%
during the six months ended June 30, 2020 reflecting the increased
competition the Company experienced in the CBD market. No B.S.
Skincare was acquired on February 18th and as a result
approximately $1.3 million of sales were reflected in the
consolidated sales for six months ended June 30, 2021.
The decrease in revenue of $0.9 million (22%) in
the second quarter of 2021 and $2.2 million during the six months
ended June 30, 2021 was mainly due to the increase in competition
of the online CBD sales and higher discounts (31% in the second
quarter of 2021 and 26% for the six months ended June 30, 2021
compared to 24% in the second quarter of 2020 and 20% for the six
months ended June 30, 2020) as well as the negative impact of the
Covid 19 health crisis that negatively impacted offline sales as
retailers were closed for a good portion of 2020 and reluctant to
add new vendors to their existing CBD product SKUs.
Cost of goods sold
|
For the three months ended |
|
|
|
June 30, 2021 |
June 30, 2020 |
Change in |
expressed in millions |
$ |
% |
|
$ |
% |
|
$ |
% |
|
Product costs |
0.9 |
70% |
|
0.9 |
65% |
|
- |
|
0% |
|
Merchant processing
fees |
0.2 |
15% |
|
0.3 |
21% |
|
(0.1 |
) |
-33% |
|
Fulfillment
costs |
0.2 |
15% |
|
0.2 |
14% |
|
- |
|
0% |
|
|
1.3 |
100% |
|
1.4 |
100% |
|
(0.1 |
) |
-7% |
|
|
For the six months ended |
|
|
|
June 30, 2021 |
June 30, 2020 |
Change in |
expressed in millions |
$ |
% |
|
$ |
% |
|
$ |
% |
|
Product costs |
1.4 |
63% |
|
1.7 |
62% |
|
(0.3 |
) |
-18% |
|
Merchant processing
fees |
0.3 |
14% |
|
0.5 |
19% |
|
(0.2 |
) |
-40% |
|
Fulfillment
costs |
0.5 |
23% |
|
0.5 |
19% |
|
- |
|
0% |
|
|
2.2 |
100% |
|
2.7 |
100% |
|
(0.5 |
) |
-19% |
|
Cost of goods sold includes the product cost,
merchant processing fees, and fulfillment and delivery costs.
Product costs may vary directly based on hemp's crop price and the
CBD derivatives from the crops. Merchant processing fees may be
affected by the CBD industry's risk and customer data security and
fraud. Fulfillment costs are mainly driven by the delivery costs
with the main courier companies.
Cost of goods sold was $1.3 million (includes
the product costs of $0.9 million (70%), merchant processing fees
of $0.2 million (15%) and fulfillment costs of $0.2 million (15%))
compared to $1.4 million (includes the product costs of $0.9
million (65%), merchant processing fees of $0.3 million (21%) and
fulfillment costs of $0.2 million (14%)) in the second quarter of
2021 and 2020, respectively.
Cost of goods sold was $2.2 million (includes
the product costs of $1.4 million (63%), merchant processing fees
of $0.3 million (14%) and fulfillment costs of $0.5 million (23%))
compared to $2.7 million (includes the product costs of $1.7
million (62%), merchant processing fees of $0.5 million (19%) and
fulfillment costs of $0.5 million (19%)) during the six months
ended June 30, 2021, and 2020, respectively.
The decrease in cost of goods sold of $0.1
million (7%) and $0.5 million (19%) in the second quarter of 2021
and six months ended June 30, 2021, respectively was primarily due
to the decrease in revenue.
Gross profit
|
For the three months ended |
|
|
|
June 30, 2021 |
June 30, 2020 |
Change in |
expressed in millions |
$ |
% |
|
$ |
% |
|
$ |
|
% |
|
Gross profit |
1.8 |
58% |
|
2.6 |
65% |
|
(0.8 |
) |
-31 |
% |
|
For the six months ended |
|
|
|
June 30, 2021 |
June 30, 2020 |
Change in |
expressed in millions |
$ |
% |
|
$ |
% |
|
$ |
|
% |
|
Gross profit |
3.4 |
61% |
|
5.0 |
64% |
|
(1.6 |
) |
-32 |
% |
Gross profit for the second quarter of 2021 was
$1.8 million (58%) compared to $2.6 million (65%) in the second
quarter of 2020.
Gross profit for the six months ended June 30,
2021 was $3.4 million (61%) compared to $5.0 million (64%) for the
six months ended June 30, 2020.
Gross profit margin % was negatively impacted by
the increase in discount during the second quarter of 2021 and the
six months ended June 30, 2021. The gross margin decreases of $0.8
and $1.6 in the second quarter of 2021 and the six months ended
June 30, 2021, respectively, compared prior periods was mainly due
to lower sales experienced in for the six months ended June 30,
2021.
Operating expenses
Followings are the breakdown of the major
operating expenses in the presented period:
|
For the three months ended |
|
|
|
June 30, 2021 |
June 30, 2020 |
Change in |
expressed in millions * |
$ |
% |
|
$ |
% |
|
$ |
|
% |
|
Customer service
support |
- |
0% |
|
0.1 |
4% |
|
(0.1 |
) |
-100% |
|
General and
administrative expenses |
0.2 |
7% |
|
0.1 |
4% |
|
0.1 |
|
100% |
|
Marketing
expense |
1.2 |
43% |
|
1.2 |
52% |
|
- |
|
0% |
|
Professional
fees |
0.3 |
11% |
|
0.5 |
22% |
|
(0.2 |
) |
-40% |
|
Regulatory and filing
fees |
0.1 |
4% |
|
- |
0% |
|
0.1 |
|
100% |
|
Salaries and
wages |
0.9 |
32% |
|
0.3 |
13% |
|
0.6 |
|
200% |
|
Other items
** |
0.1 |
3% |
|
0.1 |
5% |
|
(0.0 |
) |
0% |
|
|
2.8 |
100% |
|
2.3 |
100% |
|
0.5 |
|
22% |
|
*Items in each presented period with a balance
below $0.1M are either combined as "Other Items" or excluded from
the table above.**Other items including items with a balance below
$0.1M and rounding adjustment.
Operating costs for the second quarter of 2021
were $2.8 million, an increase of $0.5 million (22%), compared to
$2.3 million in the second quarter of 2020.
The majority of the operating costs incurred in
the second quarter of 2021 were marketing expenses of $1.2 million
(43%) and salaries and wages of $0.9 million (32%). Of the $0.9
million in salaries and wages, $0.1 million was one time salary and
wages expenses (management bonuses). Salaries and wages excluding
the one-time amount of $0.1 million was comparable to salaries and
wages in the first quarter of 2021 ($0.7 million). The majority of
the operating costs incurred in the second quarter of 2020 were
marketing expenses of $1.2 million (52%), professional fees of $0.5
million (22%) and salaries and wages of $0.3 million (13%).
Compared to the second quarter of 2020, the increase in salaries
and wages of $0.6 million (200%) was mainly related to the increase
in the company's full-time employees in the sales and marketing
operations.
As the Company pursued its growth strategy
through mergers and acquisitions it incurred regulatory filing fees
of $0.1 million as well as legal expenses related to the
acquisitions. The professional fees incurred in the second quarter
of 2020 was mainly related to the acquisition of Purekana.
|
For the six months ended |
|
|
|
June 30, 2021 |
June 30, 2020 |
Change in |
expressed in millions * |
$ |
% |
|
$ |
% |
|
$ |
|
% |
|
Customer service
support |
0.1 |
2% |
|
0.1 |
2% |
|
- |
|
0% |
|
General and
administrative expenses |
0.4 |
8% |
|
0.3 |
7% |
|
0.1 |
|
33% |
|
Marketing
expense |
2.1 |
43% |
|
2.7 |
59% |
|
(0.6 |
) |
-22% |
|
Professional
fees |
0.5 |
10% |
|
0.7 |
15% |
|
(0.2 |
) |
-29% |
|
Salaries and
wages |
1.6 |
33% |
|
0.7 |
15% |
|
0.9 |
|
129% |
|
Regulatory and filing
fees |
0.2 |
4% |
|
- |
0% |
|
0.2 |
|
100% |
|
Other items
** |
- |
0% |
|
0.1 |
2% |
|
(0.1 |
) |
-100% |
|
|
4.9 |
100% |
|
4.6 |
100% |
|
0.3 |
|
7% |
|
*Items in each presented period with a balance
below $0.1M are either combined as "Other Items" or excluded from
the table above.**Other items including items with a balance below
$0.1M and rounding adjustment.
Operating costs for the six months ended June
30, 2021 were $4.9 million, an increase of $0.3 million (7%),
compared to $4.6 million for the six months ended June 30,
2020.
The majority of the operating costs incurred
during the six months ended June 30, 2021 were marketing expenses
of $2.1 million (43%), professional fees of $0.5 (10%) and salaries
and wages of $1.6 million (33%). The majority of the operating
costs incurred during the six months ended June 30, 2020 were
marketing expenses of $2.7 million (59%), professional fees of $0.7
million (15%) and salaries and wages of $0.7 million (15%).
Compared to the six months ended June 30, 2020, the increase in
salaries and wages of $0.9 million (129%) was mainly related to the
increase in the company's full-time employees in the sales and
marketing operations.
As the Company pursued its growth strategy
through mergers and acquisitions it incurred listing and regulatory
filing fees of $0.2 million as well as legal expenses related to
the acquisitions. The professional fees incurred during the six
months ended June 30, 2020 was mainly related to the acquisition of
Purekana.
Other income (expenses)
The following are the breakdown of the major
operating expenses in the presented period:
|
For the three months ended |
|
|
|
June 30, 2021 |
June 30, 2020 |
Change in |
expressed in millions * |
$ |
|
% |
|
$ |
% |
|
$ |
|
% |
|
Finance costs |
(1.0 |
) |
250% |
|
- |
0% |
|
(1.0 |
) |
100% |
|
Fair value adjustment
of derivative liability |
0.6 |
|
-150% |
|
- |
0% |
|
0.6 |
|
100% |
|
|
(0.4 |
) |
100% |
|
- |
0% |
|
(0.4 |
) |
100% |
|
*Items in each presented period with a balance
below $0.1M are either combined as "Other Items" or excluded from
the table above.**Other items including items with a balance below
$0.1M and rounding adjustment.
|
For the six months ended |
|
|
|
June 30, 2021 |
June 30, 2020 |
Change in |
expressed in millions * |
$ |
|
% |
|
$ |
% |
|
$ |
|
% |
|
Finance
costs |
(1.6 |
) |
400% |
|
- |
0% |
|
(1.6 |
) |
100% |
|
Fair value adjustment
of derivative liability |
1.1 |
|
-275% |
|
- |
0% |
|
1.1 |
|
100% |
|
Other items
** |
0.1 |
|
-25% |
|
- |
0% |
|
0.1 |
|
100% |
|
|
(0.4 |
) |
100% |
|
- |
0% |
|
(0.4 |
) |
100% |
|
*Items in each presented period with a balance
below $0.1M are either combined as "Other Items" or excluded from
the table above.**Other items including items with a balance below
$0.1M and rounding adjustment.
Finance costsFinance costs of $1.0 million in
the second quarter of 2021 was mainly related to the accretion of
interest regarding the convertible notes, lease obligation, loan
payable, preferred shares, promissory notes and provision of
earn-out payments. No such accretion of interest was recognized in
the second quarter of 2020.
Finance costs of $1.6 million during the six
months ended June 30, 2021 was mainly related to the accretion of
interest regarding the convertible notes, lease obligation, loan
payable, preferred shares, promissory notes and provision of
earn-out payments. No such accretion of interest was recognized
during the six months ended June 30, 2020.
Gain on remeasurement of derivative liabilityThe
Company recognized a gain on remeasurement of derivative liability
of $0.6 and $1.1 million in the second quarter of 2021 and in the
six months ended June 30, 2021, respectively, pursuant to IFRS 9:
Financial Instruments. The Company is required to remeasure the
fair value of the derivative liability at each reporting period.
Any changes in the derivative liability's fair value are recognized
in the income statement as a gain or loss. The gain/loss on
remeasurement of derivative liability is driven by different
factors such as share price of the Company, risk-free interest rate
and foreign exchange rate.
Earnings before Interest, Taxes,
Depreciation, and Amortization ("EBITDA") and Adjusted EBITDA
(Non-GAAP Measures)
EBITDA and Adjusted EBITDA are non-GAAP measures
used by management that are not defined by IFRS. EBITDA and
Adjusted EBITDA do not have a standardized meaning prescribed by
IFRS and therefore may not be comparable to similar measures
presented by other issuers. Management believes that EBITDA and
Adjusted EBITDA provide meaningful and useful financial information
as these measures demonstrate the operating performance of the
business excluding non-cash charges.
The most directly comparable measure to EBITDA
and Adjusted EBITDA calculated in accordance with IFRS is
net loss. The following table presents the EBITDA and Adjusted
EBITDA for the second quarter of 2021 and 2020 and the six months
ended June 30, 2021 and 2020, and a reconciliation of same to net
income (loss):
|
For the three months ended |
|
|
|
June 30, |
|
June 30, |
|
|
|
2021 |
|
2020 |
Change in |
expressed in millions * |
$ |
|
$ |
$ |
|
% |
|
Net income
(loss) |
(1.3 |
) |
0.3 |
(1.6 |
) |
-533% |
|
Add
(less): |
|
|
|
|
Finance costs |
1.0 |
|
- |
1.0 |
|
100% |
|
EBITDA |
(0.3 |
) |
0.3 |
(0.6 |
) |
-200% |
|
Add
(less): |
|
|
|
|
Fair value adjustment of derivative liability |
(0.6 |
) |
- |
(0.6 |
) |
100% |
|
Adjusted EBITDA |
(0.9 |
) |
0.3 |
(1.2 |
) |
-400% |
|
The Adjusted EBITDA loss for the second quarter
is driven by the following factors: (1) operating loss of No BS
Skincare subsidiary ($0.2 million), (2) regulatory, listing fees
and legal fees related to business acquisitions ($0.2 million), and
(3) operating loss at Purekana ($0.5 million). Of the $0.5 million
operating loss at Purekana, $0.1 million was due to one-time salary
related costs.
|
For the six months ended |
|
|
|
June 30, |
June 30, |
|
|
|
2021 |
|
2020 |
Change in |
expressed in millions * |
$ |
|
$ |
$ |
|
% |
|
Net income
(loss) |
(1.9 |
) |
0.5 |
(2.4 |
) |
-480% |
|
Add
(less): |
|
|
|
|
Finance costs |
1.6 |
|
- |
1.6 |
|
100% |
|
EBITDA |
(0.3 |
) |
0.5 |
(0.8 |
) |
-160% |
|
Add
(less): |
|
|
|
|
Fair value adjustment of derivative liability |
(1.1 |
) |
- |
(1.1 |
) |
100% |
|
Adjusted EBITDA |
(1.4 |
) |
0.5 |
(1.9 |
) |
-380% |
|
The Adjusted EBITDA loss during the six months
ended June 30, 2021 by the following factors: (1) operating loss of
No BS Skincare subsidiary ($0.3 million), (2) regulatory, listing
fees and legal fees related to business acquisitions ($0.2
million), and (3) operating loss at Purekana ($0.9 million). Of the
$0.9 million operating loss at Purekana, $0.1 million was due to
higher fulfillment and delivery costs in the first quarter which
have subsequently being reduced in the second quarter and $0.1
million in one-time salary related costs.
LIQUIDITY AND CAPITAL RESOURCES
As at |
June 30, |
December 31, |
|
2021 |
|
2020 |
|
expressed in millions * |
$ |
|
$ |
|
ASSETS |
|
|
Current
assets |
|
|
Cash |
5.0 |
|
8.3 |
|
Accounts receivable |
0.4 |
|
0.2 |
|
Other receivable |
0.3 |
|
- |
|
Loan receivable |
0.4 |
|
0.4 |
|
Prepaid expenses |
1.3 |
|
1.9 |
|
Inventory |
1.5 |
|
0.8 |
|
Other items ** |
(0.1 |
) |
0.1 |
|
Total current
assets |
8.8 |
|
11.7 |
|
Non-current
assets |
12.4 |
|
0.4 |
|
TOTAL
ASSETS |
21.2 |
|
12.1 |
|
|
|
|
LIABILITIES |
|
|
Current
liabilities |
|
|
Accounts payable and accrued
liabilities |
(0.7 |
) |
(0.7 |
) |
Current portion of derivative
liability |
(0.4 |
) |
- |
|
Current portion of lease
obligation |
(0.1 |
) |
(0.1 |
) |
Current portion of promissory
note |
(7.3 |
) |
(3.7 |
) |
Current portion of provision
of earn-out payments |
(0.9 |
) |
- |
|
Other items ** |
- |
|
- |
|
Total current
liabilities |
(9.4 |
) |
(4.5 |
) |
Long term
liabilities |
(25.1 |
) |
(21.3 |
) |
TOTAL
LIABILITIES |
(34.5 |
) |
(25.8 |
) |
|
|
|
WORKING
CAPITAL |
(0.6 |
) |
7.2 |
|
*Items in each presented period with a balance
below $0.1M are either combined as "Other Items" or excluded from
the table above.**Other items including items with a balance below
$0.1M and rounding adjustment.
The Company’s primary liquidity and capital
requirements are for inventory and general corporate working
capital purposes. The Company currently has a cash balance of $5.0
million as of June 30, 2021 coupled with cash flows from
operations, will provide capital to support the planned growth of
the business and for general corporate working capital purposes.
The Company’s working capital decreased from 7.2 million as of
December 31, 2020 to working capital deficiency of $0.6 as of June
30, 2021. The Company continues to focus on improving its working
capital position through a number of initiatives including better
payment terms with key vendors, taking advantage of early payment
options with its offline customers and negotiating lower costs with
its key vendors.
The Company’s working capital requirements
fluctuate from period to period depending on, among other factors,
key consumer holidays (second and fourth quarter each year), new
product introductions and vendor lead times. The Company’s
principal working capital needs include accounts receivable,
inventory, prepaid expenses, and accounts payable.
Purekana is subject to externally imposed
capital requirements in connection with its loan. The Loan contains
a financial covenant for the debt service coverage ratio (the "Debt
Service Coverage Ratio") of Purekana at the end of each calendar
year during the term of the loan should not be less than 1.2.
Pursuant to the Loan, the Debt Service Coverage Ratio is defined as
the quotient of Purekana’s EBITDA for each annual reporting period
divided by a ten-year amortization of the Loan amount which is the
sum of the interest expense for the reporting period and the
scheduled principal payments made with respect to the Loan amount
for the reporting period. The Adjusted EBITDA is defined as the
unadjusted EBITDA adjusted for any non-recurring, one-time, or
irregular items. Purekana was in compliance with these capital
requirements as at December 31, 2020.
The Company’s ability to fund operating expenses
will depend on its future operating performance which will be
affected by general economic, financial, regulatory, and other
factors including factors beyond the Company’s control (See "Risk
and Uncertainties" in the Company's MD&A for the three and six
months ended June 30, 2021).
Management continually assesses liquidity in
terms of the ability to generate sufficient cash flow to fund the
business. Net cash flow is affected by the following items: (i)
operating activities, including the level of amounts receivable,
accounts payable, accrued liabilities and unearned revenue and
deposits; (ii) investing activities (iii) financing activities.
OUTSTANDING SHARE DATA
As at June 30, 2021, the Company had 21,496,896
common shares (December 31, 2020 – 21,016,875) common shares issued
and outstanding.
During the six months ended June 30,
2021
- 5,160,469 common shares released
from escrow.
- 22,500 warrants were exercised for
cash proceeds of $23,636 (CA$30,000).
- Issued 457,521 common shares for
conversion of the convertible notes.
Subsequent to June 30, 2021
- The Company granted 1,351,030
options with an exercise price of $5.70 to its officers, employees
and consultants. The options are exercisable for a period of five
years.
- The Company issued 904,100 RSUs to
its directors, employees and consultants.
- The Company issued 491,000 common
shares for the RSUs.
- 1,561,407 common shares were issued
in connection with the acquisition of Tru Brands.
As at the date hereof, the Company had
23,530,403 common shares issued and outstanding.
In addition, as at the date hereof, the Company
had 1,351,030 stock options and 413,100 RSUs issued and
outstanding.
SUBSEQUENT EVENTS
- On July 27, 2021, the Company
granted 1,351,030 options with an exercise price of $5.70 to its
officers, employees and consultants. The options are exercisable
for a period of five years.
- On July 27, 2021, the Company
issued 904,100 RSUs to its directors, employees and
consultants.
- On August 17, 2021, the Company
completed the Acquisition of Tru Brands.
- On August 20, 2021, the Company
entered into the CMG Term Sheet with CMG.
- The Company issued 491,000 common
shares for the RSUs.
- 1,561,407 common shares were issued
in connection with the acquisition of Tru Brands.
- The Company repaid $500,000
including interest of the promissory note issued in connect with
the acquisition of No B.S.
OUTLOOK
The Company change of its name to Simply Better
Brands Corp., highlighting the Company’s transition from a CBD and
plant-based wellness company to that of a global health, wellness
and lifestyle company. "Simply Better Brands" reflects the
Company’s commitment to promoting healthy and active lifestyles
while building the brands which make them possible. In addition to
expanding its majority-owned CBD subsidiary brand, Purekana, the
Company has over the past five months made or announced strategic
acquisitions in industry-leading health, wellness, beauty, pet and
lifestyle brands and companies. The Company expects to continue to
seek out additional merger and acquisition (M&A) opportunities
in these industry sectors to drive top line growth and
profitability.
- Wellness Business - The wellness business is driven by the
Company’s holdings in Purekana, a leading CBD brand. In the back
half of 2021, we plan to prioritize three sources of growth: direct
to consumer optimization, retail outlet penetration, and
international expansion. We maintain a strong direct to consumer
(D2C) position, as consumers buy online at a greater rate during
the pandemic. To accelerate our D2C sales, we are incrementally
investing in a proven customer acquisition strategy. We also see
sequential monthly improvement in our CBD specialty retail channel
with continued distribution expansion. We are encouraged by our
monthly sales progress in this offline business channel and as a
result are hiring additional sales staff to pursue additional sales
opportunities. The effects of Covid 19 impacted the adoption of CBD
in large brick & mortar retail outlooks, signally slower than
anticipated growth in this class of trade, in the second half of
2021. Our international sales growth in key markets including the
UK, the EU and Latin America in 2021 is progressing and we expect
to launch our CBD products in the fourth quarter of 2021. Sales to
Latin America and UK are expected to commence in the fourth quarter
as well. With the acquisition of Nirvana, we also plan to launch
our pet CBD products in the fourth quarter of 2021. As the result
of a weaker first half of 2021, we don’t expect 30-40% sales growth
in this sector in 2021. We do expect 18-20% growth in the wellness
sector in the second half of 2021 based on the traction of sales
initiatives we are currently seeing and the expected international
sales that will commence in the fourth quarter. We also are
continually working on merger and acquisition opportunities that
could positively impact our fourth quarter sales in the wellness
sector depending on the timing of the close of these
transactions.
- Beauty Business - The beauty business is driven by the
company’s No B.S. brand. We are expecting flat growth in this brand
in 2021. We have a major international sales growth initiative that
we expect to launch in late 2021, however any impact on sales would
be in 2022.
- Plant Based Food - TRU Brands acquisition closed in August of
2021. We are expecting the contribution to SBBC consolidated sales
to be material starting in the fourth quarter of 2021 driven by
successful placement of the bars in the Canadian and US market with
large retailers including Costco, Loblaws and Shoppers Drug
Mart.
- Other Market Sectors - The Company is currently evaluating
other markets for consumer offerings characterized by strong growth
and appeal to its core customer segments. The Company is focused on
building a direct-to-consumer platform catering to Millennial and
Gen Z consumers.
- Operating Synergies - The Company will continue to focus on
realizing operating synergies across its portfolio of consumer
brands. This includes e-commerce platforms, finance and
administration, fulfillment and marketing synergies. The Company
has made progress in all areas during the first half of 2021 and
expects this success to continue during the second half of
2021.
About Simply Better Brands
Corp.
Simply Better Brands Corp. leads an
international omni-channel platform with diversified assets in the
emerging plant-based and holistic wellness consumer product
categories. The Company’s mission is focused on leading innovation
for the informed Millennial and Generation Z generations in the
rapidly growing plant-based, natural, and clean ingredient space.
The Company continues to focus on expansion into high-growth
consumer product categories including CBD products, plant-based
food and beverage, and the global pet care and skin care
industries. For more information on Simply Better Brands Corp.,
please visit:
https://www.simplybetterbrands.com/investor-relations.
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 release.
Contact Information
Simply Better Brands Corp.Brian MeadowsChief Financial Officer+1
(855) 553-7441ir@simplybetterbrands.com
Forward-Looking Information
Certain statements contained in this news
release constitute "forward-looking information" and "forward
looking statements" as such terms are used in applicable Canadian
securities laws. Forward-looking statements and information are
based on plans, expectations and estimates of management at the
date the information is provided and are subject to certain factors
and assumptions, including, that the Company’s financial condition
and development plans do not change as a result of unforeseen
events and that the Company obtains regulatory approval.
Specifically, this news release contains
forward-looking statements relating to, but not limited to:
completion of proposed acquisitions; expansion capabilities of
PureKana, Nirvana, No BS skincare and TRU Brands; expansion and
marketing plans for the Company and its subsidiaries; the Company's
plans for continued M&A activity in specific industry sectors
to drive top line growth and profitability; projected results of
operations during 2021, including specific sales growth targets and
industry growth targets; the effects of COVID-19 on retail; planned
international sales growth in key markets; sales growth in the
beauty industry; the Company's plan to build a direct-to-consumer
platform catering to Millennial and Gen-Z consumers; operating
synergies; the Company's acquisition activities; growth of
opportunities in the Company's business segments, including
wellness, beauty, plant based foods, and others.
The material factors and assumptions used to
develop the forward-looking statements herein include, but are not
limited to, the following: (i) the impact of the COVID-19 pandemic;
(ii) the regulatory climate in which the Company operates; (iii)
the sales success of the Company’s products; (iv) the success of
sales and marketing activities; (v) the Company’s ability to
complete acquisitions; (vi) there will be no significant reduction
in the availability of qualified and cost-effective human
resources; (vii) new products will continue to be added to the
Company’s portfolio; (viii) consumer demand for the Company
products will continue to grow in the foreseeable future; (ix)
there will be no significant barriers to the acceptance of the
Company’s products in the market; (x) the Company will be able to
maintain compliance with applicable contractual and regulatory
obligations and requirements; (xi) there will be adequate liquidity
available to the Company to carry out its operations; (xii)
products do not develop that would render the Company’s current and
future product offerings undesirable and the Company is otherwise
able to minimize the impact of competition and keep pace with
changing consumer preferences; and (xiii) the Company will be able
to successfully manage and integrate acquisitions and take
advantage of synergies from acquisitions.
The Company’s forward-looking statements are
subject to risks and uncertainties pertaining to, among other
things, the adverse impact of the COVID-19 pandemic to the
Company's operations, supply chain, distribution chain, and to the
broader market for the Company's products, revenue fluctuations,
nature of government regulations (both domestic and foreign),
economic conditions, loss of key customers, retention and
availability of executive talent, competing products, common share
price volatility, loss of proprietary information, product
acceptance, internet and system infrastructure functionality,
information technology security, cash available to fund operations,
availability of capital, international and political
considerations, the successful integration of acquired businesses,
and including but not limited to those risks and uncertainties
discussed in the Company’s other filings with securities
regulators. The impact of any one risk, uncertainty, or factor on a
particular forward-looking statement is not determinable with
certainty as these are interdependent, and the Company’s future
course of action depends on management’s assessment of all
information available at the relevant time. Except to the extent
required by law, the Company assumes no obligation to publicly
update or revise any forward-looking statements made in this press
release, whether as a result of new information, future events, or
otherwise. All subsequent forward-looking statements, whether
written or oral, attributable to the Company or persons acting on
the Company’s behalf, are expressly qualified in their entirety by
these cautionary statements.
These foregoing lists are not exhaustive.
Additional information on these and other factors which could
affect the Company's operations or financial results are included
in the Company’s other public documents on file with the Canadian
Securities regulatory authorities on www.sedar.com"
www.sedar.com.
The above summary of assumptions and risks
related to forward-looking statements in this news release has been
provided in order to provide shareholders and potential investors
with a more complete perspective on the Company's current and
future operations and such information may not be appropriate for
other purposes. There is no representation by the Company that
actual results achieved will be the same in whole or in part as
those referenced in the forward-looking statements and the Company
does not undertake any obligation to update publicly or to revise
any of the included forward-looking statements, whether as a result
of new information, future events or otherwise, except as may be
required by applicable securities law.
This news release contains financial outlook
information about prospective results of operations, which are
subject to the same assumptions, risk factors, limitations and
qualifications as set forth in the above paragraphs. The financial
outlook information was approved by management as of the date of
this news release and was provided for the purpose of providing
further information about the Company’s anticipated future business
operations. Readers are cautioned that reliance on such information
may not be appropriate for other purposes. The Company disclaims
any intention or obligation to update or revise any financial
outlook information contained in this news release, whether as a
result of new information, future events or otherwise, unless
required by applicable securities law.
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 press release.
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