Rise Capital Corp. Provides Update on Qualifying

NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES

TORONTO, Nov. 05, 2021 (Globalrelease Wire) — Rise Capital Corp. (TSXV: RSE.P) (“Rise”) and MiniLuxe, Inc. (“MiniLuxe”) are pleased to provide a further update with respect to the arm’s length business combination between Rise and MiniLuxe, pursuant to which Rise will acquire all of the issued and outstanding securities of MiniLuxe (the “Transaction”). Upon completion, the Transaction will constitute a reverse take-over of Rise by MiniLuxe, with the resulting company (the “Resulting Issuer”) to be renamed “MiniLuxe Holding Corp.”.

In anticipation of the completion of the Transaction, the parties have entered into a definitive agreement and plan of reorganization (the “Merger Agreement”). The Merger Agreement contemplates the merger of MiniLuxe with a newly-incorporated subsidiary of Rise Capital and the issuance of post-consolidation securities the Resulting Issuer in exchange for all outstanding securities of MiniLuxe (the “Merger”). The Merger is an arm’s length transaction and will constitute a reverse takeover of Rise Capital by MiniLuxe.

Pursuant to the terms of the Merger Agreement, existing stockholders of MiniLuxe will receive subordinate voting shares and/or proportionate voting shares of the Resulting Issuer in exchange for their common and preferred stock of MiniLuxe. The terms of the subordinate voting shares and the proportionate voting shares of the Resulting Issuer can be found in the management information circular of Rise dated August 20, 2021, which is available on Rise’s SEDAR profile at www.sedar.com. Following the completion of the Transaction, former shareholders of MiniLuxe will hold: (a) 32,784,148 subordinate voting shares, representing approximately 59.6% of the outstanding subordinate voting shares; and (b) certain former shareholders of MiniLuxe will hold 91,065 proportionate voting shares, representing all of the outstanding proportionate voting shares.

Upon completion of the Merger, the directors of the Resulting Issuer will be Anthony Tjan, Stefanie Jay, Mats Lederhausen, Zoe Krislock and Vernon Lobo, and all senior officers of Rise Capital will resign and be replaced by appointees of MiniLuxe. It is proposed that Zoe Krislock, the current Chief Executive Officer of MiniLuxe, will serve as Chief Executive Officer of the Resulting Issuer, and Elizabeth Lorber the current Chief Financial Officer of MiniLuxe, will serve as the Chief Financial Officer of the Resulting Issuer.

The Merger is subject to a number of conditions, including, (i) all necessary shareholder and regulatory approvals, including the approval of the TSX Venture Exchange (the “TSXV”) for the listing of the Resulting Issuer subordinate voting shares; (ii) the conversion of all outstanding promissory notes of MiniLuxe into common stock of MiniLuxe (which common stock will immediately thereafter be exchanged for subordinate voting shares and/or proportionate voting shares of the Resulting Issuer in accordance with the terms of the Merger); and (iii) the Subscription Receipts issued by MiniLuxe FinCo Corp., as previously announced on October 19, 2021 (the “Financing”), shall have been exchanged for an equal number of subordinate voting shares of the Resulting Issuer. There can be no assurance that the Merger will be completed as currently proposed or at all. In addition, listing of the subordinate voting shares of the Resulting Issuer on the TSXV is subject to satisfaction of all requirements of the TSXV. A further news release will be issued by Rise if and when such requirements have been satisfied.

Upon completion of the Transaction, it is expected that there will be 54,972,714 subordinate voting shares and 91,065 proportionate voting shares outstanding. Cue Ball Capital LP (“Cue Ball”), an entity controlled, in part, by Anthony Tjan and Mats Lederhausen, is expected to own approximately 44.4% of the outstanding subordinate voting shares of the Resulting Issuer, assuming conversion of all outstanding proportionate voting shares, together with warrant to acquire an additional 206,772 subordinate voting shares, and will therefore be considered a “control person” of the Resulting Issuer, as that term is defined in the policies of the TSXV. In addition, following the completion of the Transaction an affiliate of Cue Ball will provide advisory services to the Resulting Issuer on an ongoing basis at a rate of USD$26,500 per month, subject to adjustment from time to time based on the needs of the Resulting Issuer. A copy of the Merger Agreement will be available on Rise’s SEDAR profile at www.sedar.com.

History of MiniLuxe

MiniLuxe Inc. is a privately-held Delaware company incorporated on April 22, 2008. From its inception, the MiniLuxe brand has been anchored in a dual commitment to a) setting the high standards of clean in the beauty industry and b) empowering a diverse community of self-care and beauty professionals. Since opening its first studio, every MiniLuxe service meets standards for hygiene protocol, sourcing and ingredients of the components used, and fair labor practices.

In 2015, MiniLuxe expanded its studio footprint beyond the Boston area, specifically, to the Dallas and Los Angeles markets. In parallel to its geographic expansion, MiniLuxe has focused on developing its training and education programs. It has further evolved into an omni-platform business spanning services at nail care studios and partner channels (e.g. “shop-in-shop” and kiosk form factors) and clean nail and body care products.

Today, MiniLuxe’s business model chiefly generates talent revenue via provision of nail care and waxing services, which is complemented by product revenue from the sale of MiniLuxe-branded products and select third-party products. MiniLuxe is currently executing a deliberately sequenced omni-platform strategy, which it expects will further diversify these revenue streams.

This omni-platform strategy aims to introduce on-demand services that meet the client where they are—anywhere, anytime; this, in turn will create flexible work options for MiniLuxe’s talent base (i.e. options to provide services at a branded physical fleet location, workplace, home, etc.). Such a model would be complemented by MiniLuxe-owned and developed “eduployment”-based certification programs, which would graduate talent directly onto the MiniLuxe platform.

The past three years of MiniLuxe’s history have been marked by the following milestones:

  • record revenue level of $22M generated in 2019.
  • assembly of experienced management team:
    • hired Zoe Krislock as Chief Executive Officer of MiniLuxe in 2018. Prior to MiniLuxe, Ms. Krislock had spent 15 years at Nike.
    • hired Elizabeth Lorber as Chief Financial Officer of MiniLuxe in 2020. Prior to MiniLuxe, Ms. Lorber spent 10 years in equity research at OppenheimerFunds before leading finance and corporate development at lifestyle and beauty brands.
    • expansion of digital capabilities: digitized the business by moving close to 100% online or digital bookings, removing cash-wraps in studios to accelerate the shift toward fully-digital payment, and developing an end-to-end digital customer experience with personalized recommendations throughout 2019 and 2020.
    • development of asset-light channels: established off-premise talent revenue with channel partners, including Equinox, and with the custom-designed “Myrtle” mobile nail service station in 2019.
    • launch of MiniLuxe-branded product line: launched e-commerce in 2019 with MiniLuxe-branded nail care and body-care treatments and products, followed later by customer-driven product line expansion.

Through March 8, 2020 (prior to COVID-19 related closures) MiniLuxe year-to-date service revenue was up nearly 15% versus same-store sales over the corresponding period in 2019. However, the onset of the COVID-19 pandemic resulted in government-mandated stay-at-home orders. On March 17, 2020, MiniLuxe closed all of its studios. With the full cessation of services, the board of directors and management of MiniLuxe moved immediately to enact a COVID-19 plan. A significant number of team members were furloughed; by March 30, 2020, MiniLuxe downsized from a team of hundreds to just seven full-time employees. Management also immediately moved to secure a Paycheck Protection Program loan from the Small Business Administration of the U.S. federal government, which has since been fully forgiven. In its studios, MiniLuxe has doubled down on hygiene by implementing even higher safety standards during reopening, exceeding those set by government-mandated protocols. Since May 2020, MiniLuxe has been steadily reopening its studios as capacity restrictions have permitted and is currently bringing its talent revenue back up toward pre-COVID run rates.

Summary of Financial Information of MiniLuxe

The following table sets forth selected historical financial information for MiniLuxe for the fiscal years ended December 27, 2020, December 29, 2019, and December 27, 2018, and the for the thirteen and twenty-six weeks ended June 27, 2021, in each case prepared in accordance with IFRS. The results for fiscal year 2020 reflect an environment in which the impact of the COVID-19 pandemic significantly impaired revenue and earnings relative to prior years:

Income Statement Data Fiscal year ended
  Dec. 27, 2020 Dec. 29, 2019 Dec. 27, 2018
Revenue $10,610 $22,324 $21,021
Income (Loss) From Operations ($9,520) ($8,261) ($7,699)
Net Income (Loss) $6,761 ($27,915) ($7,020)
Cash Dividends Declared $0 $0 $0
Adjusted EBITDA(1) ($8,028) ($7,045) ($6,741)
       
Balance Sheet Data Fiscal year ended
  Dec. 27, 2020 Dec. 29, 2019 Dec. 27, 2018
Total Assets $20,098 $25,422 $28,268
Total Long-Term Liabilities $50,777 $57,517 $45,405
Working Capital ($3,491) ($11,011) $1,175
Income Statement Data 13 Weeks Ended 26 Weeks Ended  
  June 27, 2021 June 27, 2021  
Revenue $4,176 $6,774  
Income (Loss) From Operations ($1,680) ($3,464)  
Net Income (Loss) ($14,282) ($21,833)  
Cash Dividends Declared $0 $0  
Adjusted EBITDA(1) ($893) ($2,451)  
       
Balance Sheet Data As of    
  June 27, 2021    
Total Assets $21,340    
Total Long-Term Liabilities $56,593    
Working Capital ($17,256)    
Note:
  (1) Adjusted EBITDA is calculated by adding back fixed asset depreciation, right-of-use asset depreciation under IFRS 16, asset disposal, and share-based compensation expense to IFRS operating income, then deducting straight-line rent expenses net of lease abatements. A reconciliation to IFRS measures will be provided in Rise’s filing statement to be filed on SEDAR at www.sedar.com.

Summary of Sources and Uses of Funds of the Resulting Issuer

The total funds expected to be available to the Resulting Issuer after giving effect to the Merger and the Financing are estimated to be approximately USD$18,030,000, which includes the following: (a) the gross proceeds from the Financing of C$10,051,269/$8,119,415; (b) the net cash and cash equivalents of Rise of C$9,388,243/USD$7,583,823 as at September 30, 2021; and (c) the net cash and cash equivalents of MiniLuxe of USD$2,327,000, as at October 31, 2021.

The table below sets forth the principal purposes for which the estimated funds available to the Resulting Issuer upon completion of the Transaction are expected to be used for the ensuing 12-month period:

Principal use of funds(1) Amount ($)  
Base business operations $4,280,000  
Studio and channel investments $2,990,000  
Corporate headcount and overhead expansion $2,710,000  
Technology and e-commerce investments $3,075,000  
Debt service $470,000  
Merger transaction costs $1,000,000  
Working capital requirements $2,300,000  
Consideration set aside for potential future acquisitions(2) $1,120,000  
Excess cash $85,000  
TOTAL $18,030,000  
Notes:
  (1) The principal use of funds has been prepared based upon anticipated needs of the Resulting Issuer over the 12-month period immediately following the completion of the Transaction. The Resulting Issuer intends to spend the funds available to it as stated above. There may be circumstances, however, where for sound business reasons, a reallocation of funds may be necessary. It is difficult, at this time, to definitively project the total funds necessary to effect the planned activities of the Resulting Issuer. For these reasons, management considers it to be in the best interests of the Resulting Issuer and Resulting Issuer shareholders to afford management a reasonable degree of flexibility as to how the funds are employed among the uses identified above, or for other purposes, as the need arises. These funds include the expected net cash need of existing business operations, but exclude anticipated contributions from studio and channel investments.
  (2) There are no agreements for contemplated acquisitions currently in place. However, MiniLuxe believes that there are numerous potential acquisition targets to deploy these resources toward in the 12 months post-Transaction. Cash earmarked for potential acquisitions will be deployed for other purposes should those acquisitions not materialize.

The parties also wish to clarify that Christine Mastrangelo, the current corporate secretary of MiniLuxe, will not be an officer of the Resulting Issuer. Ms. Lorber will act as the corporate secretary of the Resulting Issuer. In addition, Blue Door Agency, a current provider of public relations services to MiniLuxe, has not been retained to provide investor relations services to the Resulting Issuer.

About Rise

Rise is a “capital pool company” that completed its initial public offering in May 2021. The common shares of Rise (“Rise Shares”) are listed for trading on the TSX Venture Exchange (“TSXV”) under the stock symbol RSE.P. Rise has not commenced commercial operations and has no assets other than cash. It is intended that the Transaction, when completed, will constitute the “Qualifying Transaction” of Rise pursuant to Policy 2.4 – Capital Pool Companies (the “CPC Policy”) of the TSXV.

About MiniLuxe

MiniLuxe, a Delaware corporation based in Boston, Massachusetts is a digitally-driven, socially-responsible lifestyle brand and empowerment platform in nail care. For over a decade, MiniLuxe has been setting industry standards for health, hygiene, and fair labour practices in its efforts to transform the most used, but poorly regulated beauty service. MiniLuxe seeks to become one of the largest educators and employers of Asian-American, Asian-Canadian, and other diverse members who are part of one of the largest independent workforces of women.

Today, MiniLuxe has revenue streams principally across talent services (nail care and waxing services) and product revenue (through its own proprietary clean nail care products). MiniLuxe is driven by a fully integrated digital-first platform that manages all client bookings, preferences and payments and provides designers with the ability to manage their scheduling, clientele, bonuses and gratuity, and training content. Since its founding, MiniLuxe has performed over 2 million services.

Trading Halt

Trading in the common shares of Rise has been halted and is not expected to resume until completion of the Transaction or until the TSXV receives the requisite documentation for the resumption of trading.

For more information, please contact:

Michael Zych
Chief Financial Officer, Corporate Secretary and Director, Rise
(905) 825-4011

Zoe Krislock
Chief Executive Officer, MiniLuxe
[email protected]

This news release does not constitute an offer to sell, or a solicitation of an offer to buy, any of the securities in the United States. The securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”) or any state securities laws and may not be offered or sold within the United States or to U.S. Persons unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available.

Completion of the Transaction is subject to a number of conditions, including but not limited to, TSXV acceptance and if applicable pursuant to Exchange Requirements (as that term is defined in the policies of the TSXV), majority of the minority shareholder approval. Where applicable, the Transaction cannot close until the required shareholder approval is obtained. There can be no assurance that the Transaction will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the management information circular or filing statement to be prepared in connection with the Transaction, any information released or received with respect to the Transaction may not be accurate or complete and should not be relied upon. Trading in the securities of a capital pool company should be considered highly speculative. All information contained in this press release with respect to Rise and MiniLuxe was supplied by the respective party for inclusion herein, without independent review by the other party, and each party and its directors and officers have relied on the other party for any information concerning the other party.

The TSXV has in no way passed upon the merits of the Transaction and has neither approved nor disapproved the contents of this press release. Neither the TSXV nor its Regulation Services Provider (as that term is defined in the policies of the TSXV) accepts responsibility for the adequacy or accuracy of this release.

Forward-Looking Information and Statements

This press release contains certain “forward-looking information” and “forward-looking statements” within the meaning of applicable securities laws. Such forward-looking information and forward-looking statements are not representative of historical facts or information or current condition, but instead represent only the Company’s beliefs regarding future events, plans or objectives, many of which, by their nature, are inherently uncertain and outside of the Company’s control. Generally, such forward-looking information or forward-looking statements can be identified by the use of forward-looking terminology such as “plans”, “expects” or “does not expect”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate”, or “believes”, or variations of such words and phrases or may contain statements that certain actions, events or results “may”, “could”, “would”, “might” or “will be taken”, “will continue”, “will occur” or “will be achieved”. The forward-looking information contained herein may include, but is not limited to, information concerning the Transaction, the Financing, the completion and timing of the application to the TSXV in respect of the Transaction, the proposed structure by which the Transaction is to be completed, the ability of Rise and MiniLuxe to meet the conditions of the Transaction in the required timeframes, obtaining the necessary exemptions and approvals from the TSXV or other regulatory bodies, including the business, name and function of the Resulting Issuer and certain financial information.

Rise cautions that all forward-looking statements are inherently uncertain, and that actual performance may be affected by a number of material factors, assumptions and expectations, many of which are beyond the control of Rise and MiniLuxe, including expectations and assumptions concerning Rise, MiniLuxe, the Resulting Issuer, the Transaction, the timely receipt of all required shareholder, court and regulatory approvals (as applicable), including the acceptance of the TSXV, the satisfaction of other closing conditions in accordance with the terms of the Merger Agreement, as well as other risks and uncertainties, including those described in Rise’s final prospectus dated May 6, 2021, a copy of which is available on SEDAR at www.sedar.com.

In connection with the forward-looking information and forward-looking statements contained in this press release, Rise has made certain assumptions. Although Rise believes that the assumptions and factors used in preparing, and the expectations contained in, the forward-looking information and statements are reasonable, undue reliance should not be placed on such information and statements, and no assurance or guarantee can be given that such forward-looking information and statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information and statements. The forward-looking information and forward-looking statements contained in this press release are made as of the date of this press release, and Rise does not undertake to update any forward-looking information and/or forward-looking statements that are contained or referenced herein, except in accordance with applicable securities laws. All subsequent written and oral forward-looking information and statements attributable to Rise or persons acting on its behalf is expressly qualified in its entirety by this notice.

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