EXO U announces its second quarter fiscal 2016 financial results

MONTREAL, Nov. 27, 2015 /CNW Telbec/ - EXO U Inc. (TSXV: EXO) ("EXO U" or the "Company"), a software provider that develops cross platform operating system agnostic software that enables development of highly customizable touch-based user interfaces and experiences, today announced its financial results for its second quarter ended September 30, 2015. All amounts are stated in Canadian dollars, unless otherwise noted.

 

FINANCIAL HIGHLIGHTS FOR THE THREE AND SIX MONTHS ENDED SEPTEMBER 30, 2015







Three months

Q2 Fiscal 2016

Three months

Q2 Fiscal 2015

Six months

Q2 Fiscal 2016

Six months

Q2 Fiscal 2015






Revenue

$ —

$ 312,734

$ —

$ 815,923

Adjusted negative EBITDA 1

$(1,505,560)

$(1,890,961)

$(3,374,006)

$(3,026,708)

Net loss

$(1,257,766)

$(2,754,921)

$(3,359,414)

$(4,239,987)

Basic and diluted net loss per share

$(0.03)

$(0.07)

$(0.08)

$(0.10)






  1. Adjusted negative EBITDA is a non-IFRS 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 and comprehensive loss as determined in accordance with IFRS to adjusted negative EBITDA.

 

Q1, Fiscal 2016 and Subsequent Highlights 

  • On November 17, 2015, the Company announced the appointment of Ian Bryan as Vice President of Marketing. Mr. Bryan joins EXO U with 12 years of experience in marketing education technology products and companies at a global scale. Recently, he served as Director of Strategies Initiatives at BOXLIGHT, an interactive technology manufacturer, where he led demand and lead generation, marketing automation and IPO communications. The addition of Messrs. Bryan, Torregiani and Kirchner to the team is part of Mr. Pawsey's strategy to bring in experienced staff in the fields of K12, Higher Education and developing OEM and Distribution Agreements
  • On November 5, 2015, the Company announced the appointment of Mr. Roberto Torreggiani as Vice President of Sales. Mr. Torregiani was previously Director of Sales for i>Clicker, a portfolio business within the Macmillan Publishing Group, where he was responsible for growing revenues by over 225% and won adoptions with many leading Higher Education Institutions.
  • On October 29, 2015, the Company announced the hiring of Mr. Jim Kirchner as Senior Vice President of Business Development. Mr. Kirchner was previously a Senior Vice President at Amplify where he led a thirty person sales force, and prior to that was a founder and CEO of LearningStation.
  • The Company announced on October 23, 2015 that it had closed its first tranche of its previously announced private placement. The gross proceeds were $2,444,750. The Company also intends to complete a second tranche of this offering in the third quarter of Fiscal 2016.
  • The Company announced on October 23, 2015 that Mr. Kevin Pawsey, its recently hired Chief Operating Officer, was appointed as the Chief Executive Officer of the Corporation. Mr. Pawsey is a three-time CEO in the education sector. He brings over twenty years of experience to EXO U and has a proven history of success in developing sustained business growth internationally in the fields of education, technology, and online learning.
  • On October 15, 2015, the Company announced that it had entered into a license agreement with QOMO HiteVision, L.L.C. ("QOMO"), a manufacturer of high technology electronic products located in Michigan. The agreement sets out the terms and conditions in which EXO U will provide QOMO a fixed minimum number of worldwide licenses each year over a three-year renewable term on a non-exclusive basis. In addition, this agreement gives EXO U, via the QOMO sales channels, increased visibility in 16,000 school districts in the US, Europe and the Middle East.
  • In the quarter ended September 30, 2015, the Company reduced its combined research and development as well as selling, general and administrative expenses by 30% on a year over year basis. It was also lower by 19% from the previous quarter. This illustrates the Company commitment to contain and reduce expenses during this period.
  • On August 14, 2015, the Company announced that it had entered into a partnership agreement with Proeducacion, a leading Mexican based provider of comprehensive, simple and reliable technology solutions for schools and universities. With the EXO U education solution, Proeducacion plans to enhance its product offering and expand its reach into the education sector on Mexico.

 

"We have made some significant progress over the last two months", said Kevin Pawsey, EXO U's newly appointed CEO. "We have completed the first tranche of our financing, we have put in place a world class sales and marketing team who have significant experience in the relevant education technology markets we are developing, and we are making strong inroads into the market as evidenced by the license agreement that was signed with QOMO where we are now co-presenting EXOU in school districts across the US to build our pipeline. These important developments are fundamental milestones in our sales and marketing strategy and we are confident they will significantly increase our capacity to generate new revenues in the right markets and work towards achieving our objectives."

Financial Results

EXO U had no revenue in the second quarter ended September 30, 2015 versus $312,734 reported in the same period last year, while on year-to-date basis, for the six-month period ended September 30, 2015, the Company had no revenue compared to revenues of $815,923 for the same period last 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 new version of the Company's product offering. The Company continues to conduct a number of demonstrations, trials and pilots on an ongoing basis in order to develop revenue opportunities.

Research and development ("R&D") expense was $717,457 and $966,640 respectively for the second quarter and the six-month period, were $1,756,677 and $1,471,343 respectively compared to the same periods of last year. The lower expenses in the second quarter were a result of cost reductions.

Selling, general, and administrative expenses for the second quarter were $838,206, down $403,679 from that incurred in the same period last year. On a year-to-date basis, these expenses are down from $1,717,535 in Fiscal 2015 to $2,343,301 for this fiscal year. Cost containment and staff reductions were the major reasons for the reduced expenses.

Stock-based compensation recovery of $359,358 and $189,583 respectively was recognized in the second quarter and the six-month period, compared to an expense of $791,241 and $1,090,616 respectively for the same periods of last year. During the quarter there were significant cancellations of existing options that were not yet vested and this resulted in a credit to expense in the period.

Adjusted negative EBITDA was $1,505,560 for the quarter, compared to negative $1,890,961 in the same period last year. On a year-to-date basis, adjusted negative EBITDA reached $3,374,006 compared to $3,026,708 twelve months ago.

As of September 30, 2015, the Company had a cash balance of $1,179,507, a decrease of $2,912,636 from the position it had as at March 31, 2015.

Subsequent Event and Financing Update

On October 2015, the Company announced the first closing of its previously announced offering of up to 20,000,000 units of EXO U at a price of $0.20 per unit. The Company sold a total of 12,223,750 units for aggregate gross proceeds to the Company of $2,444,750.

Each Unit consists of one common share and one common share purchase warrant (each, a "Warrant"). Each Warrant entitles the holder thereof to purchase one common share at a price of $0.35 for a term of 24 months, subject to adjustment in certain events.

In consideration for its services, Mackie Research Capital Corporation (the "Agent") received a cash commission of $121,460, equal to 6% of the gross proceeds of the brokered portion of the offering. The Agent also received 607,300 non-transferable warrants (the "Broker Warrants"). Each Broker Warrant has the same term as the Warrants and an exercise price of $0.20.

The Company expects to complete a second tranche of the Offering in the third quarter of Fiscal 2016. The offering remains subject to the final approval of the TSX Venture Exchange.

Option Grants

The Company announces that is had granted a total of 20,000 stock options to certain of the Company's Officer and Directors under the Company's Stock Option Plan. The options are exercisable at a price of $0.20 per share for a period of 10 years, and vest immediately.

Going Concern

The unaudited interim condensed consolidated financial statements of the Company for the three-and-six-month periods ended September 30, 2015 have been prepared on a going concern basis, which implies the Company will be able to realize its assets and discharge its liabilities and its commitments in the normal course of business.

As at September 30, 2015, the Company had not yet achieved profitable operations nor positive cash flows from operating activities and has accumulated losses of $25,131,188 since inception, including the net loss of $3,359,414 for the six-month period ended as at the same date. The Company used $2,912,636 of cash from its operating activities for the six-month period ended September 30, 2015. 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 upon the Company's ability to continue as a going concern.

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.

Following the completion of the Company's recent financing (see "Subsequent Event and Financing Update" section) the Company's management has a reasonable expectation that the Company will be able to continue operations without requiring additional financing for the Company's fiscal year ending March 31, 2016 ("Fiscal 2016"). The Company expects to be able to obtain additional funds to finance its operations, including the closure of a second tranche in fiscal Q3 period, either through additional funds or revenue-producing partnership agreements thereafter, but there is no assurance that it will be able to do so. 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.

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.

The unaudited interim condensed consolidated financial statements and related notes, and Management's Discussion and Analysis for the second quarter ended September 30, 2015 and 2014, are available under the Company'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.V. EXO U develops an innovative software platform that 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. It enables true mobility for businesses and educational organizations by solving important mobility issues such as security, privacy, collaboration, and management of application and content. EXO U's technology agnostic framework delivers to end users a safe, reliable, and intuitive smart workspace designed for connecting with people, accessing services, and sharing information and digital content, while requiring minimal infrastructure and optional Internet connectivity. It simplifies management of the entire application lifecycle, freeing the organizations to focus on building engaging apps that work across different operating systems and form factors, thus increasing productivity for developers and reducing total cost of ownership for organizations. By offering an engaging and exceptional user experience on all computing devices, without compromising security or protected information, the EXO U enterprise and education solutions allow organizations to embrace consumerization and enjoy all the benefits of mobile. For more information, visit http://www.exou.com and follow us on Twitter @exo_u.

Disclaimer in Regards to Forward Looking Statements

As a result of the recent financing, management of the Company has a reasonable expectation that the Company will be able to continue operations in the future. Management expects that the Company will be able to obtain additional funds through additional financing (including the second tranche of the previously announced Offering) or partnership agreements, but there is no assurance that it will be able to do so. 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. Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts any responsibility for the adequacy or accuracy of this release.

ANNEX

 

Adjusted negative EBITDA for the three and six-month periods ended September 30, 2015 and 2014






(In Canadian dollars)

Three months ended
September 30, 2015

Three months ended
September 30, 2014

Six months ended
September 30, 2015

Six months ended
September 30, 2014






Net Loss

(1,257,766)

(2,754,921)

(3,359,414)

(4,239,987)






Financials expenses (income), net

2,422

(5,331)

(3,463)

(9,518)

Depreciation of
property & equipment

13,038

15,954

26,075

28,074

Amortization of intangible assets

37,066

37,067

74,131

74,132

Negative EBITDA

(1,205,241)

(2,707,231)

(3,262,671)

(4,147,299)






Stock-based compensation

(359,358)

791,241

(189,583)

1,090,616

Net loss on foreign exchange

59,039

25,029

78,248

29,975

Adjusted Negative EBITDA

(1,505,560)

(1,890,961)

(3,374,006)

(3,026,708)

 

Management uses Net Loss and Comprehensive Loss as presented in the unaudited interim 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 and Adjusted Negative EBITDA are other financial measures.

Negative EBITDA represents an indication of the Company's capacity to generate income from operations before taking into account management's financing decisions, cost of depreciation of property and equipment, amortization of intangible assets as well as income taxes.

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. Adjusted Negative EBITDA is Negative EBITDA excluding stock-based compensation expenses foreign exchange gains (losses).

Neither Negative EBITDA nor Adjusted Negative EBITDA represent the actual cash used by operating activities, nor are they recognized measures of financial performance under International Financial Reporting Standards ("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.

 

SOURCE EXO U Inc

For further information: For investor or media inquiries, please contact: Doug McCollam, dmccollam@exou.com, 514-212-7407

RELATED LINKS
http://www.exou.com

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