Cortex Business Solutions Inc. (TSX VENTURE:CBX)(OTCQX:CTPNF), an enterprise
e-procurement solutions company, reported financial results for the fiscal
second quarter ended January 31, 2014.
Fiscal Q2 2014 Financial Highlights vs. Same Year-Ago Quarter
-- Total revenues increased 32% to a record $2.0 million
-- Revenue from recurring access and usage fees increased 39% to $1.8
million
-- Total expenses decreased 4% to $3.3 million
-- Net loss improved to $1.3 million or $(0.00) per diluted share, compared
to a net loss of $1.9 million or $(0.01) per diluted share
Fiscal Q2 2014 Financial Results
Total revenues in the fiscal second quarter of 2014 increased 32% to $2.0
million, compared to $1.5 million in the fiscal second quarter of 2013. The
increase in revenues was primarily due to increased recurring access and usage
fees, which grew 39% in the second quarter to $1.8 million from $1.3 million in
the year-ago quarter.
On a sequential basis, total revenues in the second quarter increased 11% from
$1.8 million in the first quarter of 2014. Recurring access and usage fees
increased 10% from $1.7 million in the first quarter of 2014.
Total expenses in the second quarter decreased 4% to $3.3 million as compared to
the same year-ago quarter. Excluding non-cash expenses of stock-based
compensation expense that increased $24,000 and amortization that increased
$137,000, total expenses decreased 7% to $2.8 million from the year-ago quarter.
Net loss in the second quarter improved to $1.3 million or $(0.00) per diluted
common share, compared to a net loss of $1.9 million or $(0.01) per diluted
common share in the year-ago quarter. The improvement was primarily due to the
increase in revenues and prudent expense management.
The Company improved its cash outflow by 46% (Q2 F2014 - $(1,312,744); Q2 F2013
- $(2,445,755)). This improvement is the result of increased revenue,
productivity improvements and a reduction in capital spending.
The Company paid its annual Employee Performance Management bonus in the
quarter. The total bonus paid in Q2 F2014 was $819,895 (Q2 F2013 - $936,449), of
this $419,881 was paid in cash (Q2 F2013 - $443,696). The bonus paid in Q2 F2014
was included in accrued liabilities at the end of July 31, 2013 and the bonus
paid in Q2 F2013 was included in accrued liabilities at the end of July 31,
2012.
At January 31, 2014, cash totaled $2.5 million, compared to $5.2 million at July
31, 2013. Subsequent to the end of the fiscal second quarter, the company
completed a $10.0 million equity financing. The company continues to carry no
debt.
Fiscal Q2 2014 Operational Metrics
-- Signed six hubs onto the network for a total of 81, compared to eight
signed in the year-ago quarter for a total of 64
-- Active hubs on the network increased by two to a total of 62, compared
to an increase of eight in the year-ago quarter to total 42
-- Signed two new 100% e-billing customers, including Maverick Oilfield
Services and X-Cel Energy Services, for a total of five, compared to
zero in the year ago quarter since the product was not yet introduced
-- Total suppliers transacting on the network increased 13% to 6,584,
compared to 5,844 in the year-ago quarter
-- Supplier initiated transactions increased 19% to 925,445, compared to
778,387 in the year-ago quarter
-- Total transactions increased 16% to 3,039,967, compared to 2,622,069 in
the year-ago quarter
Management Commentary
"Our record revenue in the second quarter also represented another quarter of
sequential double-digit revenue growth," said Art Smith, president and CEO of
Cortex. "This double-digit growth was on top of sequential single-digit growth
in transaction volume, demonstrating the pricing power and increased revenue per
supplier in our Cortex Trading Partner Network.
"We expect average revenue per supplier to continue to increase, particularly as
we introduce additional service offerings, such as our 100% e-billing solution,
which continues to garner growing interest and new signups. Our first customer
using this solution is committed to onboarding approximately 4,000 of its
customers and we expect this to generate meaningful revenues in fiscal 2014.
"Our transaction levels have continued to strengthen in the current third
quarter, which reflects positive indicators in the broader macro environment for
our customers in the oil and gas industry, such as an increase in oil rig
utilization. As we work to expand our presence in the North American market,
particularly in the U.S. where we see a robust pipeline of sales opportunities,
we are confident the strategic steps we are taking today will result in steady
recurring revenue growth and, ultimately, greater shareholder value."
Conference Call
Cortex will hold a conference call today at 4:30 p.m. Eastern time (2:30 p.m.
Mountain time) to discuss its financial results for the second quarter ended
January 31, 2014. The company's president and CEO, Art Smith, and senior vice
president of U.S. operations and business development, Ryan Lailey, will host
the conference call, followed by a question and answer period.
Date: Thursday, March 27, 2014
Time: 4:30 p.m. Eastern time (2:30 p.m. Mountain time)
Toll-free dial-in number: 1-800-565-0813
International dial-in number: 1-416-340-8527
Please call the conference telephone number ten minutes prior to the start time.
An operator will register your name and organization. If you have any difficulty
connecting with the conference call, please contact Liolios Group at
1-949-574-3860.
A replay of the conference call will be available after the call through April
3, 2014.
Toll-free replay number: 1-800-408-3053
Toll replay number: 1-905-694-9451
Replay ID: 2960712
About Cortex Business Solutions
Cortex Business Solutions Inc. (TSX VENTURE:CBX)(OTCQX:CTPNF) is an enterprise
e-Procurement solutions company that improves efficiencies, reduces costs and
streamlines procurement and supply chain processes for its customers. Accessing
the Cortex Network enhances the exchange of business critical documents, such as
purchase orders, receipts and invoices, resulting in improved cash flow
management and business controls, while reducing day's outstanding and
administrative costs. Cortex is a low cost, low risk solution that can be
implemented quickly by leveraging clients' existing business environment. For
more information, please visit www.cortex.net.
Forward-Looking Statements
Certain statements contained in this press release may constitute
forward-looking statements. All statements other than statements of historical
fact may be forward-looking statements. In particular, this press release
contains forward-looking statements pertaining to meaning revenue growth from
e-billing solution and recurring revenue growth. These statements involve known
and unknown risks, uncertainties and other factors that may cause actual results
or events to differ materially from those anticipated in such forward-looking
statements. Cortex believes that the expectations reflected in those
forward-looking statements are reasonable, but no assurance can be given that
these expectations will prove to be correct and such forward-looking statements
included in this press release should not be unduly relied upon by investors.
With respect to forward-looking statements contained in this press release,
Cortex has made assumptions regarding, among other things: Cortex's continued
success in gaining new customers in Canada and the United States, general
economic and financial conditions, and other assumptions as set forth in the
company's annual filings. Cortex's actual results could differ materially from
those anticipated in these forward-looking statements as a result of risk
factors that may include, but are not limited to: worse than expected general
economic conditions in Canada and the United States, the inability of management
to execute its business plan and manage growth successfully and the risk of slow
service adoption. Readers are cautioned that the foregoing list of factors is
not exhaustive. Additional information on these and other factors that could
affect Cortex's operations and financial results are included in reports on file
with Canadian securities regulatory authorities and may be accessed through the
SEDAR website (www.sedar.com).
The forward-looking statements contained in this press release speak only as of
the date of this press release and are expressly qualified, in their entirety,
by this cautionary statement. Readers should not place undue reliance on
forward-looking information. Except as required by law, the company undertakes
no obligation to publicly update or revise any forward-looking statements.
Cortex Business Solutions Inc.
Condensed Consolidated Statement of Financial Position
(Prepared in Canadian dollars)
(unaudited)
-----------------------------------------------------------------
January 31 January 31
2014 2013
Assets
Current assets
Cash $ 2,525,626 $ 5,179,066
Accounts receivable 678,025 651,782
Prepaid expenses and deposits 148,094 167,870
Investments 50,000 50,000
-----------------------------
3,401,745 6,048,718
Property and equipment 414,551 476,735
Intangible assets 4,459,333 4,275,120
-----------------------------
$ 8,275,629 $ 10,800,573
-----------------------------
-----------------------------
Liabilities
Current liabilities
Accounts payable and accrued
liabilities $ 1,173,269 $ 1,404,716
Current portion of deferred revenue 262,195 539,853
-----------------------------
1,435,464 1,944,569
Deferred revenue - 4,500
-----------------------------
1,435,464 1,949,069
-----------------------------
Shareholders' Equity
Share capital 48,126,705 47,713,288
Accumulated other compehensive
income 101,380 -
Warrants 980,941 980,941
Contributed surplus 6,784,095 6,492,495
Deficit (49,152,956) (46,335,220)
-----------------------------
6,840,165 8,851,504
-----------------------------
$ 8,275,629 $ 10,800,573
-----------------------------
-----------------------------
Cortex Business Solutions Inc.
Condensed Consolidated Statement of Loss and Comprehensive Loss
For the three months ended January 31, 2014 and 2013
(Prepared in Canadian dollars)
(unaudited)
----------------------------------------------------------------------------
Three months ended Six months ended
January 31 January 31
2014 2013 2014 2013
Revenue
Access and usage
fees $ 1,829,303 $ 1,318,275 $ 3,485,118 $ 2,556,171
Integration fees 119,962 73,134 209,539 132,176
Set-up fees 29,229 110,784 74,419 217,388
Project
management 5,575 - 5,575 -
----------------------------------------------------------
1,984,069 1,502,193 3,774,651 2,905,735
----------------------------------------------------------
Expenses
Salaries, employee
benefits and
subcontract 2,094,378 2,282,151 4,358,501 4,392,199
General and
administrative 314,461 233,910 601,696 464,343
Commissions,
rebates and
credit card
charges 190,319 203,635 383,976 359,170
Rent 105,649 78,695 211,098 160,207
Professional fees 79,953 54,036 239,614 97,926
Internet and
hosting costs 26,435 26,074 50,443 53,542
Market expansion
and product
development - 228,710 - 558,880
Stock-based
compensation 148,837 125,124 300,105 234,461
Amortization 305,079 168,284 461,032 337,421
----------------------------------------------------------
3,265,111 3,400,619 6,606,465 6,658,149
----------------------------------------------------------
Loss before the
following (1,281,042) (1,898,426) (2,831,814) (3,752,414)
----------------------------------------------------------
Finance income 4,098 6,213 14,078 19,485
----------------------------------------------------------
Net loss $ (1,276,944)$ (1,892,213)$ (2,817,736)$ (3,732,929)
----------------------------------------------------------
----------------------------------------------------------
Other
comprehensive
earnings
Items that may be
reclassified
subsequently to
net income
(loss):
Foreign exchange
gain (loss) on
foreign
operations 101,380 101,380
----------------------------------------------------------
Comprehensive
earnings (loss) $ (1,175,564)$ (1,892,213)$ (2,716,356)$ (3,732,929)
----------------------------------------------------------
----------------------------------------------------------
Net loss per
share-basic and
diluted $ 0.00 $ (0.01) $ (0.01) $ (0.02)
----------------------------------------------------------
----------------------------------------------------------
Cortex Business Solutions Inc.
Condensed Consolidated Statement of Changes in Shareholders' Equity
(Prepared in Canadian dollars)
(unaudited)
-------------------------------------------------------------------------
Common
Number of shares Number Warrants
Common stated of stated
shares value Warrants value
Balance -
July 31,
2012 217,261,141 $ 41,858,963 9,806,563 $ 753,202
Net loss - - - -
Options
exercised
for cash 191,667 28,750 - -
Transferred
on exercise
of options - 31,855 - -
Issued in
lieu of
salaries and
bonus 2,574,567 508,247 - -
Issuance
costs - (6,526) - -
Stock-based
compensation - - - -
Expiration of
Compensation
units and
warrants - - (8,333,500) (653,969)
------------------------------------------------------------
Balance,
January 31,
2013 220,027,375 42,421,289 1,473,063 99,233
------------------------------------------------------------
Balance -
July 31,
2013 259,147,375 47,713,288 22,379,000 980,941
Net loss - - - -
Foreign
exchange
translation
of foreign
operations
Options
exercised
for cash 65,852 13,480 - -
Transferred
on exercise
of options - 8,502 - -
Issued in
lieu of
salaries and
bonus 2,484,200 397,475 - -
Issuance
costs - (6,040) - -
Stock-based
compensation - - - -
------------------------------------------------------------
Balance -
January 31,
2014 261,697,427 $ 48,126,705 22,379,000 $ 980,941
------------------------------------------------------------
------------------------------------------------------------
Cortex Business Solutions Inc.
Condensed Consolidated Statement of Changes in Shareholders' Equity
(Prepared in Canadian dollars)
(unaudited)
----------------------------------------------------------------------------
Accumulated
Other Total
Contributed Comprehensive shareholders'
Surplus Income Deficit equity
Balance -
July 31,
2012 $ 5,029,271 $ -$ (39,188,529) $ 8,452,907
Net loss - - (3,732,929) (3,732,929)
Options
exercised
for cash - - - 28,750
Transferred
on exercise
of options (31,855) - - -
Issued in
lieu of
salaries and
bonus - - - 508,247
Issuance
costs - - - (6,526)
Stock-based
compensation 234,461 - - 234,461
Expiration of
Compensation
units and
warrants 653,969 - - -
---------------------------------------------------------------
Balance,
January 31,
2013 5,885,846 - (42,921,458) 5,484,910
---------------------------------------------------------------
Balance -
July 31,
2013 6,492,492 - (46,335,220) 8,851,501
Net loss - - (2,817,736) (2,817,736)
Foreign
exchange
translation
of foreign
operations 101,380 101,380
Options
exercised
for cash - - - 13,480
Transferred
on exercise
of options (8,502) - - -
Issued in
lieu of
salaries and
bonus - - - 397,475
Issuance
costs - - - (6,040)
Stock-based
compensation 300,105 - - 300,105
---------------------------------------------------------------
Balance -
January 31,
2014 $ 6,784,095 $ 101,380$ (49,152,956) $ 6,840,165
---------------------------------------------------------------
---------------------------------------------------------------
Cortex Business Solutions Inc.
Condensed Consolidated Statement of Cash Flows
For the three months ended January 31, 2014 and 2013
(Prepared in Canadian dollars)
(unaudited)
----------------------------------------------------------------------------
Three months ended Six months ended
January 31 January 31
2014 2013 2014 2013
Cash provided by
(used in)
Operating
activities
Net loss $ (1,276,944) $ (1,892,213) $ (2,817,736) $ (3,732,929)
Items not
affecting cash
Stock-based
compensation 148,837 125,124 300,105 234,461
Amortization 305,079 168,284 461,032 337,421
Salaries paid
in shares 16,000 (72,020) 16,000 (78,242)
------------------------------------------------------------
(807,028) (1,670,825) (2,040,599) (3,239,289)
Changes in non-
cash working
capital (361,205) (136,357) (125,318) (235,528)
------------------------------------------------------------
Net cash used in
operating
activities
(1,168,233) (1,807,182) (2,165,917) (3,474,817)
------------------------------------------------------------
Financing
activities
Proceeds from
issuance of
shares - - - 22,224
Proceeds from
exercise of
stock options,
net of costs - - 13,480 -
Share issuance
costs (3,282) (4,084) (6,037) -
------------------------------------------------------------
Net cash from
(used in)
financing
activities (3,282) (4,084) 7,443 22,224
------------------------------------------------------------
Investing
activities
Acquisition of
property and
equipment (2,666) (89,334) (5,325) (98,167)
Software
development
costs (226,654) (439,721) (577,732) (802,550)
Changes in non-
cash working
capital - (105,434) - (114,342)
------------------------------------------------------------
Net cash used in
investing
activities (229,320) (634,489) (583,057) (1,015,059)
------------------------------------------------------------
Effect of
exchange rate
changes on cash
and cash
equivalents
held in foreign
currency 88,091 - 88,091 -
------------------------------------------------------------
Cash outflow (1,312,744) (2,445,755) (2,653,440) (4,467,652)
Cash, beginning
of period 3,838,370 4,729,073 5,179,066 6,750,970
------------------------------------------------------------
Cash, end of
period $ 2,525,626 $ 2,283,318 $ 2,525,626 $ 2,283,318
------------------------------------------------------------
------------------------------------------------------------
Non-cash
transactions:
Issuance of
shares in lieu
of salaries
and bonuses
including
prior period
amounts
accrued $ 16,000 $ 453,802 $ 16,000 $ 635,604
------------------------------------------------------------
------------------------------------------------------------
FOR FURTHER INFORMATION PLEASE CONTACT:
Liolios Group, Inc.
Cody Slach or Greg Falesnik
Investor Relations Contacts
1-949-574-3860
CBX@Liolios.com
Brisco Capital Partners
Scott Koyich
Investor Relations Contact
1-403-215-5979
skoyich@briscocapital.com
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