The Futura Loyalty Group Inc.
TSX VENTURE : FUT

The Futura Loyalty Group Inc.

May 31, 2012 17:47 ET

Futura Announces Financial Results for the Three-Month Period Ended March 31, 2012

TORONTO, ONTARIO--(Marketwire - May 31, 2012) - The Futura Loyalty Group Inc. (TSX VENTURE:FUT) ("Futura" or the "Company") has released its financial results for the three-month period ending March 31, 2012.

Financial Overview

Futura's revenue for the three-month period ending March 31, 2012 grew to $506,651 from $403,318 in 2011. Revenues, excluding breakage, for the same periods were $451,318 and $315,307 respectively, representing an annual increase of 43%. This increase in revenue was almost entirely the result of increased third party loyalty currency sales which rose 45% to $415,331 in the first quarter of 2012, compared to $287,267 in the same period in 2011.

Gross margins for the three-month period ended March 31, 2012 and 2011 were $237,728 and $221,617 respectively. Gross margins, excluding breakage revenue and expense, for the three-month period ended March 31, 2012 and 2011 were $197,927 and $133,606, representing 43.8% and 42.3% of sales respectively.

Operating expenses for the three-month period ended March 31, 2012 and 2011 were $1,007,413 and $436,440 respectively. The increase in operating expenses was primarily the result of restructuring costs accruals and increased operating costs as the Company ramped up operations in the US.

Loss before financial activities for the three-month period ended March 31, 2012 was $769,685 compared to $214,823 for 2011. Excluding breakage, the loss before financial activities was $809,486 and $302,834 respectively for the quarters in 2012 and 2011.

The net loss for three-month period ended March 31, 2012 was $1,023,907 in comparison to a net loss of $264,731 for the same quarter in 2011. Net loss per share was $0.01 per share for three-month period ended March 31, 2012 and $Nil for 2011. There were 184,915,651 shares outstanding at period end.

Business Overview

  • Futura continued to build its recurring revenue business in Canada with its core revenue base coming from selling branded loyalty currencies to mid size retailers, leveraging its loyalty marketing expertise in combination with its proprietary technology platform.

  • During the first quarter of 2012, the Company grew the Canadian business by adding new car dealers and during March signed its 130th Canadian new car dealer to issue its third party loyalty currency to consumers on the purchase or service of vehicles.

  • During the month of March, the Company also completed training of and deployed 6 sales reps into the US market and raised $550,000 of debt financing to help facilitate the US growth plan.

  • At the end of March 2012, Futura promoted David Campbell from CFO to President & CEO to lead the Company into its next growth phase.

  • At the end of May 2012, Ted Dzialowski assumed the role of Chairman of the board of directors (the "Board"). Ted has been a director of the Company since February, 2010 and throughout his tenure has provided valuable operating and strategic value to the Company. David Beutel has stepped down as Chairman but will remain a member of the Board.

"We are very pleased that Ted is assuming the Chairman position as the Company launches into a new growth phase which includes US expansion. David Beutel has served in this role since 2006 and we thank him for his valuable contribution and are very pleased that he will remain a committed member of the Board," said David Campbell, President and CEO of Futura.

Financial Summary

3 months ending March 31, 2012 3 months ending March 31, 2011
Revenue 506,651 $ 403,318
Gross Margin 237,728 221,617
Expenses 1,007,413 436,440
Loss Before Financial Activities (769,685 ) (214,823 )
Net Loss (1,023,907 ) $ (264,731 )
Numbers Excluding Breakage
Revenue 451,318 $ 315,307
Gross Margin 197,927 133,606
Expenses 1,007,413 436,440
Loss Before Financial Activities (809,486 ) (302,834 )
Net Loss (1,063,708 ) $ (352,742 )

The Company has defined the term "Loss Before Financial Activities" in its consolidated financial statements as this is an effective measure of the operating business, independent of how the business is financed. The Company has also chosen to break out its results herein by showing the numbers independent of breakage revenue and expense, as breakage can randomly and significantly vary from quarter to quarter, thereby making it difficult for readers of the consolidated financial statements to get a clear picture of the business, independent of breakage. Breakage revenue is recorded when a Futura Rewards member has not experienced an eligible transaction for a period of 24 consecutive months.

Share Consolidation

Futura also announced that all shareholders (of record date May 25, 2012) will be asked to consider and approve a resolution consolidating the Company's issued and outstanding common shares, along with other items of business to be presented at its annual and special meeting to be held on June 26, 2012 (the "Meeting").

The Company proposes to consolidate its issued and outstanding common shares on the basis of one (1) new post-consolidation common share for every forty (40) pre-consolidation common shares outstanding or on the basis of such lesser consolidation ratio as may be approved by the Board and accepted by the TSX Venture Exchange (the "Exchange"). Approval by shareholders of the resolution will give the Board the option, but not the obligation, to proceed with the consolidation.

In the event that the proposed consolidation is conducted on a 1 for 40 basis, based on the Company's currently outstanding common shares of 184,915,656, the Company would have approximately 4,622,891 common shares outstanding following the consolidation.

The Board believes that it is in the best interests of the Company for the Board to have the authority to implement the share consolidation so that the share price exceeds the minimum share and warrant price at which shares and warrants can be issued under Exchange rules as the current share price has made it difficult for the Company to secure funding that it requires.

The Company does not intend to change its name in connection with the proposed consolidation. The proposed consolidation is subject to shareholder approval and acceptance for filing by the Exchange. Additional information regarding the proposed consolidation is provided in the Company's management information circular for the Meeting. The management information circular and other materials relating to the Meeting will be mailed to registered shareholders and available for review under the Company's profile on SEDAR at www.sedar.com on or about June 5, 2012.

To see the Company's full financial statements, please go to www.tflg.ca or www.sedar.com.

About Futura Loyalty Group

The Futura Loyalty Group Inc. is an industry-leading provider of integrated and stand-alone loyalty solutions for Canadian and American businesses. The company offers a comprehensive suite of loyalty products and services including access to two existing branded loyalty currencies in Canada and three in the United States. Futura also develops custom loyalty marketing and administration programs for companies wishing to develop proprietary loyalty solutions. Futura's loyalty services include member account set up, management and reward redemption platform, a web-based program transaction reporting interface for merchants, a robust offer management system, retail POS Integration for card swipe issuance, customer loyalty analytics and a proprietary web based reward issuance solution. For more information regarding The Futura Loyalty Group, visit www.futuraloyaltygroup.com or www.tflg.ca.

Forward-Looking Information

This news release includes certain forward-looking information that is based upon current expectations, which involve risks and uncertainties associated with our business and the environment in which the business operates. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking information, including those identified by the expressions "anticipate", "believe", "plan", "estimate", "expect", "intend", "will", "may", "should", "could", and similar expressions to the extent they relate to the Company or its management. The forward looking information is not historical facts, but reflects the Company's current expectations regarding future results or events. 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; level of merchant participation in the Company's programs; uncertainties relating to the availability and costs of financing needed in the future; and other factors, including without limitation, those listed under "Economic Dependence" and "Risks and Uncertainties" in MD&A for the three and twelve month periods ended December 31, 2011.

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.

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