EXO U announces its first quarter fiscal 2017 financial results

MONTREAL, Aug. 29, 2016 /CNW Telbec/ - EXO U Inc. ("EXO U" or the "Corporation") (TSXV: EXO) today announced the financial results for the three months ended June 30, 2016. All amounts are stated in Canadian dollars, unless otherwise noted.

 

FINANCIAL HIGHLIGHTS FOR THE THREE MONTHS ENDED JUNE 30, 2016





Three months ended

June 30,2016

Three months ended

June 30,2015




Revenue

-

-

Adjusted Negative EBITDA 1

$(1,381,682)

$(1,868,447)

Net loss

$(1,567,480)

$(2,101,648)

Basic and diluted net loss per share

$(0.02)

$(0.05)




1.

Adjusted Negative EBITDA is a non-GAAP financial performance measure. Please refer to the annex of this press release for the Corporation's definition of such measure and for a reconciliation of net loss, as determined in accordance with IFRS, to Adjusted Negative EBITDA.

 

First Quarter and Subsequent Event Highlights

  • On August 26, 2016, the Company announced the launch of Ormiboard, a first-of-its-kind digital learning environment that redefines whole classroom teaching by transforming any device with any operating system into an easy-to-use whiteboarding and collaboration tool.
  • In July 2016, the Company underwent a number of changes to its leadership and organizational structure. On July 12, the Company appointed Jim Kirchner as its new Chief Executive Officer, replacing Kevin Pawsey who resigned as CEO but remains on the Board of Directors. Mr. Kirchner was previously the Senior Vice President of Business Development at the Company. Prior to joining EXO U in October, 2015, Mr. Kirchner was Senior Vice President at Amplify, Inc., a NewsCorp subsidiary, and prior to Amplify, he was a founder and CEO of LearningStation.
  • In July 2016, the Company restructured and reduced its work force to significantly lower its expenses. The workforce reduction cost savings and other expense reductions will reduce the normalized spend in excess of 50%.
  • On June 28, 2016, the Company announced it had entered into an amendment to the previously announced reseller agreement with a division of Panasonic Corporation of America for the sale and distribution of 1,500 Ormiboard Pro licenses.
  • On June 8, 2016, the Company introduced the launch of Ormiboard Pro, a first-of-its-kind front of class visual creation and collaboration tool, at Infocomm 2016.
  • On June 2, 2016, the Company announced that it had entered into an agreement with Tyton Partners Capital Markets LLC for advisory services including, but not limited to, assessing business development and partnership opportunities, including channel joint venture partnerships and identifying, evaluating and coordinating capital market opportunities.
  • On April 7, 2016, the Company announced that Ormi, the Company's mobile device teaching platform for schools, was named a finalist for the 2016 SIIA CODiE Awards in the Best Post-Secondary Learning Content Solution category. The CODiE Awards are the premier awards for the software and information industries.

"With the recent launch of our flagship solution, Ormiboard, we are seeing initial traction within the K-12 Education industry and look forward to expanding our user base in the back to school timeframe and through this year." commented newly appointed CEO Jim Kirchner. "EXO U's next generation digital learning environment is gaining attention throughout the industry and we are well positioned to expand.  Not only have we have made significant additions to the platform and are continually adding new content to make adoption and integration of Ormiboard effective, we have received our first orders for the product and have started generating revenue for the Company."

Financial Results

There was no revenue for the three months ended June 30, 2016 and in the corresponding period of the prior year. The absence of sales was attributable to the building of new sales channels with partners coupled with the timing of the launch of the newest versions of the Company's product offerings, Ormi and Ormiboard. The Company continues to conduct a number of demonstrations, trials and pilots on an ongoing basis in order to develop revenue opportunities. Based on recent contracts entered into by the Company, revenue is expected in the second fiscal quarter (July-September 2016) of 2017.

R&D expense amounted to $484,771 for the three-month period ended June 30, 2016, compared to the $1,039,220 incurred in the three-month period ended June 30, 2015. This reduction of R&D expenses was largely a result of lower compensation costs due to decreased staff. 

Selling, general and administrative ("SG&A") expenses for the three-month period ended June 30, 2016 was $938,549, an increase of $59,220, from expenses incurred during the same period in the prior year. The increased expenses for the three months ended June 30, 2016 as compared to the same period in the prior year was mainly due to an increase in professional fees associated with outside services for contract and business development support.

During the three-month period ended June 30, 2016, the Company incurred an expense of $138,030 for stock-based compensation costs, while for the three-month period ended June 30, 2015, the Company recognized a stock-based compensation expense of $169,775.

Adjusted Negative EBITDA was $1,381,682 for the quarter, compared to negative $1,868,447 for the same period in the prior year. (Please refer to the annex of this press release for the company's definition of Adjusted Negative EBITDA and for a reconciliation of net loss and comprehensive loss, as determined in accordance with IFRS, to Adjusted Negative EBITDA and for further details with respect to the company's non-GAAP financial performance measures.)

As at June 30, 2016, the Company had a cash position of $1,112,410. This represents a decrease of $1,389,453 from the Company's cash position from March 31, 2016.

Going concern considerations

The unaudited interim condensed consolidated financial statements of the Company for the three-month period ended June 30, 2016 have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities and commitments in the normal course of business. The continuation of the Company as a going concern is dependent upon, among other things, the Company's ability to generate future profitable operations by securing contracts and growing its revenue base, and its ability to obtain additional financing in the form of equity and/or debt financing, joint venture agreements, or in another form in order to meet its obligations arising from normal business operations.

As at June 30, 2016, the Company had not yet achieved profitable operations or positive cash flows from operating activities and has accumulated losses of $29,349,669 since inception, including a net loss of $1,567,480 for the three-month period ended as at the same date. The Company used $1,389,453 of cash from its operating activities for the period ended June 30, 2016. The Company expects to continue to incur further operating losses and negative cash flows from operating activities in the development of its business, and these material uncertainties cast significant doubt on the Company's ability to continue as a going concern.  Furthermore, as at June 30, 2016, the Company's committed cash obligations and expected level of expenses for the next twelve months exceeds its actual cash resources.  Whether and when the Company can attain profitability and positive cash flows from operating activities is uncertain, in particular as a result of current market conditions and the length of time required to generate positive cash flows from new customers or partner agreements.

Management is not certain that the Company will be able to obtain additional funds through financing or partnership agreements. Without additional financing or other revenues, the Company will be forced to cease operations.

Accordingly, the unaudited interim condensed consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. Such adjustments could be material.

The unaudited interim condensed consolidated financial statements and related notes, and Management's Discussion and Analysis for the three months ended June 30, 2016 are available under the Corporation's profile on SEDAR at www.sedar.com.

About EXO U

At EXO U, we believe that people learn best with instructional technologies that support and do not interrupt the momentum of teaching, learning, and collaboration—whether they are learning in person, remotely, or across an evolving device landscape. That is why our web-based whiteboarding and classroom management solutions for educational institutions and corporations work on any device with any operating system, anytime and anywhere, solving important mobility issues such as security, privacy, real-time collaboration, and management of application and content. EXO U's shares trade on the TSX Venture Exchange under the ticker symbol EXO.V. EXO U's Ormi was recently a finalist for the 2016 SIIA CODiE Award. For more information, visit http://www.exou.com and follow us on Twitter @exo_u. For more information about Ormiboard, visit https://ormiboard.com and follow us on Twitter @ormiboard.

Cautionary Note Regarding to Forward Looking Information

Certain statements included herein, including those that express management's expectations or estimates of EXO U's future performance or future events, constitute "forward-looking information" within the meaning of applicable securities laws. Such forward-looking information and statements are often, but not always, identified by the use of words such as "plans", "expects", "estimates", "intends", "anticipates", or "believes", or variations of such words and phrases (or the negative form thereof) or statements that certain actions, events or results "may", "could", "would", "might", or "will" be taken, occur or be achieved. Forward-looking information is necessarily based upon a number of estimates and assumptions that, while considered reasonable by management at this time, are inherently subject to significant business, economic, regulator and competitive uncertainties and contingencies that could cause actual results, performance or achievements of the Corporation to be materially different from any future results, performance or achievements expressed or implied by the forward-looking information. For additional information with respect to certain of these and other assumptions and risk factors, please refer to EXO U's management's discussion and analysis for the year ended March 31, 2016, available under the Corporation's profile on SEDAR at www.sedar.com. Forward-looking information contained herein is presented as of the date of this news release and the Corporation disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or results, except as may be required by applicable securities laws. There can be no assurance that forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers are cautioned not to place undue reliance on these forward-looking statements.

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.

ANNEX

Management uses net loss and comprehensive loss as presented in the audited condensed consolidated statement of loss and comprehensive loss as well as loss before financing expenses (income), income taxes, depreciation of property and equipment and amortization of intangible assets ("Negative EBITDA") and Adjusted Negative EBITDA as measures to assess the performance of the Corporation.

Negative EBITDA represents an indication of the Corporation's capacity to generate income, excluding the impact of management's financing activities, cost of depreciation of property and equipment, amortization of intangible assets as well as income taxes.

"Adjusted Negative EBITDA" is a further refinement of Negative EBITDA to exclude stock-based compensation expenses and foreign exchange gains (losses). Adjusted Negative EBITDA represents an indication of the Corporation's capacity to generate income from operations before taking into account certain non-cash transactions. Adjusted Negative EBITDA is a measure used by the Corporation to make strategic decisions, forecast future results and evaluate its performance.

Negative EBITDA and Adjusted Negative EBITDA do not have any standardized meaning prescribed by Canadian Generally Accepted Accounting Principles ("GAAP") and International Financial Reporting Standards ("IFRS") and may not be comparable to similar measures presented by other entities. Neither Negative EBITDA nor Adjusted Negative EBITDA represent the actual cash used by operating activities, nor are they recognized measures of financial performance under IFRS. EXO U's definition of Negative EBITDA and Adjusted Negative EBITDA may differ from that used by other companies. Investors are cautioned that Negative EBITDA and Adjusted Negative EBITDA should not be considered as an alternative to net loss and comprehensive loss determined in accordance with IFRS or indicators of the Corporation's performance. These measures are identified and defined under "Other Financial Measures" in the Corporation's management's discussion and analysis for the three months ended June 30, 2016.

The following is a reconciliation of Negative EBITDA and Adjusted Negative EBITDA to net loss for the three-month periods ended June 30, 2016 and 2015:

 

(In Canadian dollars)

Three months ended
June 30, 2016

Three months ended
June 30, 2015




Net Loss

(1,567,480)

(2,101,648)




Financials expenses (income), net

7,713

(5,885)

Depreciation of property & equipment

8,372

13,037

Amortization of intangible assets

33,266

37,065

Impairment charge



Negative EBITDA

(1,518,129)

(2,057,431)




Stock-based compensation

138,030

169,775

Net loss (gain) on foreign exchange

(1,583)

19,209

Adjusted Negative EBITDA

(1,381,682)

(1,868,447)

 

SOURCE EXO U Inc

For further information: For investor or media inquiries, please contact: Shan Ahdoot, sahdoot@exou.com, (480) 313-5983; Jim Kirchner, jkirchner@exou.com, 1-704-293-5461

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http://www.exou.com

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