Mene Inc. Reports Financial Results for First Quarter 2020

Menē Inc. (TSX-V:MENE) (US:MENEF) (“Menē” or the “Company”), an online 24 karat jewelry brand, today announced financial results for the first quarter ended March 31, 2020 (“Q1 2020”). All amounts are expressed in Canadian dollars unless otherwise noted.

FINANCIAL HIGHLIGHTS:

• Record IFRS Quarterly Revenue of $5.2 million, a $2.4 million (89%) increase year-over-year (“YoY”). Non-IFRS Adjusted Revenue² of $5.6 million, an increase of 93% YoY, also a new record for the Company.
• Record IFRS Gross Profit of $1 million, an increase of $0.3 million (49%) YoY. Record Non IFRS Adjusted Gross Profit³ of $1.1 million, an increase of 52% YoY.
• Generated record Free Cash Flow of $3.5 million during the quarter.
• Reduced Operating Expenses to 33% in Q1 2020, compared to 93% in Q1 2019.
• IFRS Operating Loss decreased by $1.2 million, or 62% to a record low of $0.7 million, due to record gross profit and management’s ability to reduce operating expenses.
• Record Low Total Comprehensive Loss of $0.8 million, reduced by 31% YoY.
• Sold 6,641 units of jewelry through 4,157 customer orders in Q1 2020. Average Order Value of $1,454, an increase of 92% from the same quarter last year.
• Sold 69 kilograms of gold and platinum jewelry during the quarter, an increase of 60% compared to Q1 2019.
• Early repayment of $10 million of note payable principal reducing debt and semi-annual interest payments.
• At March 31, 2020, Menē has $14.3 million in Tangible Common Equity⁵, including $8.7 million in cash and cash equivalents and $14.9 million in short-term investments.

OPERATIONAL HIGHLIGHTS:

• Introduced 89 new product designs during the quarter, including a new product collection: Sundials.
• Cumulative units of jewelry sold reached 53,615 as of quarter end.
• Sales to Returning Customers attributed to 70% of total sales in Q1 2020.
• Inventory Level of 132 Gold Equivalent Kilograms. The YoY decrease is due to higher than anticipated growth in sales and temporary production halt because of COVID-19.
• Outstanding customer order waitlist of approximately $6.4 million as of July 16, 2020.
• Unveiled “Menē Around the World”, a web-based tool that transparently illustrates the growth of the Menē community across the globe. Menē has sold to more than 60 countries, including to customers in every Canadian province and U.S. state.
• Featured in ELLE Magazine as one of the “23 Fine Jewelry Brands Worth Investing In”.
• Registered more than 15,000 independent customer reviews on mene.com/reviews.

IFRS Consolidated Income Statement Data & Key Performance Indicators (KPIs) 1	FY 2020	FY 2019				FY 2018
	Q1 2020	Q4 2019	Q3	Q2	Q1	Q4	Q3	Q2
Revenue (CAD) 2	5,156,994	4,653,601	3,218,281	2,456,930	2,733,596	3,266,663	1,985,711	1,392,867
Gross profit (CAD)	1,012,923	458,201	1,000,210	600,719	678,814	740,130	208,408	229,461
Gross profit (%)	20%	10%	31%	24%	25%	23%	10%	16%
Net loss	(1,855,303)	(3,449,094)	(1,535,114)	(672,661)	(1,107,752)	(2,668,276)	(1,644,097)	(1,164,185)
Total comprehensive loss	(808,093)	(3,991,270)	(1,405,212)	(868,784)	(1,166,288)	(2,703,205)	(1,691,124)	(919,106)
Non-IFRS Adjusted Revenue (CAD) 2	5,611,286	5,095,968	3,445,952	2,601,569	2,914,297	3,704,403	2,346,622	1,891,608
Non-IFRS Adjusted Gross Profit (CAD) 3	1,102,154	501,757	1,070,968	636,083	723,686	839,309	246,287	311,623
Non-IFRS Adjusted Loss 4	(577,147)	(867,348)	(442,016)	25,254	(476,562)	(437,785)	(1,093,533)	(998,123)
Total Shareholders' Equity (CAD)	14,321,528	15,127,316	17,399,693	18,423,043	17,833,109	18,494,246	10,077,520	11,251,166
Inventory balance (kg of gold) 5	132	212	249	255	222	244	135	131
Customer orders	4,157	4,548	2,998	5,167	4,437	6,729	3,994	2,389
Units of jewelry sold	6,641	7,225	5,164	7,183	8,182	9,111	6,168	2,920
Jewelry weight sold (total kg)	69	65	44	42	43	51	35	23
The Company’s financial statements for fiscal year-ending 2019 and 2018 are audited by an external assurance firm. The Company adjusts its revenue by adding back the value of jewelry that was returned by customers, and discounts given to customers. These adjustments are made to assess the gross revenue before deducting these items from revenue per IFRS. See Non-IFRS Measures for a full reconciliation. The Company adjusts its gross profit by adjusting for revenue and cost of sales to be added back for the value of jewelry that was returned by customers, and discounts given to customers. See Non-IFRS Measures for a full reconciliation. The Company adjusts its total comprehensive loss by adjusting for Non-IFRS Adjusted Gross Profit, and removing the impact of non-cash expenses, consisting of depreciation and amortization, stock-based compensation, accretion, revaluation of metal loan and translation gain or loss. See Non-IFRS Measures for a full reconciliation. Inventory balances in kilograms of gold are calculated by taking the total Canadian Dollar (CAD) inventory value at each quarter-end date, and dividing the value by the CAD gold spot price per gram.

STATEMENT FROM FOUNDER & CEO ROY SEBAG:

Q1 2020 was a superb operating quarter for Menē Inc. We achieved record quarterly revenue of $5.2 million under IFRS and $5.6 million when including returns and exchanges. These sales were generated with little to no marketing expense. In other words, Menē generated $5.6 million in revenue in just 90 days through organic means. This impressive feat for a two-year-old jewelry brand with no physical stores is an affirmation of our company’s long-term potential and the strength of our brand. I would like to draw our shareholders’ attention to another important milestone which we achieved in the quarter. As I have previously noted, the jewelry business is seasonal with a sowing period between April and September and a harvesting period between October through March. In this last harvesting season, Menē generated nearly $10 million in sales compared with $6 million in the prior year. However, on a purely cash flow basis (which captures precious metal gains on our inventory), we produced over $5.3 million in free cash flow with $3.5 million in this most recent quarter ended March 31, 2020. Now, to be sure, there was a reduction in inventory in this past quarter but note that this reduction was only $3.9 million while our resulting inventory is carried at cost and we completed an early repayment of $10 million of principal notes for $9.3 million in cash. Consequently, it should be clear that Menē has achieved seasonal profitability. This point can be further stressed by explaining that even in this quarter, only $1.1 million of the $1.7 million in IFRS operational expenditures are ordinary cash costs. Of the $1.7 million IFRS figure, $1.39 million were cash costs with $0.3 million being extraordinary. This point should be augmented by the fact that our inventory is carried at cost with significant embedded value to be realized at prevailing precious metal values. Moreover, the movements in our financial statements associated with the Goldmoney metal loan (we incurred $1 million in mark to market loss in this quarter) should not be confused with the soundness and trajectory of our operations. All in all, our financial performance evidences incredible growth under the stewardship of prudent operational management. Together, these two dynamics provide a snapshot of a business that is rapidly maturing from its growth phase to its sustainable and soon-to-be profitable phase. Repaying nearly 30% of our debt one year before it was due during the depths of the COVID-19 crisis, is yet another testament to this maturation. We now have our attention focused on preparing for the next big harvest and believe that our strong performance will continue into 2021. As it relates to scale, our current capacity should allow the company to achieve up to $40 million in annual sales before any additional capital expenditures will be required. Turning back to our last quarter, we can see how our business responded to increased demand while maintaining continuity in operations during COVID-19. This included a short period where our factories were shut down and inventory mix was slightly impaired. The factories have since returned to full capacity at the time of this press release. I am resoundingly pleased with our performance and would like to thank our customers, team members, and shareholders for their contributions to our success. It is truly remarkable to consider that our jewelry brand now has tens of thousands of customers around the world adorning jewelry that is worth more today than at the time we sold it to them.

Non-IFRS Measures

This news release contains non-IFRS financial measures; the Company believes that these measures provide investors with useful supplemental information about the financial performance of its business, enable comparison of financial results between periods where certain items may vary independent of business performance, and allow for greater transparency with respect to key metrics used by management in operating its business. Although management believes these financial measures are important in evaluating the Company's performance, they are not intended to be considered in isolation or as a substitute for, or superior to, financial information prepared and presented in accordance with IFRS. These non-IFRS financial measures do not have any standardized meaning and may not be comparable with similar measures used by other companies. For certain non-IFRS financial measures, there are no directly comparable amounts under IFRS. These non-IFRS financial measures should not be viewed as alternatives to measures of financial performance determined in accordance with IFRS. Moreover, presentation of certain of these measures is provided for year-over-year comparison purposes, and investors should be cautioned that the effect of the adjustments thereto provided herein have an actual effect on the Company's operating results.

Non-IFRS Adjusted Revenue² is a non-IFRS measure. The Company adjusts its revenue by adding back the value of jewelry that was returned by customers, and discounts given to customers. These adjustments are made to assess the gross revenue before deducting these items per IFRS revenue. The closest comparable IFRS measure is revenue.

Non-IFRS Adjusted Gross Profit³ is a non-IFRS measure. The Company adjusts its gross profit by adjusting for the additional revenue and associated cost of sales added back for the value of jewelry that was returned by customers, and discounts given to customers. The closest comparable IFRS measure is gross profit.

Non-IFRS Adjusted Loss⁴ is a non-IFRS measure. Non-IFRS Adjusted Loss is a non-IFRS measure, calculated as total comprehensive loss, plus adjustment for Non-IFRS Adjusted Gross Profit and debt forgiveness, and excluding depreciation and amortization, stock-based compensation, accretion, revaluation of metal loan, and translation gain or loss. The closest comparable IFRS measure is total comprehensive loss.

Tangible Common Equity⁵ is a non-IFRS measure. It is calculated as total shareholder’s equity excluding intangible assets.

For a full definition of non-IFRS financial measures used herein to their nearest IFRS equivalents, please see the section entitled "Non-IFRS Financial Measures" in the Company's MD&A for the quarter ended March 31, 2020.

About Menē Inc.

Menē crafts pure 24 karat gold and platinum jewelry that is transparently sold by gram weight. Through mene.com, customers may buy jewelry, monitor the value of their collection over time, and sell or exchange their pieces by gram weight at prevailing market prices. Menē was founded by Roy Sebag and Diana Widmaier-Picasso with a mission to restore the relationship between jewelry and savings. Menē empowers consumers by marrying innovative technology, timeless design, and pure precious metals to create pieces which endure as a store of value.

For more information about Menē, visit mene.com.

Forward-Looking Statements

This news release contains certain “forward-looking information” within the meaning of applicable Canadian securities laws that are based on expectations, estimates and projections as at the date of this news release. Any statements that involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions, future events or performance (often but not always using phrases such as “expects”, or “does not expect”, “is expected”, “anticipates” or “does not anticipate”, “plans”, “budget”, “scheduled”, “forecasts”, “estimates”, “believes” or “intends” or variations of such words and phrases or stating that certain actions, events or results “may” or “could”, “would”, “might” or “will” be taken to occur or be achieved) are not statements of historical fact and may be forward-looking information and are intended to identify forward-looking information.

This forward-looking information is based on reasonable assumptions and estimates of management of the Company at the time it was made, and involves known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking information. Such factors include, among others, the risks associated with Covid-19 and other infectious diseases presenting as major health issues; failure to comply with environmental and health and safety laws and regulations; operating or technical difficulties in connection with the manufacture, sale and distribution of jewelry; actual audited results differing from reported unaudited results; global economic climate; dilution of the Company’s shares; the Company’s limited operating history; future capital needs and uncertainty of raising capital; the competitive nature of the jewelry industry; currency exchange risks; the need for the Company to manage its planned growth and expansion; the effects of product development and need for continued technology and manufacturing change; protection of proprietary rights; the effect of government regulation and compliance on the Company and the industry; network security risks; the ability of the Company to maintain properly working systems; theft and risk of physical harm to personnel; reliance on key personnel; global economic and financial market deterioration impeding access to capital or increasing the cost of capital; and volatile securities markets impacting security pricing unrelated to operating performance. Although the Company has attempted to identify important factors that could cause actual results to differ materially, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking information. The Company undertakes no obligation to revise or update any forward-looking information other than as required by law.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

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