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Cortex Business Solutions Announces Q1 and Fiscal 2019 Financial Results

Cortex Completes First Quarter After Significant Powervision Acquisition 

CALGARY, ALBERTA – December 4, 2018 - Cortex Business Solutions Inc. (“Cortex”) (TSXV: CBX), a North American network-as-a-service complete document management & e-invoicing solutions provider, today announces its three months ended October 31, 2018 (“Q1 F2019”) Management’s Discussion and Analysis (“MD&A”) and Condensed Consolidated Interim Financial Statements (“F/S”).  The MD&A and F/S are available at www.sedar.com.

“With our first months now behind us after the Powervision acquisition, we are already starting to see the synergies that we had expected from combining the two companies.   We have made two new sales of the complete Cortex platform since the acquisition and our pipeline for the combined solution is growing rapidly” said Joel Leetzow, President and CEO.

“As the Company’s key performance indicators including revenue and Adjusted EBITDA benefit from the Powervision acquisition and our new Intelligent Invoice Approval product release, we also had approximately $0.3 million of non-recurring expenses associated with the acquisition in this quarter.  The second quarter F2019 will include full quarter consolidated results of Powervision and we look forward to Adjusted EBIDTA growth as we complete new sales and new economies of scale” said Jason Baird, VP, Finance & CFO.

Q1 F2019 Financial Highlights

Three months ended October 31, 2018 compared to October 31, 2017

  • Adjusted EBITDA(1)  increased 29% or by $0.2 million from $0.5 million to $0.7 million
  • Adjusted EBITDA % Margin(2) increased by 3% from 16% to 19%
  • Cash flow from operating activities increased 52% from $0.3 million to $0.5 million
  • Overall revenue increased 3% or by $0.1 million from $3.2 million to $3.3 million
  • Access and usage fees increased 16% or by $0.5 million from $2.8 million to $3.3 million
  • Gross profit remained flat at $2.4 million

Cash Position

The overall cash position of Cortex reduced 51% or $4.2 million from $8.2 million at July 31, 2018, to $4.0 million at October 31, 2018. Net cash provided by operating activities of $0.5 million, in conjunction with the cash position at F2018 provided the flexibility to prudently use $4.8 million for the acquisition of Powervision in September 2018.

(1)    Adjusted EBITDA is defined as earnings before interest, taxes, depreciation and amortization, non-recurring charges and share based payments.  Adjusted EBITDA is a non-IFRS financial measure that does not have any standardized meanings prescribed by IFRS and therefore may not be comparable to similar measures presented by other reporting issuers.  This measure assists the Company in evaluating the Company’s operating performance against its expectations and against other entities. Please refer to the Company’s MD&A for the quarter and year ended July 31, 2018 for further information on the Company’s use of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to Net Income.

(2)    Adjusted EBITDA % Margin is the Adjusted EBITDA divided by Total revenue.

Cortex’s Management will host a conference call, followed by a question and answer period. 

 

The details of the conference call are as follows:

 

Date:                                                        Thursday, December 6th, 2018

Time:                                                        11:00 a.m. Eastern time (9:00 a.m. Mountain time) 

Toll-free dial-in number:                          1-800-273-9672

International dial-in number:                  1-416-340-2216

 

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 at 403-219-2838.

 

A replay of the conference call will be available after the call through December 13, 2018.

 

Toll-free replay number:                           1-800-408-3053

Toll replay number:                                   1-905-694-9451

Replay ID:                                                  1503476#

About Cortex

Cortex is a service-centric, digital transformation solutions provider focused on revolutionizing B2B document exchange. We help businesses save time and money by replacing traditional paper-based manual systems with AP and AR invoice automation. Companies on the Cortex Network are positioned for success with solutions that offer the scalability and flexibility needed to evolve with their unique business needs. Cortex specializes in the development and delivery of integrated electronic document intake and management solutions using flexible connection methods that leverage existing technologies and processes.

Cortex is currently enabling digital transformation in over 11,000 companies in the Oil & Gas, Mining, Manufacturing and Sports & Entertainment industries.  For more information, please visit www.cortex.net.

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Investor Relations Contacts:

Joel Leetzow Jason Baird  
President and CEO VP, Finance & CFO  
jleetzow@cortex.net jbaird@cortex.net   
403-219-2838 403-219-2838

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Cortex Business Solutions Inc.
Consolidated Statement of Financial Position

(Prepared in Canadian Dollars)

(Unaudited)

 

 

 

 

 

 

October 31

2018

 

July 31

2018

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

Cash and cash equivalents

 

 $              4,026,861

 

 $              8,197,785

 

Cash held in escrow for acquisitions

                    500,000

 

                                  -

 

Short-term investments

 

                       60,773

 

                       60,000

 

Accounts receivable

 

                 1,178,127

 

                    907,108

 

Prepaid expenses

 

 

                    180,148

 

                    167,822

 

 

 

 

 

                 5,945,909

 

                 9,332,715

 

 

 

 

 

 

 

 

Long-term receivable

 

 

                    109,822

 

                    131,785

Deposits

 

 

 

                       32,379

 

                       32,379

Contracts assets

 

                       66,179

 

                                  -

Property and equipment

 

                    163,898

 

                    148,479

Deferred tax assets

 

 

                 2,661,919

 

                 2,758,000

Intangible assets

 

                 3,252,888

 

                       21,012

Goodwill

 

 

                 4,481,329

 

                                  -

 

 

 

 

 

 $            16,814,323

 

 $            12,424,370

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

Accounts payable and accrued liabilities

 $              1,916,813

 

 $              1,197,295

 

Deferred revenue

 

 

                    470,535

 

                    309,967

 

Current income tax payable

 

                       23,458

 

                       20,858

 

Current portion of obligations under finance lease

                       22,923

 

                       22,923

 

Current portion of promissory note

                 1,528,290

 

                                  -

 

 

 

 

 

                 3,962,019

 

                 1,551,043

 

 

 

 

 

 

 

 

Deferred rent

 

 

 

                    131,624

 

                    141,035

Obligations under finance lease

 

                         8,079

 

                       13,801

Promissory note

 

 

                    745,479

 

                                  -

 

 

 

 

 

                 4,847,201

 

                 1,705,879

Shareholders' Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share capital

 

 

               60,771,418

 

               60,771,418

Accumulated other comprehensive income

                    632,675

 

                    620,433

Contributed surplus

 

 

                 9,933,317

 

                 9,881,276

Deficit

 

 

 

 

            (59,370,288)

 

            (60,554,636)

 

 

 

 

 

               11,967,122

 

               10,718,491

 

 

 

 

 

 $            16,814,323

 

 $            12,424,370

                 

Cortex Business Solutions Inc.
Consolidated Statement of Income and Comprehensive Income

For the three months ended October 31, 2018 and 2017

(Prepared in Canadian Dollars)

(Unaudited)

 

 

 

 

 

 

Three months ended

October 31

 

 

 

 

 

2018

 

2017

Revenue

 

 

 

 

 

 

 

Access and usage fees

 

 

 $        3,261,753

 

 $           2,809,912

 

Integration fees

 

 

                30,111

 

                   86,561

 

Project management and other revenue

                43,668

 

                 338,200

 

 

 

 

 

 

 

 

 

 

 

 

 

           3,335,532

 

              3,234,673

 

 

 

 

 

 

 

 

Cost of Sales

 

 

 

              925,357

 

                 832,300

 

 

 

 

 

 

 

 

Gross Profit

 

 

 

           2,410,175

 

              2,402,373

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

Sales and marketing

 

 

              663,631

 

                 689,969

 

Research and development

 

              529,640

 

                 477,587

 

General and administrative

 

              940,807

 

                 797,419

 

Severance and termination

 

                      -

 

                 155,922

 

 

 

 

 

 

 

 

 

 

 

 

 

           2,134,078

 

              2,120,897

 

 

 

 

 

 

 

 

Income before finance income

 

              276,097

 

                 281,476

 

 

 

 

 

 

 

 

Finance income

 

 

 

                21,873

 

                     7,096

 

 

 

 

 

 

 

 

Income tax expense - current

 

                  2,379

 

                     2,108

Income tax (recovery) - deferred

 

             (814,629)

 

                             -

 

 

 

 

 

 

 

 

Net income

 

 

 

 $         1,110,220

 

 $              286,464

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive earnings

 

 

 

 

 

Items that may be reclassified subsequently to net income:

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange gain on foreign operations

                12,242

 

                   13,936

 

 

 

 

 

 

 

 

Comprehensive income

 

 

 $         1,122,462

 

 $              300,400

 

 

 

 

 

 

 

 

Net income per share – basic and diluted

 $                 0.12

 

 $                    0.03

 

Cortex Business Solutions Inc.
Consolidated Statement of Changes in Shareholders’ Equity

(Prepared in Canadian Dollars)

(Unaudited)

 

 

Number of Common Shares

Share Capital

Accumulated Other Comprehensive Income

Contributed Surplus

Deficit

Total Shareholders’ Equity

Balance – July 31, 2017

          9,069,983

 $    60,562,286

 $            591,752

 $          9,526,341

 $  (64,896,501)

 $              5,783,878

Net income

                           -

                          -

                                 -

                              -

               286,464

                    286,464

Translation of foreign operations

                           -

                          -

                        13,936

                              -

                            -

                       13,936

Compensation units & stock options exercised

                21,158

                70,290

                                 -

                (24,040)

                            -

                       46,250

Stock based compensation

                           -

                          -

                                 -

                   65,947

                            -

                       65,947

 

 

 

 

 

 

 

Balance – October 31, 2017

          9,091,141

        60,632,576

                      605,688

             9,568,248

      (64,610,037)

                 6,196,475

 

 

 

 

 

 

 

Balance - July 31, 2018

          9,137,700

        60,771,418

                      620,433

             9,881,276

      (60,554,636)

               10,718,491

IFRS 15 net opening adjustment

                           -

                          -

                                 -

                              -

                 74,128

                       74,128

Balance - August 1, 2018

          9,137,700

        60,771,418

                      620,433

             9,881,276

      (60,480,508)

               10,792,619

 

 

 

 

 

 

 

Net income

                           -

                          -

                                 -

                              -

           1,110,220

                 1,110,220

Translation of foreign operations

                           -

                          -

                        12,242

                              -

                            -

                       12,242

Stock based compensation

                           -

                          -

                                 -

                   52,041

                            -

                       52,041

 

 

 

 

 

 

 

Balance – October 31, 2018

          9,137,700

        60,771,418

                      632,675

             9,933,317

      (59,370,288)

               11,967,122

 

Cortex Business Solutions Inc.
Consolidated Statement of Cash Flows

For the three months ended October 31, 2018 and 2017

(Prepared in Canadian Dollars)

(Unaudited)

 

 

 

 

 

 

Three months ended

October 31

 

 

 

 

 

2018

 

2017

 

 

 

 

 

 

 

 

Cash provided by (used in)

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating activities

 

 

 

 

 

Net income

 

 

 

 $      1,110,220

 

 $        286,464

Items not affecting cash

 

 

 

 

 

 

Recovery for deferred taxes

 

(814,629)

 

      -

 

Stock-based compensation

 

             52,041

 

             65,947

 

Amortization

 

 

            55,812

 

           150,294

 

Deferred Rent

 

 

              (9,411)

 

             79,923

 

Contract Assets

 

 

               7,949

 

                       -

Long term receivables

 

 

             21,963

 

            (25,974)

Changes in non-cash working capital

 

             53,631

 

         (242,791)

Net cash provided by operating activities

           477,576

 

           313,863

 

 

 

 

 

 

 

 

Financing activities

 

 

 

 

 

Proceeds on exercise of compensation units & stock options

                       -

 

             46,250

Finance lease payments

 

 

              (5,722)

 

            (12,993)

Net cash provided by (used in) financing activities

              (5,722)

 

             33,257

 

 

 

 

 

 

 

 

Investing Activities

 

 

 

 

 

Cash paid on Powervision acquisition, net of cash assumed

      (4,124,141)

 

                       -

Additions to cash held in escrow

 

         (500,000)

 

                       -

Additions to short-term investments

 

                 (773)

 

                       -

Acquisition of property and equipment

 

            (30,106)

 

            (16,231)

Net cash used in investing activities

 

      (4,655,020)

 

            (16,231)

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents held in

     foreign currency

            

12,242

 

            

13,933

 

 

 

 

 

 

 

 

Cash (outflow) inflow

 

 

      (4,170,924)

 

           344,822

 

 

 

 

 

 

 

 

Cash, beginning of year

 

 

        8,197,785

 

        6,248,176

 

 

 

 

 

 

 

 

Cash, end of year

 

 

 $     4,026,861

 

 $     6,592,998

 

 

 

 

 

 

 

 

Supplemental cash flow information

 

 

 

 

 

Interest received during the year

 

 $          22,610

 

 $          14,442