Cortex Business Solutions Inc.
TSX VENTURE : CBX
OTCQX : CTPNF

Cortex Business Solutions Inc.

December 08, 2015 18:00 ET

Cortex Business Solutions Reports Q1 F2016 Financial Results

CALGARY, ALBERTA--(Marketwired - Dec. 8, 2015) - Cortex Business Solutions Inc. (TSX VENTURE:CBX)(OTCQX:CTPNF), the online network helping companies connect and interact with each other to transmit documents and grow their businesses, today announces its Q1 F2016 results.

Joel Leetzow, President and CEO commented, "The Company took an important first step in fiscal 2015, reducing staffing costs to be more in line with revenue. I had asked that you stand by to witness the actual results of these decisions as they materialize over fiscal 2016. The three months ended October 31, 2015 ("Q1 F2016") is a testament to the actions taken and the results to the bottom line. I think everyone will be as excited to see the results as we are sharing them.

I also made reference to the hard work we had been doing to improve the relationships with our workflow partner network; including expansion into new verticals, which was not previously successful. The investment in a dedicated Business Development Executive whose focus is on our partner channel has resulted in an increased pipeline from our existing partners. With the solidifying of these relationships, our clients receive better customer service from our partners, additional value add from the product bundles and a lower cost to implement.

There is now a full sales pipeline of leads to work on with our channel partners. Even with the reduction in the size of our sales team; the number of potential new customers remains steady. It's an exciting time to be involved with Cortex. I am proud of the results that we have achieved together in a very short time. I can feel the momentum building across our customers, our staff, our partners and our shareholders."

Q1 F2016 Highlights:

During the Q1 F2016 there were some significant developments as highlighted below:

  • The cash used in operating activities improved 86% to $138,521 from $1,004,797.
  • The Company's revenue has remained consistent in comparison to the three months ended October 31, 2014; despite lower billable transaction volumes. This highlights the value additional buying organizations and related suppliers bring to overall revenue stability and growth.
  • During fiscal 2015 the Company made changes to the organization which were expected to result in material cost savings. Q1 F2016 was the first quarter to fully realize these cost savings, resulting in overall costs being reduced by 25%, or $1,153,551.
  • The maintenance of revenue combined with cost savings initiatives resulted in a 31% improvement to gross profit. The gross profit in Q1 F2015 was 35% of total revenue compared to 46% of total revenue in F2016.
  • The Company raised $2,738,384 in the quarter through a bought deal private placement of 1,551,375 common shares.

Revenue

Total revenue remained flat at $2,627,272 for the three months ended October 31, 2015 compared to $2,631,647 during the quarter ended October 31 2014. Although the growth was flat year over year, this was expected. The Company made conscious cost-cutting decisions; knowing these could impact revenue growth in the short term.

  • Access and usage fees increased 4%
  • Integration and set up declined 31%
  • Project management declined 78%

Gross Profit and Cost of Sales

During F2015, the Company improved its gross profit, as reported from 35% of total revenue to 46% of total revenue; a 31% improvement.

Expenses

The changes made in fiscal 2015 materialized by way of cost reductions in Q1 F2016.

  • Sales and marketing decreased 64% to $348,634 (Q1 F2015 - $963,818). This was the largest impact in cost reductions.
  • Research and development costs were up slightly 2% over Q1 F2015. (Q1 F2016 - $585,703: Q1 F2015 - $576,507). The large increase in research and development for fiscal 2015 didn't occur until Q2. As discussed, the Company is moving this cost line back to the level before an additional team was added.
  • General and administrative expenses reduced 23% to $1,017,901 (Q1 F2015 - $1,330,332).
  • Severance and termination charges were $56,108 in Q1 F2016 compared to nil in Q1 F2015. This was the result of additional staff reductions at the end of October; which will further reduce expenses in Q2 F2016.

Operational

  • Billable transactions increased 3% Q1 F2016 over Q4 F2015.
  • Active suppliers on the Network remained flat Q1 F2016 over Q4 F2015 with a 0.5% increase bringing the active suppliers to 9,038 at October 31, 2015 compared to 8,997 at July 31, 2015.
  • There remain 86 active buying organizations on the Network at October 31, 2015.

Cash Position

October 31, 2015 July 31, 2015 Change
Cash $6,630,951 $3,986,950 $2,644,001
Working Capital $5,728,770 $3,138,608 $2,590,162

The private placement on September 2, 2015, solidified the Company's cash position. The cash outflow, net of the financing would have been $94,383 Q1 F2016. This is a $829,970 improvement from the $924,353 cash outflow in Q1 F2015.

Conference Call

Cortex management will host a conference call, followed by a question and answer period. The details of the conference call are as follows:

Date: Wednesday, December 9, 2015
Time: 11:00 a.m. Eastern time (9:00 a.m. Mountain time)
Toll-free dial-in number: 1-800-355-4959
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 Cortex Business Solutions at 403-219-2838.

A replay of the conference call will be available after the call through December 16, 2015

Toll-free replay number: 1-800-408-3053
Toll replay number: 1-905-694-9451
Replay ID: 2719510

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.

Cortex Business Solutions Inc.
Condensed Consolidated Interim Statement of Financial Position
(Prepared in Canadian dollars)
(unaudited)
October 31
2015
July 31
2015
Assets
Current assets
Cash $ 6,630,951 $ 3,986,950
Short-term investments 60,000 60,000
Accounts receivable 826,563 868,452
Prepaid expenses and deposits 104,970 154,861
7,622,484 5,070,263
Deposits 35,061 35,061
Property and equipment 385,079 413,961
Intangible assets 1,333,576 1,763,804
$ 9,376,200 $ 7,283,089
Liabilities
Current liabilities
Accounts payable and accrued liabilities $ 993,863 $ 948,311
Deferred revenue 224,116 230,989
Current portion of rebate provision 605,274 695,207
Income tax payable 70,461 57,148
1,893,714 1,931,655
Rebate provision 172,320 77,557
2,066,034 2,009,212
Shareholders' Equity
Share capital 60,277,555 57,640,393
Accumulated other comprehensive income 622,381 580,502
Warrants 980,941 980,941
Contributed surplus 8,014,942 7,848,559
Deficit (62,585,653 ) (61,776,518 )
7,310,166 5,273,877
$ 9,376,200 $ 7,283,089
Cortex Business Solutions Inc.
Condensed Consolidated Interim Statement of Loss and Comprehensive Loss
For the three months ended October 31, 2015 and 2014
(Prepared in Canadian dollars)
(unaudited)
Three months ended October 31
2015 2014
Revenue
Access and usage fees $ 2,516,293 $ 2,430,228
Integration fee and set-up fees 98,056 142,576
Project management 12,923 58,843
2,627,272 2,631,647
Cost of Sales 1,412,546 1,703,786
Gross Profit 1,214,726 927,861
Expenses
Sales and marketing 348,634 963,818
Research and development costs 585,703 576,507
General and administrative 1,017,901 1,330,332
Severance and termination charges 56,108 -
2,008,346 2,870,657
Loss before finance income (793,620 ) (1,942,796 )
Finance income (expense) (2,536 ) 8,397
Current tax expense (12,979 ) -
Net loss $ (809,135 ) $ (1,934,399 )
Other comprehensive earnings
Items that may be reclassified subsequently to net loss:
Foreign exchange gain on foreign operations 41,879 238,571
Comprehensive loss $ (767,256 ) $ (1,695,828 )
Net loss per share-basic and diluted $ (0.10 ) $ (0.27 )
Cortex Business Solutions Inc.
Condensed Consolidated Interim Statement of Changes in Shareholders' Equity
(Prepared in Canadian dollars)
(unaudited)

Number of
Common shares
Common shares
value
Number of
Warrants
Warrants value Contributed
surplus
Accumulated
Other
Comprehensive Income
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 - - - - - - (1,934,399 ) (1,934,399 )
Foreign exchange - - - - - 238,571 - 238,571
Stock-based compensation - - - - 137,985 - - 137,985
Balance - October 31, 2014 7,233,949 56,778,460 447,580 980,941 7,638,688 161,286 (55,785,119 ) 9,774,256
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 - - - - - - (809,135 ) (809,135 )
Issued during the period 1,551,375 3,102,750 3,102,750
Issuance costs - (364,366 ) - - - - - (364,366 )
Foreign exchange - - - - - 41,879 - 41,879
Stock-based compensation - - - - 65,161 - - 65,161
Compensation units issued in conjunction with private placement - (101,222 ) - - 101,222 - - -
Balance - October 31, 2015 8,977,724 $ 60,277,555 447,580 $ 980,941 $ 8,014,942 $ 622,381 $ (62,585,653 ) $ 7,310,166
Cortex Business Solutions Inc.
Condensed Consolidated Interim Statement of Cash Flows
For the three months ended October 31, 2015 and 2014
(Prepared in Canadian dollars)
(unaudited)
For the three months ended October 31
2015 2014
Cash provided by (used in)
Operating activities
Net loss $ (809,135 ) $ (1,934,399 )
Items not affecting cash
Stock-based compensation 65,161 137,985
Amortization 460,300 458,537
Accretion on rebate provision 4,830 7,987
(278,844 ) (1,329,890 )
Changes in non-cash working capital 140,323 325,093
Net cash used in operating activities (138,521 ) (1,004,797 )
Financing activities
Proceeds from issuance of shares 3,102,750 -
Share Issuance Costs (364,366 ) -
Net cash from financing activities 2,738,384 -
Investing activities
Acquisition of property and equipment (1,189 ) (4,233 )
Effect of exchange rate changes on cash and cash equivalents held in foreign currency $ 45,327 $ 84,677
Cash inflow (outflow) 2,644,001 (924,353 )
Cash, beginning of period 3,986,950 9,547,661
Cash, end of period $ 6,630,951 $ 8,623,308

Contact Information