Cortex Business Solutions Inc.

TSX VENTURE : CBX
OTCQX : CTPNF


Cortex Business Solutions Inc.

March 27, 2014 16:05 ET

Cortex Reports Record Fiscal Second Quarter 2014 Financial Results

Q2 Total Revenues up 32% to $2.0 Million; Recurring Access and Usage Revenues up 39% to $1.8 Million

CALGARY, ALBERTA--(Marketwired - March 27, 2014) - Cortex Business Solutions Inc. (TSX VENTURE:CBX)(OTCQX:CTPNF), an enterprise e-procurement solutions company, reported financial results for the fiscal second quarter ended January 31, 2014.

Fiscal Q2 2014 Financial Highlights vs. Same Year-Ago Quarter

  • Total revenues increased 32% to a record $2.0 million
  • Revenue from recurring access and usage fees increased 39% to $1.8 million
  • Total expenses decreased 4% to $3.3 million
  • Net loss improved to $1.3 million or $(0.00) per diluted share, compared to a net loss of $1.9 million or $(0.01) per diluted share

Fiscal Q2 2014 Financial Results

Total revenues in the fiscal second quarter of 2014 increased 32% to $2.0 million, compared to $1.5 million in the fiscal second quarter of 2013. The increase in revenues was primarily due to increased recurring access and usage fees, which grew 39% in the second quarter to $1.8 million from $1.3 million in the year-ago quarter.

On a sequential basis, total revenues in the second quarter increased 11% from $1.8 million in the first quarter of 2014. Recurring access and usage fees increased 10% from $1.7 million in the first quarter of 2014.

Total expenses in the second quarter decreased 4% to $3.3 million as compared to the same year-ago quarter. Excluding non-cash expenses of stock-based compensation expense that increased $24,000 and amortization that increased $137,000, total expenses decreased 7% to $2.8 million from the year-ago quarter.

Net loss in the second quarter improved to $1.3 million or $(0.00) per diluted common share, compared to a net loss of $1.9 million or $(0.01) per diluted common share in the year-ago quarter. The improvement was primarily due to the increase in revenues and prudent expense management.

The Company improved its cash outflow by 46% (Q2 F2014 - $(1,312,744); Q2 F2013 - $(2,445,755)). This improvement is the result of increased revenue, productivity improvements and a reduction in capital spending.

The Company paid its annual Employee Performance Management bonus in the quarter. The total bonus paid in Q2 F2014 was $819,895 (Q2 F2013 - $936,449), of this $419,881 was paid in cash (Q2 F2013 - $443,696). The bonus paid in Q2 F2014 was included in accrued liabilities at the end of July 31, 2013 and the bonus paid in Q2 F2013 was included in accrued liabilities at the end of July 31, 2012.

At January 31, 2014, cash totaled $2.5 million, compared to $5.2 million at July 31, 2013. Subsequent to the end of the fiscal second quarter, the company completed a $10.0 million equity financing. The company continues to carry no debt.

Fiscal Q2 2014 Operational Metrics

  • Signed six hubs onto the network for a total of 81, compared to eight signed in the year-ago quarter for a total of 64
  • Active hubs on the network increased by two to a total of 62, compared to an increase of eight in the year-ago quarter to total 42
  • Signed two new 100% e-billing customers, including Maverick Oilfield Services and X-Cel Energy Services, for a total of five, compared to zero in the year ago quarter since the product was not yet introduced
  • Total suppliers transacting on the network increased 13% to 6,584, compared to 5,844 in the year-ago quarter
  • Supplier initiated transactions increased 19% to 925,445, compared to 778,387 in the year-ago quarter
  • Total transactions increased 16% to 3,039,967, compared to 2,622,069 in the year-ago quarter

Management Commentary

"Our record revenue in the second quarter also represented another quarter of sequential double-digit revenue growth," said Art Smith, president and CEO of Cortex. "This double-digit growth was on top of sequential single-digit growth in transaction volume, demonstrating the pricing power and increased revenue per supplier in our Cortex Trading Partner Network.

"We expect average revenue per supplier to continue to increase, particularly as we introduce additional service offerings, such as our 100% e-billing solution, which continues to garner growing interest and new signups. Our first customer using this solution is committed to onboarding approximately 4,000 of its customers and we expect this to generate meaningful revenues in fiscal 2014.

"Our transaction levels have continued to strengthen in the current third quarter, which reflects positive indicators in the broader macro environment for our customers in the oil and gas industry, such as an increase in oil rig utilization. As we work to expand our presence in the North American market, particularly in the U.S. where we see a robust pipeline of sales opportunities, we are confident the strategic steps we are taking today will result in steady recurring revenue growth and, ultimately, greater shareholder value."

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 second quarter ended January 31, 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: Thursday, March 27, 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 April 3, 2014.

Toll-free replay number: 1-800-408-3053
Toll replay number: 1-905-694-9451
Replay ID: 2960712

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 Statement of Financial Position
(Prepared in Canadian dollars)
(unaudited)
January 31 January 31
2014 2013
Assets
Current assets
Cash $ 2,525,626 $ 5,179,066
Accounts receivable 678,025 651,782
Prepaid expenses and deposits 148,094 167,870
Investments 50,000 50,000
3,401,745 6,048,718
Property and equipment 414,551 476,735
Intangible assets 4,459,333 4,275,120
$ 8,275,629 $ 10,800,573
Liabilities
Current liabilities
Accounts payable and accrued liabilities $ 1,173,269 $ 1,404,716
Current portion of deferred revenue 262,195 539,853
1,435,464 1,944,569
Deferred revenue - 4,500
1,435,464 1,949,069
Shareholders' Equity
Share capital 48,126,705 47,713,288
Accumulated other compehensive income 101,380 -
Warrants 980,941 980,941
Contributed surplus 6,784,095 6,492,495
Deficit (49,152,956) (46,335,220)
6,840,165 8,851,504
$ 8,275,629 $ 10,800,573
Cortex Business Solutions Inc.
Condensed Consolidated Statement of Loss and Comprehensive Loss
For the three months ended January 31, 2014 and 2013
(Prepared in Canadian dollars)
(unaudited)
Three months ended
January 31
Six months ended
January 31
2014 2013 2014 2013
Revenue
Access and usage fees $ 1,829,303 $ 1,318,275 $ 3,485,118 $ 2,556,171
Integration fees 119,962 73,134 209,539 132,176
Set-up fees 29,229 110,784 74,419 217,388
Project management 5,575 - 5,575 -
1,984,069 1,502,193 3,774,651 2,905,735
Expenses
Salaries, employee benefits and subcontract 2,094,378 2,282,151 4,358,501 4,392,199
General and administrative 314,461 233,910 601,696 464,343
Commissions, rebates and credit card charges 190,319 203,635 383,976 359,170
Rent 105,649 78,695 211,098 160,207
Professional fees 79,953 54,036 239,614 97,926
Internet and hosting costs 26,435 26,074 50,443 53,542
Market expansion and product development - 228,710 - 558,880
Stock-based compensation 148,837 125,124 300,105 234,461
Amortization 305,079 168,284 461,032 337,421
3,265,111 3,400,619 6,606,465 6,658,149
Loss before the following (1,281,042) (1,898,426) (2,831,814) (3,752,414)
Finance income 4,098 6,213 14,078 19,485
Net loss $ (1,276,944) $ (1,892,213) $ (2,817,736) $ (3,732,929)
Other comprehensive earnings
Items that may be reclassified subsequently to net income (loss):
Foreign exchange gain (loss) on foreign operations 101,380 101,380
Comprehensive earnings (loss) $ (1,175,564) $ (1,892,213) $ (2,716,356) $ (3,732,929)
Net loss per share-basic and diluted $ 0.00 $ (0.01) $ (0.01) $ (0.02)
Cortex Business Solutions Inc.
Condensed Consolidated Statement 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
Accumulated
Other
Comprehensive
Income
Deficit Total
shareholders'
equity
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)
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
Expiration of Compensation units and warrants - - (8,333,500) (653,969) 653,969 - - -
Balance, January 31, 2013 220,027,375 42,421,289 1,473,063 99,233 5,885,846 - (42,921,458) 5,484,910
Balance - July 31, 2013 259,147,375 47,713,288 22,379,000 980,941 6,492,492 - (46,335,220) 8,851,501
Net loss - - - - - - (2,817,736) (2,817,736)
Foreign exchange translation of foreign operations 101,380 101,380
Options exercised for cash 65,852 13,480 - - - - - 13,480
Transferred on exercise of options - 8,502 - - (8,502) - - -
Issued in lieu of salaries and bonus 2,484,200 397,475 - - - - - 397,475
Issuance costs - (6,040) - - - - - (6,040)
Stock-based compensation - - - - 300,105 - - 300,105
Balance - January 31, 2014 261,697,427 $ 48,126,705 22,379,000 $ 980,941 $ 6,784,095 $ 101,380 $ (49,152,956) $ 6,840,165
Cortex Business Solutions Inc.
Condensed Consolidated Statement of Cash Flows
For the three months ended January 31, 2014 and 2013
(Prepared in Canadian dollars)
(unaudited)
Three months ended
January 31
Six months ended
January 31
2014 2013 2014 2013
Cash provided by (used in)
Operating activities
Net loss $ (1,276,944) $ (1,892,213) $ (2,817,736) $ (3,732,929)
Items not affecting cash
Stock-based compensation 148,837 125,124 300,105 234,461
Amortization 305,079 168,284 461,032 337,421
Salaries paid in shares 16,000 (72,020) 16,000 (78,242)
(807,028) (1,670,825) (2,040,599) (3,239,289)
Changes in non-cash working capital (361,205) (136,357) (125,318) (235,528)
Net cash used in operating activities
(1,168,233) (1,807,182) (2,165,917) (3,474,817)
Financing activities
Proceeds from issuance of shares - - - 22,224
Proceeds from exercise of stock options, net of costs - - 13,480 -
Share issuance costs (3,282) (4,084) (6,037) -
Net cash from (used in) financing activities (3,282) (4,084) 7,443 22,224
Investing activities
Acquisition of property and equipment (2,666) (89,334) (5,325) (98,167)
Software development costs (226,654) (439,721) (577,732) (802,550)
Changes in non-cash working capital - (105,434) - (114,342)
Net cash used in investing activities (229,320) (634,489) (583,057) (1,015,059)
Effect of exchange rate changes on cash and cash equivalents held in foreign currency 88,091 - 88,091 -
Cash outflow (1,312,744) (2,445,755) (2,653,440) (4,467,652)
Cash, beginning of period 3,838,370 4,729,073 5,179,066 6,750,970
Cash, end of period $ 2,525,626 $ 2,283,318 $ 2,525,626 $ 2,283,318
Non-cash transactions:
Issuance of shares in lieu of salaries and bonuses including prior period amounts accrued $ 16,000 $ 453,802 $ 16,000 $ 635,604

Contact Information

  • Liolios Group, Inc.
    Cody Slach or Greg Falesnik
    Investor Relations Contacts
    1-949-574-3860
    CBX@Liolios.com

    Brisco Capital Partners
    Scott Koyich
    Investor Relations Contact
    1-403-215-5979
    skoyich@briscocapital.com