Smart Employee Benefits Inc.
TSX VENTURE : SEB

Smart Employee Benefits Inc.

October 30, 2014 21:07 ET

Smart Employee Benefits Inc. Reports Financial Results for the Quarter Ending August 31, 2014

TORONTO, ONTARIO--(Marketwired - Oct. 30, 2014) - Smart Employee Benefits Inc. ("SEB" or the "Company") (TSX VENTURE:SEB) is a technology company providing software enabled services in the areas of healthcare transaction processing, big data environments and professional services for corporate and government clients.

SEB has created a global infrastructure of technological expertise and proprietary software utilizing a "Software as a Service" (SaaS) business model. The Company's health care technology platform (in which SEB has invested over $6-million since 2011) is very sophisticated and can manage the total business processing services for group benefits and health claims. The leading-edge adjudication platform is open architecture, rules based and modular, allowing clients to integrate either the full solution or individual components. This real-time "rules-based adjudication" environment is very unique, as rules creation become an administrative, not a programming exercise, allowing high customization and flexibility. When combined with the fully integrated administration, payment/billing and reporting modules, the Company is able to offer easy and cost effective solutions to the marketplace in Canada and globally.

The growth plan for the remainder of fiscal 2014 and 2015 is acquisition based, complemented by organic growth initiatives. Through acquisitions, the Company continues to acquire the client relationships and the vendor status necessary to facilitate organic growth. Acquisition and investment targets for SEB's Healthcare segment are TPAs, as well as broker and consultant organizations that provide solutions and services to employers. The objective is to secure the client relationships and transition both the front- and back-office business processes to SEB's technology environment capturing revenue that was previously being outsourced. Acquisitions and investments on the Technology side will focus on technology companies that have established corporate and government relationships, security clearances and the project references required to bid on outsourcing contracts.

From the beginning of fiscal 2013 until now, SEB has closed six acquisitions and has announced two others that are expected to give the Company a solid base of sustainable profitable revenue in excess of $51-million with established offices in Toronto, Ottawa, North Bay, Winnipeg and Regina, the United Arab Emirates and India. Historically, the consolidated annual revenues for these six acquisitions exceed $50-million. These transactions have brought a solid profitable base of business and clients, both corporate and government.

Company developments during the quarter ending August 31, 2014, include the following:

  • On June 11, 2014, the Company's wholly owned subsidiary, SOMOS Consulting Group Ltd., acquired 100% of Stroma Service Consulting Inc., a company providing consulting services to various clients including the Government of Ontario.
  • On August 20, 2014, SEB entered into a Letter of Agreement to acquire, through a wholly owned subsidiary, 50% of Banyan Work Health Solutions Inc., BITS Licensing Inc. and Banyan IT Solutions Inc. ("Banyan Group"). The Banyan Group operates as a full spectrum Disability Management TPA serving employers and disability insurers. Its offerings include claims management, field rehabilitation services and a full range of assessments/interventions to support its holistic approach. The Banyan Group is also a provider of Disability Benefit Technology solutions. The Banyan Group is now well established across Canada and extends into the United States, Australia and New Zealand.
  • On August 26, 2014, SEB through its wholly owned subsidiary SOMOS Consulting Group Ltd., announced it entered into a Letter of Agreement to acquire Paradigm Consulting Group Ind. and PCGI Consulting Services. Paradigm is a very strategic acquisition for SEB, bringing significant government and corporate client relationships along with technical skills and expertise. This will allow SEB to compete more effectively in Western Canada, particularly in the areas of healthcare and benefits administration and adjudication.
  • On August 27, 2014, a Letter of Agreement was signed to acquire 50% ownership in SEB Benefits and HR Consulting Inc. This consulting practice focuses on providing corporate and government clients with innovative solutions to group and health benefit plans, retirement plans and human resources.

Financial results for the quarter ended August 31, 2014

For the quarter ended August 31, 2014, SEB recorded a loss of $1,685,673, compared with a loss of $1,172,183 for the comparable period in fiscal 2013. The results included non-cash costs of $513,760, made up of accretion of non-cash interest of $134,214 related to the Company's convertible financings, share-based compensation of $106,071 relating to options issued to employees and consultants, amortization of $249,287, and depreciation of $24,188.

Results also included non-operating acquisition-related professional fees of $129,160. In addition, the Company incurred one-time moving costs of approximately $93,944 for both the Ottawa office and the Toronto office, which resulted in the combining in one office of SEB, Logitek, Inforica and Adeeva. The adding back of the non-cash and acquisition-related items results in a more-normalized loss of $948,809.

Revenue

Revenue for the quarter was $5,749,929 compared to $3,005,052 in the comparable period ending August 31, 2013. The increase in revenue was due to the inclusion of the revenues of the companies acquired since then: Inforica, Adeeva, Antian and Stroma. The August quarter revenue is constrained by seasonality, since a significant portion of revenue is based on contractor time and materials, and the summer is typically a period when vacations are taken.

Cost of revenues

The Compensation portion of Cost of Revenues during the period primarily reflects the cost of contractors of Inforica, Antian and Stroma. The "Other" reflects primarily the product costs of Adeeva, which costs were not present in the quarter ending August 31, 2013.

Operating costs

Of the other operations costs, the largest was Salaries and Other Compensation Costs of $1,229,655 (a portion of which was related to software development and maintenance); the next largest single type of expense was professional fees of $129,160, some of which was related to the one-time costs of closing of the Stroma acquisitions.

Cash

The major source of cash during the quarter was the advance of $600,000 to the Company by the President and CEO. The largest use of cash other than operating expenses was $650,000 to close the acquisition of Stroma. The amount of $400,000 was expended as part of a large contract undertaken for a department of the Government of Canada. These funds were reimbursed in September.

The unaudited condensed interim consolidated financial statements and related management's discussion and analysis for the period ended August 31, 2014, can be found on SEDAR under the profile of Smart Employee Benefits.

Forward-Looking Statements

This news release is intended for information purposes only. Statements made in this news release may contain "forward looking" information about the company's future business prospects. These statements while expressed in good faith and believed to have a reasonable basis are subject to risk and uncertainties that could cause actual results to differ materially from those set forth or implied by such forward looking statements. Investors should consult a professional advisor before making any investment decision.

For further information about SEB, please visit www.seb-inc.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.

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