CALGARY, ALBERTA–(Marketwired – Oct. 27, 2016) – Cortex Business Solutions Inc. (TSX VENTURE:CBX), the online network helping companies connect and interact with each other to transmit documents and grow their businesses, today announces its three months ended July 31, 2016 (Q4 F2016) and year ended July 31, 2016 (“F2016”) Management’s Discussion and Analysis and Consolidated Financial Statements.
“Fiscal 2016 has been an exciting year for everyone involved, and as we post the results of our first full fiscal year together as a management team; I am excited to share that phase one of our transformation plan is now complete” expressed Joel Leetzow, President and CEO of Cortex Business Solutions. “When I came aboard last year, our established oil and gas market was in the early stages of a major economic downturn. As a management team, it was clear that what we had to do, during F2016, would be difficult. While others began looking at how to merely survive this economic headwind, Cortex instead began to reshape our business to better position ourselves for continued success. The cost cutting measures Cortex undertook while working together with our customers to further reduce their costs has been mutually beneficial and will continue to pay off for years to come.”
F2016 was a year of ensuring the Company strategy and processes are aligned with a lower cost structure for future success. After the major restructuring in F2015, Cortex was prepared to move ahead with its ambitious plan of reshaping the business further in F2016. Part of that work included the improvement of internal processes, implementation of a proven sales strategy and a culture of organizational discipline. With companies facing hard financial decisions, the value proposition of a platform such as the Cortex Network has never been more appealing, and gives customers greater control over their costs. Cortex provides value to customers in an environment where cost reductions are necessary, through the automation and streamlining of their invoice processes, while preparing them for scalable growth when the economy recovers.
Sandra Fawcett, CFO of Cortex added, “Cortex is proud of the results realized over the past fiscal year. These results show not only the strength of our offering but also the Company’s ability to survive a tough economic environment. Although total revenue is down, it is minor compared to the severity of decline throughout the entire oil and gas industry.”
F2016 Highlights:
Revenue
- Total revenue was down 7%,
- Access and usage fees were down 3%:
- Access fees grew 20%,
- Usage fees declined 24%,
- Integration and set up fees were down 31%, and
- Project management fees were down 85%.
Expenses
- Total expenses were down 32%,
- Cost of sales down 14%,
- Sales and marketing down 61%,
- Research and development costs down 34%,
- General and administrative costs were down 27%, and
- Severance and termination charges were down 73%.
CashFlow
- Net cash used in operating activities was down 81%. A reduction of $4,868,540.
- Closed a bought deal financing in September 2015 for gross proceeds of $3,102,750.
- Cash inflow for the year improved 129% from an outflow in F2015 or $5,560,711 to an inflow in F2016 of $1,634,885.
F2016 was a positive year for the Company. The cost savings realized did not impede the ability to continue to provide a quality product to the marketplace with the same level of customer support and quality our customers have been accustomed to. This transition year was required to align the processes internally to allow for future growth and success without the same level of costs of the past.
Q4 F2016 Highlights compared to Q4 F2015
Revenue
- Total revenue declined 10%,
- Access and usage fees declined 7%;
- Access fees grew 17%,
- Usage fees declined 31%,
- Integration and set-up fees declined 45%, and
- Project management fees declined 69%.
Expenses
- Total expenses were down 34%,
- Cost of sales were down 24%,
- Sales and marketing were down 43%,
- Research and development costs were down 29%,
- General and administrative costs were down 31%, and
- Severance and termination charges were down 98%.
Cashflow
- Net cash used in operating activities improved 72% to $432,424 in Q4 F2016 (Q4 F2015 – $1,559,674),
- Cash outflow for the quarter improved 49% or $1,032,966.
The introduction of the new VP of Sales in Q4 F2016 has refocused the sales organization. The new sales leadership is putting together a solid, senior experienced salesforce to help take us into F2017 and beyond. The upcoming year will see growth in our sales and marketing expenditures as the new sales team is put into place and continues to work through and refine the existing sales pipeline.
Cortex management will host a conference call, followed by a question and answer period.
The details of the conference call are as follows:
| Date: | Friday, October 28, 2016 |
| Time: | 10:00 a.m. Eastern time (8:00 a.m. Mountain time) |
| Toll-free dial-in number: | 1-866-225-0198 |
| International dial-in number: | 1-416-340-2219 |
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 Cortex Business Solutions at 403-219-2838.
A replay of the conference call will be available after the call through November 4, 2016
| Toll-free replay number: | 1-800-408-3053 |
| Toll replay number: | 1-905-694-9451 |
| Replay ID: | 5357320 |
About Cortex Business Solutions
Cortex Business Solutions Inc. (TSX VENTURE:CBX) is a business-to-business network that enables electronic invoicing for buying and supplying organizations. The Cortex network offers flexible connection methods to reduce the time required to process invoices and tools that leverage existing customer technologies and processes. Access to the Cortex Network enhances the exchange of documents allowing companies to connect and interact with each other to grow their businesses.
For more information, please visit www.cortex.net.
| Cortex Business Solutions Inc. |
| Consolidated Statements of Financial Position |
| (Prepared in Canadian dollars) |
| July 31 | July 31 | ||||||
| 2016 | 2015 | ||||||
| Assets | |||||||
| Current assets | |||||||
| Cash | $ | 5,621,835 | $ | 3,986,950 | |||
| Short-term investments | 60,000 | 60,000 | |||||
| Accounts receivable | 866,142 | 868,452 | |||||
| Prepaid expenses | 145,823 | 154,861 | |||||
| 6,693,800 | 5,070,263 | ||||||
| Deposits | 35,061 | 35,061 | |||||
| Property and equipment | 292,791 | 413,961 | |||||
| Intangible assets | 42,882 | 1,763,804 | |||||
| $ | 7,064,534 | $ | 7,283,089 | ||||
| Liabilities | |||||||
| Current liabilities | |||||||
| Accounts payable and accrued liabilities | $ | 1,086,380 | $ | 948,311 | |||
| Deferred revenue | 46,854 | 230,989 | |||||
| Current portion of rebate provision | 294,145 | 695,207 | |||||
| Income tax provision | 59,647 | 57,148 | |||||
| 1,487,026 | 1,931,655 | ||||||
| Rebate provision | – | 77,557 | |||||
| 1,487,026 | 2,009,212 | ||||||
| Shareholders’ Equity | |||||||
| Share capital | 60,291,515 | 57,640,393 | |||||
| Accumulated other comprehensive income | 640,232 | 580,502 | |||||
| Warrants | – | 980,941 | |||||
| Contributed surplus | 9,126,948 | 7,848,559 | |||||
| Deficit | (64,481,187 | ) | (61,776,518 | ) | |||
| 5,577,508 | 5,273,877 | ||||||
| $ | 7,064,534 | $ | 7,283,089 | ||||
| Cortex Business Solutions Inc. |
| Consolidated Statements of Loss and Comprehensive Loss |
| For the years ended July 31, 2016 and 2015 |
| (Prepared in Canadian dollars) |
| 2016 | 2015 | ||||||
| Revenue | |||||||
| Access and usage fees | $ | 9,376,298 | $ | 9,712,870 | |||
| Integration fee and set-up fees | 404,062 | 583,056 | |||||
| Project management and other revenue | 43,158 | 291,029 | |||||
| 9,823,518 | 10,586,955 | ||||||
| Cost of Sales | 5,462,248 | 6,371,620 | |||||
| Gross Profit | 4,361,270 | 4,215,335 | |||||
| Expenses | |||||||
| Sales and marketing | 1,429,838 | 3,634,172 | |||||
| Research and development | 1,990,361 | 3,008,873 | |||||
| General and administrative | 3,412,059 | 4,655,259 | |||||
| Severance and termination charges | 213,445 | 789,325 | |||||
| 7,045,703 | 12,087,629 | ||||||
| Loss before finance expense | (2,684,433 | ) | (7,872,294 | ) | |||
| Finance expense | (7,249 | ) | (1,103 | ) | |||
| Income tax expense | (12,987 | ) | (52,401 | ) | |||
| Net loss | $ | (2,704,669 | ) | $ | (7,925,798 | ) | |
| Other comprehensive earnings | |||||||
| Items that may be reclassified subsequently to net loss: | |||||||
| Foreign exchange gain on foreign operations | 59,730 | 657,787 | |||||
| Comprehensive loss | $ | (2,644,939 | ) | $ | (7,268,011 | ) | |
| Net loss per share – basic and diluted | $ | (0.31 | ) | $ | (1.08 | ) | |
| Cortex Business Solutions Inc. |
| Consolidated Statements of Changes in Shareholders’ Equity |
| (Prepared in Canadian dollars) |
| Number of Common Shares | Share Capital | Number of Warrants | Warrants Value | Contributed Surplus | Accumulated Other Comprehensive Income (Loss) | Deficit | Total Shareholders’ Equity | ||||||||||||||||
| Balance – July 31, 2014 | 7,233,949 | $ | 56,778,460 | 447,580 | $ | 980,941 | $ | 7,500,703 | $ | (77,285 | ) | $ | (53,850,720 | ) | $ | 11,332,099 | |||||||
| Net loss | – | – | – | – | – | – | (7,925,798 | ) | (7,925,798 | ) | |||||||||||||
| Issued during the period | 192,400 | 865,800 | – | – | – | – | – | 865,800 | |||||||||||||||
| Issuance cost | – | (3,867 | ) | – | – | – | – | – | (3,867 | ) | |||||||||||||
| Translation of foreign operations | – | – | – | – | – | 657,787 | – | 657,787 | |||||||||||||||
| Stock based compensation | – | – | – | – | 347,856 | – | – | 347,856 | |||||||||||||||
| Balance – July 31, 2015 | 7,426,349 | 57,640,393 | 447,580 | 980,941 | 7,848,559 | 580,502 | (61,776,518 | ) | 5,273,877 | ||||||||||||||
| Net loss | – | – | – | – | – | – | (2,704,669 | ) | (2,704,669 | ) | |||||||||||||
| Issued during the period | 1,558,355 | 3,116,710 | – | – | – | – | – | 3,116,710 | |||||||||||||||
| Issuance costs | – | (364,366 | ) | – | – | – | – | – | (364,366 | ) | |||||||||||||
| Expiration of warrants | – | – | (447,580 | ) | (980,941 | ) | 980,941 | – | – | – | |||||||||||||
| Translation of foreign operations | – | – | – | – | – | 59,730 | – | 59,730 | |||||||||||||||
| Stock based compensation | – | – | – | – | 196,226 | – | – | 196,226 | |||||||||||||||
| Compensation units issues in conjunction with private placement | – | (101,222 | ) | – | – | 101,222 | – | – | – | ||||||||||||||
| Balance – July 31, 2016 | 8,984,704 | $ | 60,291,515 | – | $ | – | $ | 9,126,948 | $ | 640,232 | $ | (64,481,187 | ) | $ | 5,577,508 | ||||||||
| Cortex Business Solutions Inc. |
| Consolidated Statements of Cash Flows |
| For the years ended July 31, 2016 and 2015 |
| (Prepared in Canadian dollars) |
| 2016 | 2015 | ||||||
| Cash provided by (used in) | |||||||
| Operating activities | |||||||
| Net loss | $ | (2,704,669 | ) | $ | (7,925,798 | ) | |
| Items not affecting cash | |||||||
| Stock-based compensation | 196,226 | 347,856 | |||||
| Amortization | 1,841,521 | 1,860,171 | |||||
| Salaries paid in shares | – | 865,800 | |||||
| Accretion on rebate provision | 15,924 | 31,180 | |||||
| Loss on disposal of equipment | 3,494 | – | |||||
| (647,504 | ) | (4,820,791 | ) | ||||
| Rebate payment | (494,543 | ) | (536,403 | ) | |||
| Changes in non-cash working capital | (34,719 | ) | (688,112 | ) | |||
| Net cash used in operating activities | (1,176,766 | ) | (6,045,306 | ) | |||
| Financing activity | |||||||
| Proceeds from issuance of shares | 3,102,750 | – | |||||
| Share issuance costs | (364,366 | ) | (3,867 | ) | |||
| Proceeds on exercise of compensation units for cash | 13,960 | – | |||||
| Net cash used in provided by financing activities | 2,752,344 | (3,867 | ) | ||||
| Investing activities | |||||||
| Acquisition of property and equipment | (2,924 | ) | (158,781 | ) | |||
| Software development costs and third party software purchases | – | (14,512 | ) | ||||
| Net cash used in investing activities | (2,924 | ) | (173,293 | ) | |||
| Effect of exchange rate changes on cash and cash equivalents held in foreign currency | 62,231 | 661,755 | |||||
| Cash inflow (outflow) | 1,634,885 | (5,560,711 | ) | ||||
| Cash, beginning of year | 3,986,950 | 9,547,661 | |||||
| Cash, end of year | $ | 5,621,835 | $ | 3,986,950 | |||
| Supplemental cash flow information: | |||||||
| Interest received during the year | $ | 8,675 | $ | 30,077 | |||
| Non-cash transactions: | |||||||
| Issuance of shares in lieu of salaries and bonuses including prior years amounts accrued in accounts payable and accrued liabilities | $ | – | $ | 540,058 | |||
Joel Leetzow
President and CEO
[email protected]
403-219-2838
Sandra Fawcett (formerly Weiler)
CFO
[email protected]
403-219-2838
Andrew Stewart
Director, Marketing & Investor Relations
[email protected]
403-219-2838
www.cortex.net
