Advantex Marketing International Inc.
TSX VENTURE : ADX

Advantex Marketing International Inc.

February 10, 2010 19:31 ET

Advantex Announces Fiscal 2010 Second Quarter Results

TORONTO, ONTARIO--(Marketwire - Feb. 10, 2010) -



- Advantex reports Net Profit for second consecutive quarter.
- Company achieves operational improvements, despite weak economy, in
second quarter vs. corresponding period previous year:
- Revenue up $582,000 (17.4% +) to $3.9 million;
- Contribution from Operations (EBITDA) up $222,000 to $745,000.
- Increasing merchant participation in Canadian Loyalty programs
driving operational improvements


Advantex Marketing International Inc. (TSX VENTURE:ADX), a leading specialist in loyalty marketing programs and merchant funding, today announced its results for the fiscal second quarter ended December 31, 2009. All references to quarters or years are for the fiscal periods and all currency amounts are in Canadian dollars unless otherwise noted.

"The solid results of the second quarter are a reflection of efforts to strengthen the Company by increasing the number of merchants participating in Advantex programs, and operational improvements. We now have over 650 merchants participating in our CIBC Advantex programs, a record participation level, "said Kelly Ambrose, Chief Executive Officer and President.

"Advantex is well positioned to build on this achievement, and we expect to add significant incremental revenue streams towards the end of fiscal 2010 by expanding our existing loyalty marketing and merchant funding programs into new business segments. We are in advanced stages of finalizing arrangements, with new and existing affinity partners and existing lenders, which will enable this expansion. We will leverage our existing infrastructure and processes to implement the expansion in new business segments, "Mr. Ambrose said.

Key operational metrics are summarized in the table.



-------------------------------------------------------------------------
Fiscal Year Revenues EBITDA (i) Net Profit/(Loss)
-------------------------------------------------------------------------
3 months 6 months 3 months 6 months 3 months 6 months
ended ended ended ended ended ended
December December December December December December
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Current
-Fiscal
2010 $3,925,000 $7,406,000 $745,000 $1,460,000 $166,000 $297,000
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Fiscal 2009 $3,343,000 $6,453,000 $523,000 $1,103,000 $20,000 $75,000
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Fiscal 2008 $3,237,000 $6,082,000 $28,000 ($17,000)($330,000)($696,000)
-------------------------------------------------------------------------
(i) EDITDA is a non -GAAP measure. It demonstrates the Company's ability
to generate cash from its operations


Advantex earns revenue as customers make purchases at establishments participating in its programs. While the Company continues to be cautiously optimistic of its operational performance during the balance of Fiscal 2010, it will continue to be subjected to weakness in the economy. In addition, the Company results will reflect seasonality of consumer spend, with the January to March quarter being historically the weakest revenue quarter for the Company.

With regards to its existing agreement with CIBC that expires June 30, 2010, the Company believes its CIBC Advantex programs offer an attractive method for eligible CIBC credit cardholders to accelerate accumulation of loyalty rewards, and is working towards a multi year renewal with CIBC on mutually beneficial terms.

The Company believes its Advance Purchase Marketing (APM) model which offers loyalty, marketing, and merchant funding is a winning product. APM appeals to small businesses because it delivers marketing value and access to working capital. We expect it to be well received when it is launched in new business segments outside of the current restaurant sector.

"Renewal and/or extension of the existing CIBC agreement, and finalization of agreements that will allow the Company to launch its products, particularly APM, in new business segments are priorities for the balance of fiscal 2010, "said Mr. Ambrose.

About Advantex Marketing International Inc.

Advantex is a specialist in the marketing services industry, managing white-labeled rewards accelerator programs for major affinity groups through which their members earn bonus frequent flyer miles and/or other rewards on purchases at participating merchants. Under the umbrella of each program, Advantex provides merchants with marketing, customer incentives, and secured future sales through its Advance Purchase Marketing model. Advantex partners include more than 1000 restaurants, online retailers, golf courses, small inns and resorts, and major organizations, including CIBC, United Airlines, Alaska Airlines, and Lufthansa Airlines. Advantex is traded on the TSX Venture Exchange under the symbol "ADX". For additional information on Advantex, please visit www.advantex.com.

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

Forward-Looking Information

This Press Release contains certain "forward-looking information". All information, other than information comprised of historical fact, that addresses activities, events or developments that the Company believes, expects or anticipates will or may occur in the future constitutes forward-looking information. Such forward-looking information relates to, without limitation, information regarding: the Company's belief that it will be able to reach agreement with existing and or new affinity groups to launch its product offering, in particular the APM program, in new business segments during Fiscal 2010 and beyond; the size of the market for the Company's products, in particular the APM program, in the new business segments; the Company's ability to extend its current agreement with CIBC beyond June 30, 2010; the Company's ability to expand its product offering in existing business segments (dining, golf, small inns and spas) allowed under the current CIBC agreement during Fiscal 2010 and beyond; the Company's ability to continue to access financing under its existing line of credit facility, and or its ability to access additional debt with respect to expanding the APM program within the existing business segments and launching and or expanding into new business segments during Fiscal 2010 and beyond; expectations relating to consumer spending and trends; the Company's anticipated increase in the number of establishments with which it will do business; the Company's expectations with respect to its operational performance during the balance of Fiscal 2010; the impact on the Company's revenues, results and cash flows that increased merchant participation would have; the continued impact of economic conditions on the Company's performance; the Company' ability to leverage existing infrastructure and processes to scale its business; the Company's ability to renew the agreement with United Airlines beyond August, 2010; the ability of management to obtain waivers or renegotiate the covenants of the Company's convertible debt if a default in respect of
the same arises; Company's expectation with respect to renewal or replacement of the non convertible debentures on their maturity in December, 2010;and other information regarding financial and business prospects and financial outlook is forward-looking information. Forward-looking information reflects the current expectations or beliefs of the Company based on information currently available to the Company. With respect to the forward-looking information contained in this Press Release, the Company has made assumptions regarding, among other things, its ability to access current and future financing; current and future economic and market conditions and the impact of same on the Company's business; ongoing and future revenue sources; future business levels; interest and currency rates; the impact of an extension of the agreement with CIBC on future business; ongoing consumer interest in accumulating frequent flyer miles; and the Company's ability to manage risks connected to collection of transaction credits. Forward-looking information is subject to a number of risks, uncertainties and assumptions that may cause the actual results of the Company to differ materially from those discussed in the forward-looking information, and even if such actual results are realized or substantially realized, there can be no assurance that they will have the expected consequences to, or effects on the Company. Factors that could cause actual results or events to differ materially from current expectations include, among other things, changes in general economic and market conditions, changes to regulations affecting the Company's activities, uncertainties relating to the availability and costs of financing needed in the future, delays in finalizing agreements that allow the Company to launch its products in new business segments, the termination or expiration of the CIBC agreement, expiration of the United Airlines agreement, any adverse change to the currently agreed payment plan with the CRA, currency risks, the inability of the Company to collect under its APM program, the Company's financial status, and other factors, including without limitation, those listed under "General Risks and Uncertainties" and "Economic Dependence" in the Company's Management Discussion and Analysis for the six months ended December 31, 2009. All forward-looking information speaks only as of the date on which it is made and, except as may be required by applicable securities laws, the Company disclaims any intent or obligation to update any forward-looking information, whether as a result of new information, future events or results or otherwise. Although the Company believes that the assumptions inherent in the forward-looking information are reasonable, forward-looking information is not a guarantee of future performance and accordingly undue reliance should not be put on such information due to the inherent uncertainty therein.



ADVANTEX MARKETING INTERNATIONAL INC.
CONSOLIDATED FINANCIAL STATEMENTS
For the three month and six month periods
Ended December 31, 2009


The accompanying consolidated financial statements have been prepared by management and approved by the Board of Directors of the Company. Management is responsible for the information and representations contained in these consolidated financial statements and other sections of this report.

An auditor has not performed a review of these financial statements.



ADVANTEX MARKETING INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
(unaudited - note 1)

Note December 31, 2009 June 30, 2009
----------------- -------------
$ $
ASSETS

Current:
Cash and cash equivalents 415,058 344,180
Accounts receivable 965,809 506,380
Transaction credits 9,171,451 8,151,185
Aeronotes 8 502,799 -
Prepaid expenses and sundry
assets 350,598 223,066
----------------- -------------
11,405,715 9,224,811
----------------- -------------
Long-term:
Property, plant and equipment 625,122 652,639

TOTAL ASSETS $12,030,837 $9,877,450
----------------- -------------
----------------- -------------

LIABILITIES
Current:
Loan payable 5 1,887,804 980,988
Accounts payable and accrued
liabilities 4,165,965 3,544,327
Non-convertible debentures
payable 6 2,569,982 -
----------------- -------------
8,623,751 4,525,315
----------------- -------------

Long-term:
Non-convertible debentures payable 6 - 2,519,661
Convertible debentures payable 7 4,961,226 4,713,408
----------------- -------------
4,961,226 7,233,069
----------------- -------------

13,584,977 11,758,384
----------------- -------------
SHAREHOLDERS' DEFICIENCY

Capital Stock
Class A preference shares 3,815 3,815
Common shares 24,106,281 24,106,281
----------------- -------------
24,110,096 24,110,096

Contributed surplus 4 608,379 578,090
Equity portion of debentures 7 2,114,341 2,114,341
Warrants 6/7 374,554 374,554
Deficit (28,761,510) (29,058,015)
----------------- -------------

(1,554,140) (1,880,934)
----------------- -------------
TOTAL LIABILITIES AND
SHAREHOLDERS' DEFICIENCY $12,030,837 $9,877,450
----------------- -------------
----------------- -------------
(see accompanying notes)

Economic Dependence and Going Concern (note 1b)
Taxation (note 11)



ADVANTEX MARKETING INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF PROFITAND COMPREHENSIVE PROFIT
(unaudited - note 1)

Three Months Ended Six Months Ended
December 31 December 31
----------- -----------
2009 2008 2009 2008
---- ---- ---- ----
$ $ $ $

REVENUE 3,924,877 3,342,760 7,405,877 6,452,946
Direct expenses 1,534,188 1,130,878 2,651,320 2,114,329
---------- ---------- ---------- ----------

GROSS PROFIT 2,390,689 2,211,882 4,754,557 4,338,617
---------- ---------- ---------- ----------

OPERATING EXPENSES
Selling and
marketing 825,564 806,806 1,651,718 1,489,562
General and
administrative 819,730 881,725 1,642,707 1,745,914
---------- ---------- ---------- ----------
1,645,294 1,688,531 3,294,425 3,235,476

CONTRIBUTION
FROM OPERATIONS 745,395 523,351 1,460,132 1,103,141

Stock-based
compensation 8,289 18,000 30,289 35,067
---------- ---------- ---------- ----------

PROFIT BEFORE
AMORTIZATION 737,106 505,351 1,429,843 1,068,074
AND INTEREST


Amortization of
property, plant
and equipment 99,271 68,628 188,753 139,972

Interest expense
Stated interest
expense - loan
payable,
non-convertible
debentures, and
other 154,748 107,485 311,814 248,174
Stated interest
expense -
convertible
debentures 151,233 151,233 302,466 302,466
Accretion charge
on debentures,
and amortization
of deferred
financing
charges 166,248 157,741 330,305 302,121
---------- ---------- ---------- ----------

NET PROFIT AND
COMPREHENSIVE PROFIT
FOR THE PERIOD $165,606 $20,264 $296,505 $75,341
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------

NET PROFIT PER
COMMON SHARE $0.00 $0.00 $0.00 $0.00
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------

(see accompanying notes)



ADVANTEX MARKETING INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF DEFICIT
(unaudited - note 1)

Three Months Ended Six Months Ended
December 31 December 31
----------- -----------
2009 2008 2009 2008
----- ----- ----- -----
$ $ $ $

BALANCE AT THE
START OF PERIOD (28,927,116) (28,149,008) (29,058,015) (28,204,085)

Net profit for
the period 165,606 20,264 296,505 75,341
----------- ----------- ----------- -----------

BALANCE AT THE
END OF PERIOD (28,761,510) (28,128,744) (28,761,510) (28,128,744)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------

(see accompanying notes)



ADVANTEX MARKETING INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited - note 1)

Three Months Ended Six Months Ended
December 31 December 31
----------- -----------
2009 2008 2009 2008
----- ----- ----- -----
$ $ $ $
OPERATING
ACTIVITIES

Net profit for
the period $165,606 $20,264 $296,505 $75,341

Items not
affecting cash
Amortization of
property, plant
and equipment 99,271 68,628 188,753 139,972
Accretion charge
on debentures 119,700 111,193 237,209 209,088
Amortization of
deferred
financing charges 46,548 46,548 93,096 93,033
Stock-based
compensation 8,289 18,000 30,289 35,067
-------- -------- -------- --------
439,414 264,633 845,852 552,501

Changes in non-cash
working capital
items
Accounts
receivable (527,729) 211,066 (459,429) (426,559)
Transaction
credits (719,761) (885,903) (1,020,266) (17,057)
Prepaid expenses
and sundry assets (69,305) (108,960) (127,532) (115,271)
Aeronotes (502,799) - (502,799) -
Accounts payable
and accrued
liabilities 710,818 185,352 621,638 678,107
-------- -------- -------- --------
(1,108,776) (598,445) (1,488,388) 119,220

Movement in
Long-term other
liabilities - (40,000) - (120,000)
-------- -------- -------- --------

Cash provided
by/(utilized in)
operating
activities (669,362) (373,812) (642,536) 551,721

FINANCING ACTIVITIES
Financing charges
- non convertible
debenture - - - (1,833)
Loan payable 464,112 46,767 874,650 (530,830)
-------- -------- -------- --------
464,112 46,767 874,650 (532,663)

INVESTING ACTIVITIES
Purchase of
property, plant
and equipment (108,745) (86,569) (161,236) (156,257)

MOVEMENT IN CASH AND
CASH EQUIVALENTS (313,995) (413,614) 70,878 (137,199)
DURING THE PERIOD

Cash and cash
equivalents at the
start of period 729,053 421,209 344,180 144,794

CASH AND CASH
EQUIVALENTS AT END
OF PERIOD $415,058 $7,595 $415,058 $7,595

ADDITIONAL
INFORMATION
Interest paid $454,748 $453,000 $611,814 $558,000

(see accompanying notes)

Contact Information

  • Advantex Marketing International Inc.
    Mukesh Sabharwal
    Vice-President and Chief Financial Officer
    905-470-9558 ext. 249
    Mukesh.sabharwal@advantex.com