Cortex Business Solutions Inc.

TSX VENTURE : CBX


Cortex Business Solutions Inc.

April 01, 2013 10:12 ET

Cortex Announces January 31, 2013 Quarterly Financial Results

CALGARY, ALBERTA--(Marketwire - April 1, 2013) - Cortex Business Solutions Inc. ("Cortex" or the "Company") (TSX VENTURE:CBX) is pleased to announce the Company's FY 2013 Q2 Financial and Operational Highlights. Complete financials and MD&A are available on Sedar (www.sedar.com).

Revenue was $1.5M in the second quarter of the Fiscal Year of 2013, compared to $1.1M in the same quarter Fiscal Year 2012, reflecting a 37% growth in total revenue. Included in the total revenue is access and usage fee revenue of $1.3M Q2 F2013 compared to $976K in Q2 F2012 representing a 35% increase in recurring revenue growth year over year.

At the end of the quarter ended January 31, 2013 ("Q2 F2013"), Cortex had signed agreements with 64 Hubs, 9 more than at the end of October 31, 2012 ("Q1 F2013"). Of those, 42 have progressed through the pilot phase and were available to receive invoices from their suppliers electronically. Hubs are the main driving force for the growth in the Company as each new hub brings a list of additional customers to the Network and provides an additional destination for existing network users to send invoices to. During the quarter, Cortex added 340 new customers, an increase of 4% over Q1 F2013.

Cortex had a net loss of $1,892,213 or $0.01 per basic and diluted share, compared to net loss of $2,563,428 or $0.01 per basic and diluted share. This improvement in net loss quarter over quarter is the result of increased revenue in conjunction with a reduction of expenditures of 7% compared to Q2 2012.

"Cortex continues to grow our Network of companies, transactions and revenue during a time period when drilling activity in the oil and gas industry is down considerably from last year. This is a direct result of our investments in market expansion, productivity improvements and technology over the past year", said Art Smith President & CEO of Cortex. "We expect 2013 to be a significant year for the Company in terms of both revenue growth and productivity improvements, as we expand our Network in Canada and the United States"

Outlook

Cortex is seeing increasing demand for our new 100% e-Billing service with the signing of a large initiative in February 2013. This initiative will expand the Cortex network into 4 new industries including Mining, Construction, Power Systems and Forestry and has the potential to add thousands of new Hubs to the Cortex network. We have seen additional demand for this service and expect more projects to be signed over the next 6 months.

Cortex expects to launch the next phase of our Roadmap project in the summer of 2013, which will include a collaboration environment enabling customers to create profiles, search, message and connect with each other through the Cortex Network.

Cortex will continue to expand the Network by adding Hubs and their supplier groups through current and new partnerships. Cortex will explore new revenue, industry and partnership opportunities in Canada and the U.S.

Cortex is halfway through fiscal 2013 with 64 Hubs signed to the Network, 42 Hubs active on the Network and 8,780 contracted suppliers. F2013 continues the momentum with a focus on strong relationships with clients and partners which are expected to provide continued month over month revenue growth through increasing transaction volumes between our Hub customers and their suppliers.

Organic network growth, both in the number of customers connected and the number of transactions they do, has provided a solid revenue foundation for the Company. Management expects to see continued Hub signings in 2013 and is projecting to exit fiscal year ended July 31, 2013 with over 100 Hub customers.

Strategic partnerships with Full Circle, Powervision, Pandell, Basware, Verian Technologies, IT Canada and Concerta are providing numerous opportunities to add Hubs in both Canada and the U.S.

In fiscal 2013, management expects to complete more partnerships, launch new features to the Network and continue increasing recurring revenue.

The Company has applied to the TSX Venture Exchange for the issuance of 200,000 common shares as part of employee's letters of offer. Of these 100,000 will be issued to an insider.

Quarterly Results Conference Call

On April 9, 2013 at 10:00 am MST, please join the live conference:

Toll-Free Dial-In Number: (877) 240-9772

Local Dial-In #: (416) 340-8527

Time: 10:00 am MST

A replay of the conference call will be available two hours after the call's completion and will expire by 11:59 pm EST on April 16, 2013. You may listen to the recording by calling (905) 694-9451 or toll-free at 1-800-408-3053. The password for the replay is 9645422.

About Cortex Business Solutions

Cortex Business Solutions Inc. is a leading eCommerce service 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 its customers existing business environment - evolving business.

Forward-Looking Statements

Statements in this release that are forward-looking statements are subject to various risks and uncertainties concerning the specific factors disclosed under the heading "Risk Factors" and elsewhere in the Company's periodic filings with Canadian securities regulators. Such information contained herein represents management's best judgment as of the date hereof based on information currently available. The Company does not assume the obligation to update any forward-looking statement.

Cortex Business Solutions Inc.

Condensed Consolidated Statements of Financial Position

(Prepared in Canadian dollars)

(unaudited)

January 31 2013 July 31 2012
Assets
Current assets
Cash $ 2,283,318 $ 6,750,970
Accounts receivable 936,210 847,847
Prepaids and deposits 163,878 168,160
3,383,406 7,766,977
Property and equipment 601,637 611,082
Intangible asset 3,542,986 2,970,245
$ 7,528,029 $ 11,348,304
Liabilities
Current liabilities
Accounts payable and accrued liabilities $ 1,172,269 $ 1,842,431
Current portion of deferred revenue 692,642 710,598
1,864,911 2,553,029
Deferred revenue 178,208 342,368
2,043,119 2,895,397
Shareholders' Equity
Share capital 42,421,289 41,858,963
Warrants 99,233 753,202
Contributed surplus 5,885,846 5,029,271
Deficit (42,921,458 ) (39,188,529 )
5,484,910 8,452,907
$ 7,528,029 $ 11,348,304

Cortex Business Solutions Inc.

Condensed Consolidated Statements of Loss and Comprehensive Loss

For the three months and six months ended January 31, 2013 and 2012

(Prepared in Canadian dollars)

(unaudited)

Three months ended January 31 Six months ended January 31
2013 2012 2013 2012
Revenue
Access and usage fees $ 1,318,275 $ 975,853 $ 2,556,171 $ 1,861,578
Integration fees 73,134 68,278 132,176 320,192
Set-up fees 110,784 55,105 217,388 106,479
1,502,193 1,099,236 2,905,735 2,288,249
Expenses
Commissions, rebates and credit card charges 203,635 97,431 359,170 194,608
General and administrative 233,910 283,379 464,343 541,253
Internet and hosting costs 26,074 34,930 53,542 68,236
Market expansion and product development 228,710 682,168 558,880 1,196,560
Professional fees 54,036 60,271 97,926 94,906
Rent 78,695 80,841 160,207 159,226
Salaries, employee benefits and subcontract 2,282,151 2,153,485 4,392,199 4,141,838
Stock-based compensation 125,124 139,785 234,461 302,650
Amortization 168,284 140,920 337,421 243,816
3,400,619 3,673,210 6,658,149 6,943,093
Loss before the following (1,898,426 ) (2,573,974 ) (3,752,414 ) (4,654,844 )
Finance income 6,213 10,546 19,485 26,225
Net loss and comprehensive loss $
(1,892,213
) $
(2,563,428
) $
(3,732,929
) $
(4,628,619
)
Net loss per share-basic and diluted $
(0.01
) $
(0.01
) $
(0.02
) $
(0.03
)

Cortex Business Solutions Inc.

Condensed Consolidated Statements of Changes in Shareholders' Equity

(Prepared in Canadian dollars)

(unaudited)


Number of Common shares
Common shares stated value Number of Warrants Warrants stated value Contributed surplus Deficit Total shareholders' equity
Balance - July 31, 2011 177,222,248 $ 33,851,308 10,995,063 $ 1,135,282 $ 4,825,444 $ (29,884,939 ) $ 9,927,095
Net loss - - - - - (4,628,619 ) (4,628,619 )
Options exercised for cash 20,000 2,400 - - - - 2,400
Transferred on exercise of options - 2,200 - - (2,200 ) - -
Issued in lieu of salaries and bonus 2,844,819 635,604 - - - - 635,604
Issuance costs - (5,833 ) - - - - (5,833 )
Stock-based compensation - - - - 302,650 - 302,650
Balance, January 31, 2012 180,087,067 34,485,679 10,995,063 1,135,282 5,125,894 (34,513,558 ) 6,233,297
Net loss (4,674,971 ) (4,674,971 )
Prospectus offering for cash 31,492,665 6,298,533 - - - - 6,298,533
Exercise of Compensation Options for cash 423,000 67,680 - - - - 67,680
Transferred on exercise of Compensation Options - 79,626 - - (79,626 ) - -
Exercise of Compensation units into warrants for cash - - 211,500 16,920 - - 16,920
Warrants expired - - (1,400,000 ) (399,000 ) 399,000 - -
Options exercised for cash 5,008,409 923,173 - - - - 923,173
Transferred on exercise of options - 742,012 - - (742,012 ) - -
Issued in lieu of salaries and bonus 250,000 50,000 - - - - 50,000
Stock-based compensation - - - - 193,746 - 193,746
Issuance costs - (787,740 ) - - 132,269 - (655,471 )
Balance - July 31, 2012 217,261,141 41,858,963 9,806,563 753,202 5,029,271 (39,188,529 ) 8,452,907
Net loss - - - - - (3,732,929 ) (3,732,929 )
Expiration of Compensation units and warrants - - (8,333,500 ) (653,969 ) 653,969 - -
Options exercised for cash 191,667 28,750 - - - - 28,750
Transferred on exercise of options - 31,855 - - (31,855 ) - -
Issued in lieu of salaries and bonus 2,574,567 508,247 - - - - 508,247
Issuance costs - (6,526 ) - - - - (6,526 )
Stock-based compensation - - - - 234,461 - 234,461
Balance - January 31, 2013 220,027,375 $ 42,421,289 1,473,063 $ 99,233 $ 5,885,846 $ (42,921,458 ) $ 5,484,910

Cortex Business Solutions Inc.

Condensed Consolidated Statements of Cash Flows

For the three months and six months ended January 31, 2013 and 2012

(Prepared in Canadian dollars)

(unaudited)

Three months ended January 31 Six months ended January 31
2013 2012 2013 2012
Cash provided by (used in)
Operating activities
Net loss $ (1,892,213 ) $ (2,563,428 ) $ (3,732,929 ) $ (4,628,619 )
Items not affecting cash
Stock-based compensation 125,124 139,785 234,461 302,650
Amortization 168,284 140,920 337,421 243,816
Adjustment to salaries expense for salaries paid in shares (72,020 ) 9,523 (78,242 ) (39,812 )

(1,670,825
)
(2,273,200
)
(3,239,289
)
(4,121,965
)
Changes in non-cash working capital
(136,357
)
(275,921
)
(235,528
)
58,507
Net cash used in operating activities (1,807,182 ) (2,549,121 ) (3,474,817 ) (4,063,458 )
Financing activities
Proceeds from issuance of shares and warrants, net of costs (4,084 ) (3,555 ) 22,224 (3,433 )
Net cash from financing activities
(4,084
)
(3,555
)
22,224

(3,433
)
Investing activities
Acquisition of property and equipment (89,334 ) (62,403 ) (98,167 ) (118,523 )
Software development costs (439,721 ) (291,646 ) (802,550 ) (756,724 )
Changes in non-cash working capital (105,434 ) 53,775 (114,342 ) (193 )
Net cash used in investing activities (634,489 ) (300,274 ) (1,015,059 ) (875,440 )
Cash outflow
(2,445,755
)
(2,852,950
)
(4,467,652
)
(4,942,331
)
Cash, beginning of period 4,729,073 7,605,829 6,750,970 9,695,210
Cash, end of period $ 2,283,318 $ 4,752,879 $ 2,283,318 $ 4,752,879
Non-cash transactions:
Issuance of shares in lieu of salaries and bonuses including prior period amounts accrued $ 453,802 $ 456,771 $ 508,247 $ 635,604

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