EXO U announces its second quarter and first half fiscal 2017 financial results

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

FINANCIAL HIGHLIGHTS FOR THE THREE AND SIX MONTHS ENDED SEPTEMBER 30, 2016

Second Quarter and Subsequent Event Highlights

  • On November 21, 2016, the Company announced that it had entered into a non-binding letter agreement with Alternative Capital Group Inc. for a credit facility of up to $4 million. The finalization of the credit facility is still subject to the satisfactory completion of certain conditions, which includes due diligence, a mutually agreeable final loan documentation and TSX Venture Exchange and shareholder approval. Although the completion of all the conditions of the financing are progressing positively, there can be no assurance that the financing will be finalized. The credit facility will also include the issuance by the Company to the lender of bonus warrants to purchase a substantial number of common shares of the Company. Please see the Company's news release dated November 21, 2016 for further details.
  • On October 4, 2016, the Company secured a loan from Investissement Québec for $379,530. This loan will significantly help to carry the Company forward to its longer-term financing.
  • On September 27, 2016, the Company announced that it had become a referral partner with Samsung Electronics America Ltd.  Samsung will promote, bundle and refer Ormiboard to new and current Samsung customers.
  • In the second quarter ended September 30, 2016, the Company recorded its first sales ($88,465) and revenue ($37,139) in over a year. All the sales and revenue were for its new product offerings.
  • Research and development and selling, general and administrative expenses were $711,500 in the quarter ended September 30, 2016, down 54% from the $1,555,700 recorded in the same period in the previous year.  This is a direct result of the significant downsizing and other cost controls that the Company has instituted.  Six-month year-to-date expenses of $2,100,000 were also down significantly from the $3,500,000 recorded in the same period last year.
  • 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 collaborative tool.

 


Three months ended

September 30, 2016

Three months ended

September 30,2015

Six months ended
September 30, 2016

Six months ended
September 30, 2015






Revenue

$37,139

-

$37,139

-

Adjusted Negative EBITDA 1

$(557,940)

$(1,505,560)

$(1,941,622)

$(3,374,006)

Net loss

$(536,249)

$(1,257,766)

$(2,103,729)

$(3,359,414)

Basic and diluted net loss per share

$(0.01)

$(0.03)

$(0.03)

$(0.08)



1.

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

 

"I am pleased on the progress we made saving costs and conserving cash, while at the same time expanding our revenue channels", said Jim Kirchner, CEO since July.  "In the last quarter, we have reduced our costs by over 50% and launched our flagship product, Ormiboard. In the coming quarter, we are planning to release an enhanced version of Ormiboard as well as make significant efforts in converting our opportunities into revenue. Additionally, we will be focused on finalizing the financing with ACG in the next 30 days."

Financial Results

The Company recorded $37,139 of revenue and invoiced $88,465 in the three months ended September 30, 2016. There were no sales or revenues in the corresponding period in the prior year. The difference between sales and revenue is reflected in deferred revenue and will be reflected in revenue over the next year. The Company expects that additional sales and revenue will be recorded in future periods.

R&D expense was $239,255 in the quarter ended September 30, 2016, down significantly from the $717,457 incurred in the three-month period ended September 30, 2015. Year to date expenses at $724,026 were also down from the $1,756,677 incurred in the corresponding period last year. In both cases, expenses were down primarily due to decreased staffing levels.

Selling, general, and administrative ("SG&A") expenses for the three-month period ended September 30, 2016 were $472,213, a decrease of $365,993 or 44% from the same period last year. SG&A expenses were also down 50% from the previous quarter ended June 30, 2016. These significant savings were due to employee downsizing as well as reduced professional fees, public company costs and rent.

Stock based compensation costs in the quarter was a credit of $147,665 and was the main factor in a six- month year to date credit expense of $9,635. For the six-month period ended September 30, 2015 this expense was a credit of $189,583.

Adjusted Negative EBITDA was $557,940 for the quarter ended September 30, 2016, compared to a negative $1,505,560 for the same period in the prior year. On a six-month year to date basis, the Company has recorded a negative EBITDA loss of $1,941,622, which is substantially better than the same period last year's loss of $3,374,006 (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 September 30, 2016, the Company had a cash position of $375,637. This represents a decrease of $2,126,226 from the Company's cash position from March 31, 2016. Since the end of the quarter, the Company received a loan of $379,530 and has entered into a non-binding letter agreement with a lender for a credit facility of up to $4 million, detailed above in the first bullet of our highlights. 

Going concern considerations

The unaudited consolidated financial statements of the Company for the three and six-month periods ended September 30, 2016 have been prepared on a going concern basis, which implies that the Company will continue to realize its assets and discharge its liabilities 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 September 30, 2016, the Company had not yet achieved profitable operations and had accumulated losses of $29,885,918 since inception, including the net loss of $2,103,729 for the six-month period ended as at the same date. The Company used $2,126,226 of cash for its operating activities for the six-month period ended September 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 September 30, 2016, the Company's committed cash obligations and expected level of expenses for the next twelve months exceed its actual cash resources. Whether and when the Company can attain profitability and positive cash flows from operating activities is uncertain, particularly 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 believes that the Company will be able to obtain additional funds through financing or partnerships 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. The Company was able to secure a $379,530 loan from Investissement Québec in October and has entered into a non-binding letter agreement for a secured credit facility of up to $4 million with Alternative Capital Group Inc. The finalization of the credit facility is still subject to the satisfactory completion of certain conditions, which includes due diligence, a mutually agreeable final loan documentation and TSX Venture Exchange and shareholder approval. There can be no assurance that the financing will be finalized.

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 and six month periods ended September 30, 2016 are available under the Company'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://www.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 Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking information, including, but not limited to, risks related to whether or not the Company will enter into the credit facility, and risks related to the Company's incapacity to execute on its business plan. 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 Company'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 Company 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 Company.

Negative EBITDA represents an indication of the Company'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 Company's capacity to generate income from operations before taking into account certain non-cash transactions. Adjusted Negative EBITDA is a measure used by the Company 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 Company's performance. These measures are identified and defined under "Other Financial Measures" in the Company'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 and six-month periods ended September 30, 2016 and 2015:

 

(In Canadian dollars)

Three months ended
September 30, 2016

Three months ended
September 30, 2015

Six months ended
September 30, 2016

Six months ended
September 30, 2015






Net Loss

(536,249)

(1,257,766)

(2,103,729)

(3,359.414)






Financials expenses (income), net

(11,489)

2,422

(3,776)

(3,463)

Depreciation of property & equipment

81,122

13,036

89,494

26,075

Amortization of intangible assets

33,267

37,065

66,533

74,131

Impairment charge





Negative EBITDA

(433,493)

(1,205,241)

(1,951,622)

(4,262,671)






Stock-based compensation

(147,665)

(359,358)

(9,635)

(189,583)

Net loss (gain) on foreign exchange              

21,074

59,039

19,941

78,248

Adjusted Negative EBITDA

(557,940)

(1,505,560)

(1,941,622)

(3,374,006)

 

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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