Cortex Business Solutions Inc. (TSX VENTURE:CBX)(OTCQX:CTPNF), an enterprise
e-Procurement solutions company, reported financial results for the fiscal third
quarter ended April 30, 2014.
Fiscal Q3 2014 Financial Highlights vs. Same Year-Ago Quarter
-- Total revenues increased 46% to a record $2,390,652.
-- Revenue from recurring access and usage fees increased 44% to
$2,070,174.
-- Net cash used in operating activities improved to $(860,456) compared to
$(1,155,584).
Management Commentary
"The fiscal third quarter marked the highest quarterly revenue in our company's
history as well as the third sequential quarter of double-digit revenue growth,"
said Art Smith, president and CEO of Cortex. "These record results were driven
by continued robust growth in suppliers transacting on the network, the rollout
of value-added services and accelerated traction in the U.S. market."
"Along those lines, we continue to execute on our plan to penetrate the U.S.
markets. We believe the strategic initiatives we are making, such as ramping our
U.S. sales force, will allow us to capitalize on the tremendous, untapped
opportunity in this market. In fact, U.S. revenues, which grew by 43% during the
quarter, will play an integral role in driving top line growth."
"Looking ahead, our overall activity in the fiscal fourth quarter remains
strong, both in terms of transaction volume and the onboarding of new customers
to the network. As our customer base expands, we are confident that the
introduction of additional service offerings will result in recurring revenue
growth, and ultimately, profitability."
Fiscal Q3 2014 Financial Results
Total revenues in the fiscal third quarter of 2014 increased 46% to $2,390,652
compared to $1,634,469 in the fiscal third quarter of 2013. The key growth was
in the access and usage revenue stream, which increased 44% as the result of
increased billable suppliers on the Network and increased transactions flowing
through the Network.
On a sequential basis, total revenues increased 20% to $2,390,652, compared to
$1,984,069 in the second quarter of 2014. Recurring access and usage fees
increased 13% to $2,070,174 in the third quarter of 2014 from $1,829,303 in the
second quarter of 2014. This growth can be attributed to an increase in the
number of suppliers transacting on the Network.
Net cash used in operating activities in the third quarter improved to
$(860,456) compared to $(1,155,584) in the year-ago quarter. The improvement in
cash outflow is the result of the increase in the revenue as well as the
monitoring of expenditures across the organization.
Total expenses in the third quarter increased 20% to $4,125,881 compared to the
same year-ago quarter. Expenses in the quarter include bonus provisions of
$531,274. Of this, $301,274 is with respect to the employee performance
management program (April 30, 2013 - $263,613), of which approximately $158,000
will be settled through issuance of common shares. An additional $230,000 was
accrued based on approval received at the June 12, 2014 AGM for incentive
compensation for leadership members of Cortex, payable by way of common shares.
The Company will see further compensation increases in fiscal fourth quarter of
2014 as the Company increases its sales force to focus on its U.S. growth
strategy.
Net loss in the third quarter was $1,716,619 or $(0.01) per diluted common
share, compared to a net loss of $1,809,062 or $(0.01) per diluted common share
in the year-ago quarter.
At April 30, 2014, cash totaled $10,669,125 compared to $5,179,066 at July 31,
2013. During the fiscal third quarter, the company completed a $10,000,000
equity financing. The company continues to carry no debt.
Fiscal Q3 2014 Operational Metrics
-- Signed three buying organizations onto the network for a total of 82,
compared to five signed in the year-ago quarter for a total of 69
-- Active buying organizations on the network increased by seven for a
total of 69, compared to the year-ago quarter for a total of 51
-- Signed four new 100% e-billing customers for a total of 12, compared to
zero in the year ago quarter since the product was not yet introduced
-- E-Billing destinations on the network totaled 249, compared to zero in
the year ago quarter since the e-billing product was not yet introduced
-- Total suppliers transacting on the network increased 34% to 7,817,
compared to 5,849 in the year-ago quarter
-- Supplier initiated transactions increased 21% to 998,814, compared to
823,440 in the year-ago quarter
-- Total transactions increased 15% to 3,231,611, compared to 2,821,534 in
the year-ago quarter
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 third quarter ended
April 30, 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: Monday, June 16, 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 June
23, 2014.
Toll-free replay number: 1-800-408-3053
Toll replay number: 1-905-694-9451
Replay ID: 3174225
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 Statements of Financial Position
(Prepared in Canadian dollars)
(unaudited)
----------------------------------------------------------------------------
April 30 July 31
2014 2013
Assets
Current assets
Cash $ 10,669,125 $ 5,179,066
Accounts receivable 842,450 651,782
Prepaid expenses and deposits 210,087 167,870
Investments 60,000 50,000
---------------- ----------------
11,781,662 6,048,718
Property and equipment 382,309 476,735
Intangible assets 4,273,296 4,275,120
---------------- ----------------
$ 16,437,267 $ 10,800,573
---------------- ----------------
---------------- ----------------
Liabilities
Current liabilities
Accounts payable and accrued liabilities $ 1,881,485 $ 1,404,716
Current portion of deferred revenue 151,098 539,853
---------------- ----------------
2,032,583 1,944,569
Deferred revenue - 4,500
---------------- ----------------
2,032,583 1,949,069
---------------- ----------------
Shareholders' Equity
Share capital 56,782,560 47,713,288
Accumulated other comprehensive income 141,745 -
Warrants 980,941 980,941
Contributed surplus 7,369,013 6,492,495
Deficit (50,869,575) (46,335,220)
---------------- ----------------
14,404,684 8,851,504
---------------- ----------------
$ 16,437,267 $ 10,800,573
---------------- ----------------
---------------- ----------------
Approved by the Board:
Art Smith, Director
Randy Henderson, Director
Cortex Business Solutions Inc.
Condensed Consolidated Statements of Loss and Comprehensive Loss
For the three months and nine months ended April 30, 2014 and 2013
(Prepared in Canadian dollars)
(unaudited)
----------------------------------------------------------------------------
Three months ended April Nine months ended April
30 30
2014 2013 2014 2013
Revenue
Access and usage fees $ 2,070,174 $ 1,439,219 $ 5,555,292 $ 3,995,390
Integration fees 213,490 84,578 423,029 216,754
Set-up fees 18,304 110,672 92,723 328,060
Project management 88,684 - 94,259 -
------------- ------------ ------------ ------------
2,390,652 1,634,469 6,165,303 4,540,204
------------- ------------ ------------ ------------
Expenses
Salaries, employee
benefits and
subcontract 2,810,515 2,330,878 7,169,016 6,723,077
General and
administrative 397,956 260,881 999,652 725,224
Commissions, rebates
and credit card
charges 222,275 150,934 606,251 510,104
Rent 127,492 96,192 338,590 256,399
Professional fees 107,738 50,989 347,352 148,915
Internet and hosting
costs 31,856 27,943 82,299 81,485
Market expansion and
product development - 218,226 - 777,106
Stock-based
compensation 122,918 153,894 423,023 388,355
Amortization 305,131 161,716 766,163 499,137
------------- ------------ ------------ ------------
4,125,881 3,451,653 10,732,346 10,109,802
------------- ------------ ------------ ------------
Loss before the
following (1,735,229) (1,817,184) (4,567,043) (5,569,598)
Finance income 18,610 8,122 32,688 27,607
------------- ------------ ------------ ------------
Net loss $(1,716,619) $(1,809,062) $(4,534,355) $(5,541,991)
------------- ------------ ------------ ------------
------------- ------------ ------------ ------------
Other comprehensive
earnings
Items that may be
reclassified
subsequently to net
income (loss):
Foreign exchange gain
(loss) on foreign
operations 40,365 - 141,745 -
------------- ------------ ------------ ------------
Comprehensive loss $(1,676,254) $(1,809,062) $(4,392,610) $(5,541,991)
------------- ------------ ------------ ------------
------------- ------------ ------------ ------------
Net loss per share-basic
and diluted $ (0.01) $ (0.01) $ (0.01) $ (0.02)
------------- ------------ ------------ ------------
------------- ------------ ------------ ------------
Cortex Business Solutions Inc.
Condensed Consolidated Statements of Changes in Shareholders' Equity
(Prepared in Canadian dollars)
(unaudited)
----------------------------------------------------------------------------
Common
Number of shares Number of Warrants
Common shares stated value Warrants stated 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 2,774,567 536,247 - -
Issuance costs - (892,061) - (164,305)
Stockckcbased
compensation - - - -
Expiration of
Compensation units
and warrants - - (8,333,500) (653,969)
Prospectus offering
for cash 38,920,000 6,168,820 22,379,000 1,148,140
-------------- ------------- ------------ -------------
Balance, April 30,
2013 259,147,375 47,732,574 23,852,063 1,083,068
-------------- ------------- ------------ -------------
Balance July 31, 2013 259,147,375 47,713,288 22,379,000 980,941
Net loss - - - -
Foreign exchange
translation of
foreign operations
Prospectus offering
for cash 100,000,000 10,000,000 - -
Compensation units
issued in
conjunction with
prospectus - (462,000) - -
Options exercised for
cash 65,852 13,480 - -
Transferred on
exercise of options - 8,505 - -
Issued in lieu of
salaries and bonus 2,484,200 397,472
Issuance costs - (888,185) - -
Stockcbased
compensation - - - -
-------------- ------------- ------------ -------------
Balance April 30,
2014 359,213,227 $ 56,782,560 22,379,000 $ 980,941
-------------- ------------- ------------ -------------
-------------- ------------- ------------ -------------
Cortex Business Solutions Inc.
Condensed Consolidated Statements 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 - - (5,541,991) (5,541,991)
Options exercised for
cash - - - 28,750
Transferred on
exercise of options (31,855) - - -
Issued in lieu of
salaries and bonus - - - 536,247
Issuance costs 261,797 - - (794,569)
Stockckcbased
compensation 388,355 - - 388,355
Expiration of
Compensation units
and warrants 653,969 - - -
Prospectus offering
for cash - - - 7,316,960
------------ ------------- ------------- --------------
Balance, April 30,
2013 6,301,537 - (44,730,520) 10,386,659
------------ ------------- ------------- --------------
Balance July 31, 2013 6,492,495 - (46,335,220) 8,851,504
Net loss - - (4,534,355) (4,534,355)
Foreign exchange
translation of
foreign operations 141,745 141,745
Prospectus offering
for cash - - - 10,000,000
Compensation units
issued in
conjunction with
prospectus 462,000 - - -
Options exercised for
cash - - - 13,480
Transferred on
exercise of options (8,505) - - -
Issued in lieu of
salaries and bonus 397,472
Issuance costs - - - (888,185)
Stockcbased
compensation 423,023 - - 423,023
------------ ------------- ------------- --------------
Balance April 30,
2014 $ 7,369,013 $ 141,745 $(50,869,575) $ 14,404,684
------------ ------------- ------------- --------------
------------ ------------- ------------- --------------
Cortex Business Solutions Inc.
Condensed Consolidated Statements of Cash Flows
For the three months and nine months ended April 30, 2014 and 2013
(Prepared in Canadian dollars)
(unaudited)
----------------------------------------------------------------------------
Three months ended April Nine months ended April
30 30
2014 2013 2014 2013
Cash provided by (used
in)
Operating activities
Net loss $(1,716,619) $(1,809,062) $(4,534,355) $(5,541,991)
Items not affecting
cash
Stock-based
compensation 122,918 153,894 423,023 388,355
Amortization 305,131 161,716 766,163 499,137
Salaries paid in
shares (note 7(b)) - 3,928 16,000 (74,314)
------------ ------------ ------------ ------------
(1,288,570) (1,489,524) (3,329,169) (4,728,813)
Changes in non-cash
working capital 428,114 333,940 259,160 (15,930)
------------ ------------ ------------ ------------
Net cash used in
operating activities (860,456) (1,155,584) (3,070,009) (4,744,743)
------------ ------------ ------------ ------------
Financing activities
Proceeds from issuance
of shares 10,000,000 6,528,917 10,000,000 6,551,141
Proceeds from exercise
of stock options, net
of costs - - 13,480 -
Share issuance costs (882,148) - (888,185) -
------------ ------------ ------------ ------------
Net cash from (used in)
financing activities 9,117,852 6,528,917 9,125,295 6,551,141
------------ ------------ ------------ ------------
Investing activities
Acquisition of property
and equipment (1,641) (7,200) (6,966) (105,367)
Intangible asset costs (85,215) (411,267) (662,947) (1,213,817)
------------ ------------ ------------ ------------
Net cash used in
investing activities (86,856) (418,467) (669,913) (1,319,184)
------------ ------------ ------------ ------------
Effect of exchange rate
changes on cash and cash
equivalents held in
foreign currency (27,041) - 104,686 -
------------ ------------ ------------ ------------
Cash inflow (outflow) 8,143,499 4,954,866 5,490,059 487,214
Cash, beginning of period 2,525,626 2,283,318 5,179,066 6,750,970
------------ ------------ ------------ ------------
Cash, end of period $10,669,125 $ 7,238,184 $10,669,125 $ 7,238,184
------------ ------------ ------------ ------------
Non-cash transactions:
Issuance of shares in
lieu of salaries and
bonuses including
prior period amounts
accrued (note 7(b)) $ - $ 28,000 $ 16,000 $ 536,247
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
See accompanying notes
FOR FURTHER INFORMATION PLEASE CONTACT:
Investor Relations Contacts:
Liolios Group, Inc.
Cody Slach or Greg Falesnik
1-949-574-3860
CBX@Liolios.com
Brisco Capital Partners
Scott Koyich
1-403-215-5979
skoyich@briscocapital.com
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