EXO U announces its fourth quarter and fiscal 2016 financial results

MONTREAL, July 29, 2016 /CNW Telbec/ - EXO U Inc. ("EXO U" or the "Corporation") (TSXV: EXO) today announced the financial results for its fourth quarter and fiscal year ended March 31, 2016. All amounts are stated in Canadian dollars, unless otherwise noted.

FINANCIAL HIGHLIGHTS FOR THE THREE MONTHS AND YEAR ENDED MARCH 31, 2016



Three months

Fiscal 2016

Three months

Fiscal 2015

Fiscal 2016

Fiscal 2015







Revenue


$386,925

-

$386,925

$ 815,923

Adjusted negative EBITDA 1


$(1,084,320)

$(1,607,177)

$(5,917,487)

$(6,898,226)

Net loss


$(948,232)

$(2,025,337)

$(6,010,415)

$(9,194,832)

Basic and diluted net loss per share


$(0.02)

$(0.05)

$(0.12)

$(0.22)







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 and comprehensive loss, as determined in accordance with IFRS, to Adjusted Negative EBITDA.

 

Fourth Quarter, Fiscal 2016 and Subsequent Event Highlights 

  • 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.
  • 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 by approximately 50%.
  • On May 11, 2016, the Company announced launch dates and activities for Ormiboard, its new white boarding software for Kindergarten to Grade 12 classrooms and professional learning environments that allows collaboration on any device or display.
  • 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 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 ("Panasonic") for the sale and distribution of 1,500 Ormiboard Pro licenses.
  • 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.
  • On February 26, 2016, the Company announced that it successfully completed a private placement for gross proceeds totaling $2,300,000. This followed the successful completion of a private placement on October 23, 2015 for gross proceeds of $2,444,750.
  • During the year, the Company entered into a number of distribution and reseller agreements with various partners including, among others, Panasonic, Genee World Ltd., QOMO HiteVision LLC. and Today's Classroom Inc.
  • During the year, a number of distribution and reseller agreements were cancelled, put on hold or not renewed. These included, among others, Yazmi USA, ProEducation and WebServices pour l'Éducation.

"With the launch of Ormiboard Pro over the summer and the pending launch of Ormiboard Go, EXO U is in a unique position to provide educators with a collaboration & whiteboarding solution not currently available within our marketplace," stated newly appointed CEO Jim Kirchner. "While the immediate future is not without its challenges for us as a company, we are driving hard to realize a steadily increasing level of adoption by district, schools and classroom educators across the US and abroad."

Financial Results

Revenues for the year ended March 31, 2016 were $386,925 compared to $815,923 in the previous year. At March 31, 2015, the Company had deferred revenue of $386,925 relating to the first milestone of a project with a Latin American client. This portion of the project was completed in fiscal 2014 and the Company had received the related payment; however, this milestone has no stand-alone value for the customer without the completion of the subsequent milestones. As a result, it was not recognized as revenue as at March 31, 2015. In order to fully complete its obligations under this contract, the customer would need to inform the Company of the content to be included in the virtual library. The customer has not responded to the Company for over two years and therefore the Company believes this is a breach of contract and that it has no further obligations toward the customer. Therefore, the Company recognized the related deferred revenue of $386,925 as revenue in fiscal 2016.

Research and development ("R&D") expense amounted to $527,612 for the fourth quarter of fiscal 2016, a reduction of $351,502 compared to expenses incurred during the same period in the prior year.  For the year ended March 31, 2016, the R&D expense amounted to $2,951,929 compared to $3,535,645 for the prior year. 

Selling, general and administrative ("SG&A) expenses for the fourth quarter of fiscal 2016 were $993,835, an increase of $198,729 from expenses incurred during the same period last year . For the year ended March 31, 2016, SG&A expenses amounted to $3,553,299, as compared to $4,268,173 for the prior year. The increased expenses for the three months ended March 31, 2016 as compared to the same period in the prior year was mainly due to increased public company costs as well as a shift in focus from R&D to sales and marketing activities. The decreased SG&A expenses for the year ended March 31, 2016 as compared to the prior year was largely due to a decrease in professional fees and overall reduced compensation costs.

During the three-month period ended March 31, 2016, the Company recognized a recovery of $40,160 for stock-based compensation expenses, while for the year ended March 31, 2016, the Company recognized a recovery of stock-based compensation expense of $165,045. This compares to expenses of $243,603 and $1,898,007, respectively, for the three-month period and year ended March 31, 2015. During the three and twelve-month periods ended March 31, 2016, a significant number of stock options were cancelled that were not yet vested, largely as a result of employee downsizing and resignations, and resulted in a credit to stock-based compensation expense for the year.

Adjusted Negative EBITDA was $1,084,320 for the quarter, compared to negative $1,607,177 for the same period in the prior year. On a year to date basis, Adjusted Negative EBITDA was $5,917,487, as compared to $6,898,226 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 March 31, 2016, the Company had a cash position of $2,051,863. This represents a decrease of $2,040,280 from the Company's cash position as at March 31,2015.

Appointment to Board and Option Grants

The Board has granted 250,000 options to Jim Kirchner under the Company's stock option plan. The options are exercisable at a price of $0.08 per common share of the Company for a period of 10 years following the date of grant. The options shall vest one-third annually over the next three years. Mr. Kirchner is also appointed to the Board of Directors of the Company effective August 1, 2016.

Going concern considerations

The consolidated financial statements of the Company for the year ended March 31, 2016 have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business.

As at March 31, 2016, the Company had not yet achieved profitable operations and has accumulated losses of $27,782,189 since inception, including the net loss of $6,010,415 for the year ended as at the same date. The Company used $5,805,545 of cash from its operating activities for the year ended March 31, 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 this indicates the existence of a material uncertainty that may cast significant doubt on the Company's ability as a going concern. Furthermore, as at March 31, 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 customer or partner agreements.

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 order to meet its obligations arising from normal business operations. The Company will continue to seek additional sources of financing in the form of equity and/or debt financing and will continue to pursue joint venture or other partnership agreements. At the same time, the Company has recently reduced its current operating costs in order to improve its liquidity. Whether and when the Company can obtain additional financing or 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 customer or partner agreements. Management believes that the Company will be able to obtain additional funds through financing or partnership agreements, but there is no assurance that it will be able to do so. Without additional financing or other revenues, the Company will be forced to cease operations.

Accordingly, the 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 audited consolidated financial statements and related notes, and Management's Discussion and Analysis for the three months and years ended March 31, 2016 and 2015, are available under the Corporation's profile on SEDAR at www.sedar.com.

About EXO U

EXO U's shares trade on the TSX Venture Exchange under the ticker symbol EXO. EXO U develops an innovative software platform which enables businesses and educational institutions to securely mobilize and manage their mobile workforce and students by delivering engaging experiences spanning desktop and mobile applications. At the core of EXO U's platform is the smart and agnostic EXO engine that unifies multiple software platforms, allowing devices to interact and communicate seamlessly together. EXO U 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.

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 year ended March 31, 2016.

The following is a reconciliation of Negative EBITDA and Adjusted Negative EBITDA to net loss and comprehensive loss for the three-month periods and fiscal years ended March 31, 2016 and 2015:

 

 (In Canadian dollars)

Three months ended
March 31, 2016

Three months ended
March 31, 2015

Year ended
March 31, 2016

Year ended March 31, 2015






Net Loss and Comprehensive Loss

(948,232)

(2,025,337)

(6,010,415)

(9,194,832)






Financials expenses (income), net

15,957

7,306

(15,413)

(8,781)

Depreciation of
property & equipment

13,140

14,778

52,558

58,679

Amortization of intangible assets

37,062

37,065

148,258

148,262

Impairment charge


15,200


15,200

Negative EBITDA

(882,073)

(1,950,988)

(5,794,186)

(8,981,472)






Stock-based compensation

(40,160)

(243,603)

(165,045)

1,898,007

Net loss (gain) on foreign exchange            

(162,087)

100,208

41,744

185,239

Adjusted Negative EBITDA

(1,084,320)

(1,607,177)

(5,917,487)

(6,898,226)

 

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

RELATED LINKS
http://www.exou.com

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