PureK Holdings Corp. (the "
Company" or
"
PureK") (TSX Venture: PKAN) is pleased to
announce its financial results for the year ended December 31,
2020. 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
Completion of RTO transaction -
The Company completed an RTO transaction on December 8, 2020. The
Company entered into a business combination agreement with Heavenly
Rx Ltd. ("Heavenly"), Heavenly Rx, LLC ("Heavenly Subco"),
Purekana, LLC ("PureKana"), Cody J. Alt and Jeff Yauck (the
"PureKana Founders") to acquire 50.1% equity interest of PureKana,
which was indirectly held by Heavenly (the "Transaction").
Three-for-one Forward Stock
Split - On February 22, 2021, the Company announced that
the Board of Directors of the Company approved a 3 for 1 forward
stock split (the "Stock Split") to make its shares more accessible
to investors and enhance liquidity for its shareholders. The stock
split was completed on March 2, 2021.
Acquisition of No B.S. Life, LLC ("No
B.S. Skincare") - On February 18, 2021, the Company
completed the acquisition of No B.S. Skincare, the industry-leading
clean-formula skincare and beauty company.
Proposed 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, to be purchased
through the issuance of common shares of the Company.
Both No B.S. Skincare and TRU Brands are
groundbreaking female-led companies in North America that will
expand the Company’s footprint across the beauty and health and
wellness sectors. TRU Brands products are available at Costco
Canada East locations, and sold online through major U.S.
retailers, including Target, Walgreens, and select Whole Foods
locations.
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
April 29, 2021, the Company announced that it will change its name
to "Simply Better Brands Corp.". In connection with the name
change, the Company will adopt "SBBC" as its new trading symbol for
its common shares. It is expected that the Name Change will occur
on or about May 3, 2021, and the Company's common shares will
commence trading under the symbol "SBBC" effective at market open
on or about May 3, 2021.
PureKana launched active ingredient
product line - The Company’s subsidiary, PureKana,
launched key innovation with its new active ingredient product line
starting in May 2020. This product line is intended to bring
increased efficacy to its CBD products for its customer base.
During 2020 and in the first quarter of 2021, PureKana expanded its
offerings in the need state areas of sleep, energy, pain, calm,
wellness, and immunity.
$10 million Loan under Mainstreet Loan
Program - On December 11, 2020, the Company, through its
subsidiary PureKana, entered into a five-year loan agreement with
an amount of $10,000,000 (the "Loan"). The interest rate is LIBOR
plus 3%. The first year’s interest is deferred for 12 months and
principal payments will commence in the third year of the loan.
Financial Highlights
|
For the year ended |
expressed in millions except for |
December 31, 2020 |
|
December 31, 2019 |
|
earnings (loss) per share |
$ |
|
$ |
|
Revenue |
13.8 |
|
25.3 |
|
Gross
margin (in $) |
9.0 |
|
16.8 |
|
Gross
margin (in %) |
65 |
% |
66 |
% |
Operating expenses |
7.6 |
|
11.0 |
|
Other
income (expenses) |
(3.3 |
) |
- |
|
Net
income (loss) |
(2.0 |
) |
5.8 |
|
Earnings (loss) per share |
|
|
- Basic |
(0.1 |
) |
15.4 |
|
- Diluted |
(0.1 |
) |
15.4 |
|
Adjusted EBITDA |
1.4 |
|
5.8 |
|
|
|
|
expressed in million except for |
December 31, 2020 |
|
December 31, 2019 |
|
dividend per share |
$ |
|
$ |
|
Cash |
8.3 |
|
1.1 |
|
Total
assets |
12.1 |
|
3.7 |
|
Total
non-current financial liabilities |
21.3 |
|
0.1 |
|
Dividend per share |
- |
|
- |
|
RESULTS OF OPERATIONS
The net loss for the fourth quarter of 2020 and
the year ended December 31, 2020 was $2.4M and $2M, respectively,
compared to net income of $0.9M and $5.8M for the fourth quarter of
2019 and the year ended December 31, 2019.
REVENUE
|
For the three months ended |
|
|
|
December 31, 2020 |
December 31, 2019 |
Change in |
expressed in millions |
$ |
% |
$ |
% |
$ |
|
% |
Direct to consumer |
2.9 |
94 |
% |
4.6 |
96 |
% |
(1.7 |
) |
-37 |
% |
Business to business |
0.2 |
6 |
% |
0.2 |
4 |
% |
- |
|
0 |
% |
|
3.1 |
100 |
% |
4.8 |
100 |
% |
(1.7 |
) |
-35 |
% |
|
|
|
|
|
|
|
|
For the years ended |
|
|
|
December 31, 2020 |
December 31, 2019 |
Change in |
expressed in millions |
$ |
% |
$ |
% |
$ |
|
% |
Direct to consumer |
12.7 |
92 |
% |
24.4 |
96 |
% |
(11.7 |
) |
-48 |
% |
Business to business |
1.1 |
8 |
% |
0.9 |
4 |
% |
0.2 |
|
22 |
% |
|
13.8 |
100 |
% |
25.3 |
100 |
% |
(11.5 |
) |
-45 |
% |
The Company’s revenue is generated by two
segments, Direct to Consumer ("DTC") and Business to Business
("B2B").
Revenue for the fourth quarter of 2020 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 $4.8
million, of which $4.6 million (96%) and $0.2 million (4%) was
generated from the DTC and B2B, in the fourth quarter of 2019.
Gross revenue excludes sales discount for the fourth quarter of
2020 and 2019 was $4 million and $6.4 million, respectively. The
Company’s discount was decrease to an average of 22% in the fourth
quarter of 2020 compared to 25% in the fourth quarter of 2019.
Revenue for the year ended December 31, 2020 was
$13.8 million, of which $12.7 million (92%) and $1.1 million (8%)
was generated from the DTC and B2B, respectively, compared to $25.3
million, of which $24.4 million (96%) and $0.9 million (4%) was
generated from the DTC and B2B, for the year ended December 31,
2019. Gross revenue excludes sales discount for the year ended
December 31, 2020 and 2019 was $17.4 million and $29.2 million,
respectively. The Company’s discount was increase to an average of
20% in the year ended December 31, 2020 compared to 14% in the year
ended December 31, 2019.
The decrease in revenue of $1.7 million (35%) in
the fourth quarter of 2020 and $11.5 million (45%) in the year
ended December 31, 2020 was mainly due to the increase in
competition of the online CBD sales, as well as the negative impact
of 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 SKU’s.
COST OF GOODS SOLD
|
For the three months ended |
|
|
|
December 31, 2020 |
December 31, 2019 |
Change in |
expressed in millions |
$ |
% |
$ |
% |
$ |
|
% |
Product costs |
0.6 |
60 |
% |
1.3 |
72 |
% |
(0.7 |
) |
-54 |
% |
Merchant processing fees |
0.2 |
20 |
% |
0.3 |
17 |
% |
(0.1 |
) |
-33 |
% |
Fulfillment costs |
0.2 |
20 |
% |
0.2 |
11 |
% |
- |
|
0 |
% |
|
1.0 |
100 |
% |
1.8 |
100 |
% |
(0.8 |
) |
-44 |
% |
|
|
|
|
|
|
|
|
For the years ended |
|
|
|
December 31, 2020 |
December 31, 2019 |
Change in |
expressed in millions |
$ |
% |
$ |
% |
$ |
|
% |
Product costs |
3.0 |
62 |
% |
5.5 |
65 |
% |
(2.5 |
) |
-45 |
% |
Merchant processing fees |
0.9 |
19 |
% |
1.4 |
16 |
% |
(0.5 |
) |
-36 |
% |
Fulfillment costs |
0.9 |
19 |
% |
1.6 |
19 |
% |
(0.7 |
) |
-44 |
% |
|
4.8 |
100 |
% |
8.5 |
100 |
% |
(3.7 |
) |
-44 |
% |
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 for the fourth quarter of
2020 was $1 million (includes the product costs of $0.6 million
(60%), merchant processing fees of $0.2 million (20%) and
fulfillment costs of $0.2 million (20%)) compared to $1.8 million
(includes the product costs of $1.3 million (72%), merchant
processing fees of $0.3 million (17%) and fulfillment costs of $0.2
million (11%)) in the fourth quarter of 2019.
Cost of goods sold for the year ended December
31, 2020 was $4.8 million (includes the product costs of $3 million
(62%), merchant processing fees of $0.9 million (19%) and
fulfillment costs of $0.9 million (19%)) compared to $8.5 million
(includes the product costs of $5.5 million (65%), merchant
processing fees of $1.4 million (16%) and fulfillment costs of $1.6
million (19%)) in the year ended December 31, 2019.
The decrease in cost of goods sold of $0.8
million (44%) in the fourth quarter of 2020 and $3.7 million (44%)
in the year ended December 31, 2020 was primarily due to the
decrease in revenue.
GROSS PROFIT
|
For the three months ended |
|
|
|
December 31, 2020 |
December 31, 2019 |
Change in |
expressed in millions |
$ |
% |
$ |
% |
$ |
|
% |
Gross profit |
2.1 |
67 |
% |
2.9 |
62 |
% |
(0.8 |
) |
-28 |
% |
|
|
|
|
|
|
|
|
For the years ended |
|
|
|
December 31, 2020 |
December 31, 2019 |
Change in |
expressed in millions |
$ |
% |
$ |
% |
$ |
|
% |
Gross profit |
9.0 |
65 |
% |
16.8 |
66 |
% |
(7.8 |
) |
-46 |
% |
Gross profit for the fourth quarter of 2020 was
$2.1 million (67%) compared to $2.9 million (62%) in the fourth
quarter of 2019.
Gross profit for the year ended December 31,
2020 was $9 million (65%) compared to $16.8 million (66%) in the
year ended December 31, 2019.
The decrease of gross profit of $0.8 million
(28%) in the fourth quarter of 2020 and $7.8 million (46%) in the
year ended December 31, 2020 was primarily due to the decrease in
revenue.
The gross margin remains relatively constant
during the fourth quarter of 2020 and 2019 and years ended December
31, 2020 and 2019.
OPERATING EXPENSES
Followings are the breakdown of the major
operating expenses in the presented period:
|
For the three months ended |
|
|
|
December 31, 2020 |
December 31, 2019 |
Change in |
expressed in millions * |
$ |
% |
$ |
|
% |
$ |
|
% |
Bad debts recovery |
- |
0 |
% |
(0.8 |
) |
-40 |
% |
0.8 |
|
-100 |
% |
Customer service support |
- |
0 |
% |
0.2 |
|
10 |
% |
(0.2 |
) |
-100 |
% |
General and administrative expenses |
0.1 |
6 |
% |
0.1 |
|
5 |
% |
- |
|
0 |
% |
Marketing expense |
0.9 |
56 |
% |
1.7 |
|
85 |
% |
(0.8 |
) |
-47 |
% |
Professional fees |
0.2 |
13 |
% |
0.4 |
|
20 |
% |
(0.2 |
) |
-50 |
% |
Salaries and wages |
0.4 |
25 |
% |
0.2 |
|
10 |
% |
0.2 |
|
100 |
% |
Other items ** |
- |
0 |
% |
0.2 |
|
10 |
% |
(0.2 |
) |
-100 |
% |
|
1.6 |
100 |
% |
2.0 |
|
100 |
% |
(0.4 |
) |
-20 |
% |
*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 years ended |
|
|
|
December 31, 2020 |
December 31, 2019 |
Change in |
expressed in millions * |
$ |
% |
$ |
|
% |
$ |
|
% |
Bad debts recovery |
- |
0 |
% |
(0.1 |
) |
-1 |
% |
0.1 |
|
-100 |
% |
Customer service support |
0.2 |
3 |
% |
0.5 |
|
5 |
% |
(0.3 |
) |
-60 |
% |
General and administrative expenses |
0.5 |
7 |
% |
0.4 |
|
4 |
% |
0.1 |
|
25 |
% |
Marketing expense |
4.5 |
59 |
% |
8.1 |
|
73 |
% |
(3.6 |
) |
-44 |
% |
Professional fees |
0.8 |
11 |
% |
1.2 |
|
11 |
% |
(0.4 |
) |
-33 |
% |
Salaries and wages |
1.5 |
20 |
% |
0.7 |
|
6 |
% |
0.8 |
|
114 |
% |
Sales tax expense |
- |
0 |
% |
0.2 |
|
2 |
% |
(0.2 |
) |
-100 |
% |
Travel and entertainment |
- |
0 |
% |
0.1 |
|
1 |
% |
(0.1 |
) |
-100 |
% |
Other items ** |
0.1 |
0 |
% |
(0.1 |
) |
-1 |
% |
0.2 |
|
-274 |
% |
|
7.6 |
100 |
% |
11.0 |
|
100 |
% |
(3.4 |
) |
-31 |
% |
*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 fourth quarter of 2020
were $1.6 million, a decrease of $0.4 million (20%), compared to $2
million in the fourth quarter of 2019. The majority of the
operating costs incurred in the fourth quarter of 2020 were
marketing expenses of $0.9 million (56%), professional fees of $0.2
million (13%) and salaries and wages of $0.4 million (25%). The
majority of the operating costs incurred in the fourth quarter of
2019 were marketing expenses of $1.7 million (85%), professional
fees of $0.4 million (20%) and salaries and wages of $0.2 million
(10%). In addition, in the fourth quarter of 2019, the Company
recognized a bad debt recovery of $0.8 million (40%).
Compared to the fourth quarter of 2019, the
decrease in marketing expenses of $0.8 million (47%) in the fourth
quarter of 2020 resulted from the decrease in sales. The decrease
in professional fees of $0.2 million (50%) was mainly due to the
decrease in legal expenses incurred in the normal course of
business. In addition, certain professional fees related to the
Transaction were classified as listing expenses. The increase in
salaries and wages of $0.2 million (100%) was mainly related to the
increase in the company's full-time employees.
Operating costs for the year ended December 31,
2020, were $7.6 million, a decrease of $3.4 million (31%), compared
to $11 million in the year ended December 31, 2019. The majority of
the operating costs incurred in the year ended December 31, 2020,
were marketing expenses of $4.5 million (59%), professional fees of
$0.8 million (11%) and salaries and wages of $1.5 million (20%).
The majority of the operating costs incurred in the year ended
December 31, 2019, were marketing expenses of $8.1 million (73%),
professional fees of $1.2 million (11%) and salaries and wages of
$0.7 million (6%).
Compared to the year ended December 31, 2019,
the decrease in marketing expenses of $3.6 million (44%) in the
year ended December 31, 2020, resulted from the decrease in sales.
The decrease in professional fees of $0.4 million (33%) was mainly
due to the decrease in legal expenses incurred in the normal course
of business. In addition, certain professional fees related to the
Transaction were classified as listing expenses. The increase in
salaries and wages of $0.8 million (114%) was mainly related to the
increase in the company's full-time employees.
OTHER INCOME (EXPENSES)
Followings are the breakdown of the major
operating expenses in the presented period:
|
For the three months ended |
|
|
|
December 31, 2020 |
December 31, 2019 |
Change in |
expressed in millions * |
$ |
|
% |
$ |
% |
$ |
|
% |
Finance costs |
(0.1 |
) |
4 |
% |
- |
0 |
% |
(0.1 |
) |
100 |
% |
Loss on remeasurement of derivative liability |
(0.4 |
) |
14 |
% |
- |
0 |
% |
(0.4 |
) |
100 |
% |
Grant and other assistance |
0.1 |
|
-4 |
% |
- |
0 |
% |
0.1 |
|
100 |
% |
Listing expenses |
(2.4 |
) |
86 |
% |
- |
0 |
% |
(2.4 |
) |
100 |
% |
|
(2.8 |
) |
100 |
% |
- |
0 |
% |
(2.8 |
) |
100 |
% |
*Items in each presented period with a balance
below $0.1M are either combined as "Other Items" or excluded from
the table above.
|
For the years ended |
|
|
|
December 31, 2020 |
December 31, 2019 |
Change in |
expressed in millions * |
$ |
|
% |
$ |
% |
$ |
|
% |
Finance costs |
(0.1 |
) |
3 |
% |
- |
0 |
% |
(0.1 |
) |
100 |
% |
Loss on remeasurement
of derivative liability |
(0.4 |
) |
12 |
% |
- |
0 |
% |
(0.4 |
) |
100 |
% |
Grant and other
assistance |
0.1 |
|
-3 |
% |
- |
0 |
% |
0.1 |
|
100 |
% |
Listing
expenses |
(3.0 |
) |
91 |
% |
- |
0 |
% |
(3.0 |
) |
100 |
% |
Other items
** |
0.1 |
|
-3 |
% |
- |
0 |
% |
0.1 |
|
100 |
% |
|
(3.3 |
) |
100 |
% |
- |
0 |
% |
(3.3 |
) |
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.
EBITDA & ADJUSTED EBITDA
EBITDA (earnings before interest, taxes,
depreciation and amortization) 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 business excluding non-cash charges.
The most directly comparable measure to EBITDA
and Adjusted EIBTDA calculated in accordance with IFRS is net
loss. The following table presents the EBITDA and Adjusted EBITDA
for the fourth quarter 2020, the fourth quarter 2019, the year
ended December 31, 2020 and the year ended December 31, 2019, and a
reconciliation of same to net income (loss):
|
For the three months ended |
|
|
|
December 31, |
|
December 31, |
|
|
|
2020 |
|
2019 |
Change in |
expressed in millions * |
$ |
|
$ |
$ |
|
% |
Net income (loss) |
(2.4 |
) |
1.0 |
(3.4 |
) |
-340 |
% |
Add (less): |
|
|
|
|
Finance costs |
0.1 |
|
- |
0.1 |
|
100 |
% |
EBITDA |
(2.3 |
) |
1.0 |
(3.3 |
) |
-330 |
% |
Add (less): |
|
|
|
|
Loss on remeasurement of derivative liability |
0.4 |
|
- |
0.4 |
|
100 |
% |
Grant and other assistance |
(0.1 |
) |
- |
(0.1 |
) |
100 |
% |
Listing expenses |
2.4 |
|
- |
2.4 |
|
100 |
% |
Adjusted EBITDA |
0.4 |
|
1.0 |
(0.6 |
) |
-60 |
% |
*Items in each presented period with a balance
below $0.1M are either combined as "Other Items" or excluded from
the table above.
|
For the years ended |
|
|
|
December 31, |
|
December 31, |
|
|
|
2020 |
|
2019 |
Change in |
expressed in millions * |
$ |
|
$ |
$ |
|
% |
Net income (loss) |
(2.0 |
) |
5.8 |
(7.8 |
) |
-134 |
% |
Add (less): |
|
|
|
|
Finance costs |
0.1 |
|
- |
0.1 |
|
100 |
% |
EBITDA |
(1.9 |
) |
5.8 |
(7.7 |
) |
-133 |
% |
Add (less): |
|
|
|
|
Loss on remeasurement of derivative liability |
0.4 |
|
- |
0.4 |
|
100 |
% |
Grant and other assistance |
(0.1 |
) |
- |
(0.1 |
) |
100 |
% |
Listing expenses |
3.0 |
|
- |
3.0 |
|
100 |
% |
Adjusted EBITDA |
1.4 |
|
5.8 |
(4.4 |
) |
-76 |
% |
*Items in each presented period with a balance
below $0.1M are either combined as "Other Items" or excluded from
the table above.
LIQUIDITY AND CAPITAL RESOURCES
As at |
December 31, |
|
December 31, |
|
|
2020 |
|
2019 |
|
expressed in millions * |
$ |
|
$ |
|
ASSETS |
|
|
Current
assets |
|
|
Cash |
8.3 |
|
1.1 |
|
Accounts receivable |
0.2 |
|
0.9 |
|
Prepaid expenses |
1.9 |
|
0.4 |
|
Loan receivable |
0.4 |
|
- |
|
Inventory |
0.8 |
|
1.3 |
|
Other items ** |
0.1 |
|
(0.1 |
) |
Total current
assets |
11.7 |
|
3.6 |
|
Non-current
assets |
0.4 |
|
0.1 |
|
TOTAL
ASSETS |
12.1 |
|
3.7 |
|
|
|
|
LIABILITIES |
|
|
Current
liabilities |
|
|
Accounts payable and accrued
liabilities |
(0.7 |
) |
(1.1 |
) |
Deferred revenue |
- |
|
- |
|
Current portion of lease
obligation |
(0.1 |
) |
- |
|
Current portion of promissory
note |
(3.7 |
) |
- |
|
Other items ** |
- |
|
(0.1 |
) |
Total current
liabilities |
(4.5 |
) |
(1.2 |
) |
Long term
liabilities |
(21.3 |
) |
(0.1 |
) |
TOTAL
LIABILITIES |
(25.8 |
) |
(1.3 |
) |
|
|
|
WORKING
CAPITAL |
7.2 |
|
2.4 |
|
*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.
CASH FLOW
|
For the three months ended |
|
|
December 31, |
|
December 31, |
|
|
|
2020 |
|
2019 |
|
Change |
|
expressed in millions * |
$ |
|
$ |
|
$ |
|
Cash
flow from operating activities |
(0.1 |
) |
1.0 |
|
(1.1 |
) |
Cash
flow used investing activities |
(1.8 |
) |
- |
|
(1.8 |
) |
Cash
flow from (used in) financing activities |
8.6 |
|
(2.2 |
) |
10.8 |
|
Increase (decrease) in cash |
6.7 |
|
(1.2 |
) |
7.9 |
|
*Items in each presented period with a balance
below $0.1M is presented as $nil.
|
For the years ended |
|
|
December 31, |
|
December 31, |
|
|
|
2020 |
|
2019 |
|
Change |
|
expressed in millions * |
$ |
|
$ |
|
$ |
|
Cash
flow from operating activities |
0.9 |
|
5.5 |
|
(4.6 |
) |
Cash
flow used investing activities |
(1.8 |
) |
- |
|
(1.8 |
) |
Cash
flow from (used in) financing activities |
8.1 |
|
(5.7 |
) |
13.8 |
|
Increase (decrease) in cash |
7.2 |
|
(0.2 |
) |
7.4 |
|
*Items in each presented period with a balance
below $0.1M is presented as $nil.
Cash flow from (used in) operating activities
Following is the breakdown of the cash flow from operating
activities:
|
For the three months ended |
|
|
December 31, |
|
December 31, |
|
|
|
2020 |
|
2019 |
|
Change |
|
expressed in millions * |
$ |
|
$ |
|
$ |
|
Net income (loss) for the period |
(2.4 |
) |
1.0 |
|
(3.4 |
) |
Adjustments for items not affecting cash |
1.6 |
|
(0.1 |
) |
1.7 |
|
Change in non-cash working capital |
0.7 |
|
0.1 |
|
0.6 |
|
|
(0.1 |
) |
1.0 |
|
(1.1 |
) |
*Items in each presented period with a balance
below $0.1M is presented as $nil.
Cash generated used in operating activities was
$0.1 million in the fourth quarter of 2020, compared to cash flow
generated from operating activities of $1.0 million in the fourth
quarter of 2019. This increase of $1.1 million was the result of 1)
a decrease in cash generated in operating activities before the
impact of non-cash working capital of $1.7 million and (2) an
increase in cash generated by non-cash working capital of $0.6
million in the fourth quarter of 2020.
|
For the years ended |
|
|
December 31, |
|
December 31, |
|
|
|
2020 |
|
2019 |
|
Change |
|
expressed in millions * |
$ |
|
$ |
|
$ |
|
Net
income (loss) for the year |
(2.0 |
) |
5.8 |
|
(7.8 |
) |
Adjustments for items not affecting cash |
2.3 |
|
0.1 |
|
2.2 |
|
Change in non-cash working capital |
0.6 |
|
(0.4 |
) |
1.0 |
|
|
0.9 |
|
5.5 |
|
(4.6 |
) |
*Items in each presented period with a balance
below $0.1M is presented as $nil.
Cash generated from operating activities was
$0.9 million during the year ended December 31, 2020, compared to
$5.5 million during the year ended December 31, 2019. The decrease
of $4.6 million was the result of (1) a decrease in cash generated
in operating activities before the impact of non-cash working
capital of $5.6 million and (2) an increase in cash generated by
non-cash working capital of $1 million during the year ended
December 31, 2020.
Cash flow from (used in) investing activitiesThe
increase in cash flow ($1.8 million) used in investing activities
for the fourth quarter of 2020 and the year ended December 31, 2020
compared to the fourth quarter of 2019 and the year ended December
31, 2019 was related to the $1.5 million refundable deposit related
to the No. B.S. Skincare acquisition and $0.3M loan advanced to Tru
Brands.
Cash flow from (used in) financing activitiesThe
increase in cash flow ($10.8M) from financing activities during the
fourth quarter of 2020 compared to the fourth quarter of 2019 was
mainly related to the Loan entered into during the fourth quarter
of 2020 with net proceeds of $9.4M and the net reduction of the
distribution to PureKana’s members of $1.4M.
The increase in cash flow ($13.8M) from
financing activities during the year ended December 31, 2020
compared to the year ended December 31, 2019 was mainly related to
the Loan entered into during the fourth quarter of 2020 with net
proceeds of $9.4M and the net reduction of the distribution to
PureKana’s members of $4.7M.
OUTSTANDING SHARE DATA
At December 31, 2020, the Company had 21,016,875
common shares (2019 – 375,000) issued and outstanding.
During the year ended December 31, 2020, in
connection with the Transaction, the Company:
- issued 12,000,000
post-consolidation common shares of the Company to the former
Heavenly security holders in exchange for membership units of
PureKana;
- issued 8,454,375 post-consolidation
common shares to the PureKana Founders;
- issued 187,500 post-consolidation
common shares as the finder’s fees;
- issued 22,500 agent’s warrants;
and
- issued 37,500 post-consolidation
options to replace the outstanding options previously issued by
PureK.
Subsequent to December 31, 2020, 22,500 warrants
were exercised for cash proceeds of $30,000.
On January 19, 2021, the Board approved a
Restricted Share Unit ("RSU") Plan and Deferred Share Unit (the
"DSU") Plan (collectively the "Incentive Plan") for the purpose of
providing a share-related mechanism to attract, retain and motivate
qualified directors, employees and consultants of the Company and
its subsidiaries. The Incentive Plan is administered by the Board
of Directors, which sets the terms of incentive awards under the
Incentive Plan. The maximum number of common shares available for
issue under the Incentive Plan is 2,101,686 common shares of the
Company. Grants of RSUs and DSUs vest as to on-third on each of the
first, second and third anniversaries of the date of grant, unless
otherwise set by the Board or plan administrator. Subsequent to
December 31, 2020, the Company granted 390,000 RSUs to a consultant
of the Company, which will vest upon the Incentive Plan receiving
disinterested shareholder approval.
On February 22, 2021, the Company implemented a
3 for 1 forward split (the "Stock Split") of the Company's issued
and outstanding common shares. The number of shares and relevant
information including but not limited to the share price, number of
warrants and options and exercise price per warrant and option
presented in this MD&A had been adjusted accordingly.
As at the date of this MD&A, the Company had
21,039,375 common shares issued and outstanding.
In addition, as at the date of this MD&A,
the Company had 37,500 stock options with exercise prices of
CA$1.33 per share issued and outstanding.
OUTLOOK
Effective May 3, 2021, the Company will change
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. We expect a rebound
in the company’s wellness sales in 2021 driven by both higher
online as well as offline or retail sales. We expect the effects of
Covid 19 on retail to improve in 2021 and our offline business is
expected to show strong growth in 2021. Further we are planning
international sales growth in key markets including the UK, the EU
and Latin America in 2021. Sales growth targets for the wellness
segment are expected to be a 50% increase in 2021 compared to the
sales levels realized in 2020.
- Beauty
Business - The beauty business is driven by the company’s
No BS brand. Sales growth targets for the beauty segment are
expected to be a 75% increase in 2021 compared to the sales levels
realized in 2020 (pre-acquisition of No BS).
- Plant
Based Food - We expect to close the TRU Brands acquisition
within the second quarter of 2021. We will provide updates to our
outlook once this acquisition is complete.
- 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.
About PureK Holdings Corp.
PureK Holdings 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 PureK Holdings Corp., please visit
https://purekana.com/investor-relations/.
For further information:
Brian MeadowsChief Financial OfficerPh: +1 (855) 553-7441Email:
ir@purekana.com
Daniel NussbaumMedia and Investor RelationsPh: +1 (917)
232-8960Email: Daniel@amwpr.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 are typically
identified by words such as "may", "will", "should", "could",
"anticipate", "expect", "project", "estimate", "forecast", "plan",
"intend", "target", "believe" and similar words suggesting future
outcomes or statements regarding an outlook. Although these
forward-looking statements are based on assumptions the Company
considers to be reasonable based on the information available on
the date such statements are made, such statements are not
guarantees of future performance and readers are cautioned against
placing undue reliance on forward-looking statements. By their
nature, these statements involve a variety of assumptions, known
and unknown risks and uncertainties, and other factors which may
cause actual results, levels of activity, and achievements to
differ materially from those expressed or implied by such
statements. The forward-looking statements contained in this press
release are based on certain assumptions and analysis by management
of the Company ("Management") in light of its experience and
perception of historical trends, current conditions and expected
future development and other factors that it believes are
appropriate. The forward-looking statements contained in this press
release speak only as of the date hereof and are expressly
qualified by this cautionary statement.Specifically, this news
release contains forward-looking statements relating to, but not
limited to: completion of proposed acquisitions, including of TRU
Brands; expansion capabilities of No B.S. Skincare and TRU Brands;
completion of the Name Change; PureKana's active ingredient product
launch; expansion plans for PureKana; 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; the effects
of COVID-19 on retail; planned international sales growth in key
markets; sales growth in the beauty industry; timing for closing
the TRU Brands acquisition; the Company's plan to build a
direct-to-consumer platform catering to Millennial and Gen-Z
consumers; operating synergies; and the Company's acquisition
activities.
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.
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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