TORONTO, January 28, 2019 /PRNewswire/ --
- Concerned Shareholders highlight perilous 86% share price decline during past 14 months caused by inadequate management and oversight, underscored by apparent lack of appreciation for the underlying business and operational issues.
- New board of highly experienced and fully independent directors will revitalize Kuuhubb by leveraging existing assets, focusing on market opportunities, reducing costs, improving existing apps and developing new associated apps.
- Nominee directors bring much needed industry, operational, public company, governance, financial and legal expertise to the board, have demonstrated the ability to manage a company through growth and are all personally committed to reversing value destruction.
- Time to put an end to the share price freefall and refocus on value creation.
A group of Kuuhubb Inc. (TSXV: KUU) ("Kuuhubb" or the "Company") shareholders (the "Concerned Shareholders"), led by Marco Durante, together owning more than 5% of the outstanding shares of the Company, have requisitioned a special meeting of Kuuhubb shareholders for the purpose of replacing the entire board of directors (the "Board") with new directors capable of fixing the staggering value destruction at the hands of the current CEO, Jouni Keränen, and overseen by the Board.
"The current board-consisting of Jouni Keränen, Christian Kolster, Carl-Gustaf von Troil, Philip Chen, Maurice Colson and Arnold Kondrat-has presided over a period of dramatic destruction of shareholder value and has shown no ability or plan to turn things around," said Mr. Durante. "The only pragmatic choice is to install a completely new and independent board consisting of five independent, highly qualified, skilled and experienced directors who bring significant industry, operational, public company, governance, financial and legal expertise to the Company."
Given the current Board's inability to stop the share price freefall and the fact that the Board is already late in holding the annual meeting of Company shareholders in contravention of the Canada Business Corporations Act, the Concerned Shareholders request that the special meeting of Kuuhubb shareholders be held by no later than March 25, 2019 (the "Meeting").
Fully Independent, Qualified, Motivated and Accountable Nominees
The proposed nominees (the "Nominees") are all personally focused on shareholder value creation for suffering shareholders, who have seen Kuuhubb's share price decline by 86% during the past 14 months. Each Nominee has been chosen based on their extensive experience and expertise as set out below, as well as their commitment to strong corporate governance.
Each of the industry veterans put forward knows how to build and grow a business like Kuuhubb and has demonstrated the acumen to adapt to constantly changing market conditions. While the Nominees will act as independent fiduciaries, they have all personally committed support for plans to revitalize Kuuhubb by leveraging existing assets, focusing on market opportunities, reducing costs, improving existing apps and developing new associated apps. Now is the time for immediate and proactive action, not for excuses and defensive tactics.
 See note under Additional Information
The Nominees are as follows:
Richard Lachcik - Mr. Lachcik practiced corporate and securities law in Toronto, Canada for 34 years, formerly with the law firm Norton Rose Fulbright Canada LLP. He is an experienced public company director, with many years of experience as a director of both TSX Venture Exchange and Toronto Stock Exchange companies and is knowledgeable on corporate governance and legal and regulatory requirements for public companies. Mr. Lachcik would act as Chairman of the new Kuuhubb board. Mr. Lachcik is a resident of Ontario, Canada.
Jon Walsh - Mr. Walsh is a veteran of game publishing, delivering more than 30 games across console, PC and mobile platforms, including five number 1 games that have collectively generated more than 50 million downloads. He was the Founder of Fuse Powered, a mobile ad mediation and analytics platform used by hundreds of successful apps, and later acquired by Upsight where he served as President. Mr. Walsh is currently a director and officer of PopReach Incorporated, a developer and publisher of free to play games with 150+ employees working from offices in Toronto, Halifax and Bangalore. Mr. Walsh is a resident of Ontario, Canada.
Christopher Locke - Mr. Locke's 20-year career in game development and publishing includes being responsible for industry defining freemium games like Smurfs' Village and Kim Kardashian: Hollywood, which have collectively grossed over US$350 million. He was the Founder and Chief Executive Officer of Blammo Games, acquired by Glu Mobile (NASDAQ: GLUU), where he served as Senior Vice President. Mr. Locke is currently a director and officer of PopReach Incorporated, a developer and publisher of free to play games with 150+ employees working from offices in Toronto, Halifax and Bangalore. Mr. Locke is a resident of Ontario, Canada.
Amit Khanduja - Mr. Khanduja is Chief Executive Officer of Reliance Entertainment - Digital, of Chicago, leading all the digital business for Reliance Entertainment including gaming, VOD and cloud sourcing platforms. Reliance Entertainment is a division of a multi-billion dollar conglomerate based in Mumbai, India. Mr. Khanduja has an extensive background in leading mobile and digital media apps, cloud and analytics businesses, bringing a unique blend of international management experience. He is also on the boards of Zapak Digital Entertainment and BigFlix, leading VOD platforms. Mr. Khanduja is a resident of Illinois, United States of America.
Pasi Jokinen - Mr. Jokinen is Executive Advisor and Board member of Fingersoft OY, a mobile game company based in Finland. Over the past six years, Fingersoft has collected over one billion downloads internationally for its Hill Climb Racing series. Mr. Jokinen is a former Chief Executive Officer of pioneering Nordic IoT company Thingsee. He is also a founder and advisor to RoundZero, cutting edge mobile app analytics company. Mr. Jokinen is a resident of Helsinki, Finland.
The Facts Tell a Frightening Story
For reasons highlighted below, the time has come for immediate, real and meaningful change in the oversight and management of Kuuhubb:
(a) 86% Share Price Decline - During the past 14 months, Kuuhubb 's share price on the TSX Venture Exchange ("TSXV") has declined 86%. Shareholders that invested Cdn$2.35 had around Cdn$0.31 of it left as at December 31, 2018.
(b) Large Losses - During the first 15 months following Kuuhubb's listing on the TSXV (July 2017 to September 30, 2018), the Company reported, in its financial statements, losses totaling approximately US$19.l million (about Cdn$25.4 million based on current exchange rates). This is more than 47% larger than the Company's market capitalization on the TSXV as at December 31, 2018. For the year ending June 30, 2018, Kuuhubb reported a loss of US$0.34 per share which, based on current exchange rates, is significantly more than the current share price of the Company on the TSXV. To the detriment of shareholders, management has done nothing to stop the bleeding.
(c) 39% Drop in Revenue - During the last two financial quarters reported on by the Company, the Company's revenue dropped precipitously, by approximately 39%.
(d) Cash Balance - As of September 30, 2018 the Company reported a cash balance of only US$208,713 despite having raised about US$20,000,000 during the 16 months prior. Shareholders now face further dilution (or debt) to replace the cash that has been burned by Mr. Keränen.
(e) Decline in Total Assets - Total assets as reported by the Company have fallen 48% from US$30.2 million as at December 31, 2017 to US$15.6 million as at September 30, 2018.
(f) Popularity of the Recolor App - The Concerned Shareholders view the Recolor App as the principal asset for the entire business of the Company. According to App Annie, a respected app performance monitoring service, weekly iPhone downloads of the Recolor App have collapsed over the past 12 months. Most of the drop off can be attributed to poorly executed app development and roll-out.
(g) Cease Trade Order and TSXV Trading Suspension - The Company failed to file its most recent audited annual financial statements (and related MD&A and certifications under National Instrument 52-109 - Certification of Disclosure in Issuers' Annual and Interim Filings) by the filing deadline, resulting in the issuance, by the Ontario Securities Commission in November 2018, of a cease trade order with respect to securities of the Company and the TSXV suspending trading in the Company's shares (trading on the TSXV was reinstated once the Company filed the said documents late). Shareholders of well-run companies do not face cease trade events due to a bookkeeper's failure to meet their obligations.
(h) Delinquent in Holding Annual Shareholders' Meeting - The directors failed to hold the annual meeting of the Company's shareholders to elect directors by the December 31, 2018 deadline in breach of section 155 of the Canada Business Corporations Act.
URGENT ACTION REQUIRED
Kuuhubb is "bleeding" when measured against all its key performance indicators. Management and the Board don't seem to care. The Concerned Shareholders call for immediate triage by replacing the current Board with experts capable of fixing the issues. The Concerned Shareholders call on all shareholders to contact the Board, insist that the requisitioned meeting be held promptly so that transition can take place smoothly before it is too late. Shareholders should further caution the Board against taking defensive steps that are not in shareholders' best interests. The Concerned Shareholders intend to prepare an Information Circular in support of the requisitioned meeting that will provide further information related to the issues Kuuhubb faces and the plan for addressing them. In the meantime, shareholders may contact our communications advisor Kingsdale Advisors by toll-free telephone in North America at 1-866-228-8614, by collect call outside North America at 1-416-867-2272, or by email at email@example.com
Kingsdale Advisors is acting as the strategic shareholder and communications advisor and Fasken Martineau DuMoulin LLP is acting as legal counsel to Marco Durante.
The Concerned Shareholders have not sought or obtained consent from any third party to the use herein of previously published information. Any such information should not be viewed as indicating the support of such third party for the views expressed herein.
Except for the historical information contained herein, the matters addressed herein are forward-looking statements that involve certain risks and uncertainties. One should be aware that actual results could differ materially from those contained in the forward-looking statements. The Concerned Shareholders do not assume any obligation to update the forward-looking information.
Information in Support of Public Broadcast Solicitation
The Concerned Shareholders are relying on the exemption under section 9.2(4) of National Instrument 51-102 - Continuous Disclosure Obligations ("NI 51-102") to make this public broadcast solicitation. The following information is provided in accordance with corporate and securities laws applicable to public broadcast solicitations. This solicitation is being made by the Concerned Shareholders, and not by or on behalf of the management of Kuuhubb. The head office of Kuuhubb is 1 First Canadian Place, 100 King Street West, Suite 7070, Toronto, Ontario, M5X 1E3, Canada.
This news release and any solicitation made by the Concerned Shareholders in advance of the Meeting is, or will be, as applicable, made by the Concerned Shareholders and not by or on behalf of the management of Kuuhubb. All costs incurred for any solicitation will be borne by the Concerned Shareholders, provided that, subject to applicable law, the Concerned Shareholders may seek reimbursement from Kuuhubb for his out-of-pocket expenses, including proxy solicitation expenses and legal fees, incurred in connection with a successful reconstitution of the Company's board of directors.
Any proxies solicited by the Concerned Shareholders may be solicited by way of public broadcast, including through news releases, speeches or publications and by any other manner permitted under applicable laws, including pursuant to a dissident information circular sent to shareholders of Kuuhubb. Solicitations may be made by or on behalf of the Concerned Shareholders, by mail, telephone, fax, email or other electronic means, and in person by directors, officers and employees of the Concerned Shareholders, as applicable, or by the Nominees.
It is expected that any proxies solicited by the Concerned Shareholders in connection with the Meeting may be revoked by instrument in writing by the shareholder giving the proxy or by its duly authorized officer or attorney, or in any other manner permitted by law. The Concerned Shareholders have filed this news release, which contains the information required by section 9.2(4)(c) of NI 51-102 and Form 51-102F5 Information Circular in respect of the Nominees under Kuuhubb's company profile on SEDAR at http://www.sedar.com .
None of the Nominees have been or are currently a director of officer of the Company (with the exception of Mr. Richard Lachcik who was a director of a predecessor, BRC Diamond Corporation). None of the Nominees beneficially own, or control or direct, directly or indirectly, any securities of Kuuhubb or any of its subsidiaries.
To the knowledge of the Concerned Shareholders, no Nominee is, as at the date hereof, or has been, within 10 years before the date hereof, a director, chief executive officer ("CEO") or chief financial officer ("CFO") of any company (including the Company) that was the subject, while the Nominee was acting in the capacity as director, CEO or CFO of such company, of a cease trade or similar order or an order that denied the relevant company access to any exemption under securities legislation, that was in effect for a period of more than 30 consecutive days or was subject to a cease trade or similar order or an order that denied the relevant company access to any exemption under securities legislation, that was in effect for a period of more than 30 consecutive days, that was issued after the Nominee ceased to be a director, CEO or CFO but which resulted from an event that occurred while the Nominee was acting in the capacity as director, CEO or CFO of such company; or is, as at the date hereof, or has been within 10 years before the date hereof, a director or executive officer of any company (including the Company) that, while that person was acting in that capacity, or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets; or has, within the 10 years before the date of this release, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of the proposed director.
To the knowledge of the Concerned Shareholders, no Nominee has been subject to any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with a securities regulatory authority; or has been subject to any penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable securityholder in deciding whether to vote for a proposed director.
Except as set out herein, to the knowledge of the Concerned Shareholders, neither the Concerned Shareholders, nor any of the Nominees or their respective associates or affiliates, have: (a) any material interest, direct or indirect, in any transaction since the commencement of the Company's most recently completed financial year or in any proposed transaction which has materially affected or will materially affect the Company or any of its subsidiaries; or (b) any material interest, direct or indirect, by way of beneficial ownership of securities or otherwise, in any matter currently known to be acted on at the Meeting, other than the election of directors.
Mr. Durante provided consulting services to the Company from January to July 2018 and earned fees of Cdn$5,000 per month in relation to services provided.
The Concerned Shareholders are Marco Durante, Josephine ("Josie") Durante, Antonio Paluzzi and Grazzia Paluzzi and Tymar Holdings Inc.
Executive Vice President Communication Strategy
SOURCE Concerned Shareholders of Kuuhubb Inc.