EXO U announces its first quarter fiscal 2016 financial results

MONTREAL, Aug. 31, 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 first quarter ended June 30, 2015. All amounts are stated in Canadian dollars, unless otherwise noted.

FINANCIAL HIGHLIGHTS FOR THE THREE MONTHS ENDED JUNE 30, 2015

	Q1 Fiscal 2016	Q1 Fiscal 2015
Revenue	$       —	$ 503,189
Adjusted negative EBITDA ^1	$(1,868,446)	$(1,135,747)
Net loss	$(2,101,648)	$(1,485,066)
Basic and diluted net loss per share	$(0.05)	$(0.04)
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

• The Company announced on July 8, 2015 that it engaged Mackie Research Capital Corporation as sole agent for up to a $5,000,000 convertible debt financing that was to close on or about July 29, 2015. The Company subsequently reported on August 5, 2015 that due to seasonality and market conditions, the closing of the offering was then targeted on or about August 19, 2015. The offering has not yet closed and there is currently no certainty that it will be completed on the terms previously announced or at all. See "Subsequent event and financing update".
• On August 14, 2015 the Company announced that it has 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 in Mexico.
• On August 5, 2015, the Company announced the appointment of Kevin Pawsey as its new Chief Operating Officer. Mr. Pawsey, a three-time CEO in the education sector and one of the industry's most dynamic and connected executives, brings 20 years of experience to EXO U and a proven history of success in developing sustained business growth internationally in the fields of education, technology, and online learning.
• During the quarter, the Company conducted a number of trials and pilots of its product with educational institutions. In addition, demonstrations of the product have been made with a number of significant potential partners throughout the Americas and Europe.
• EXO U joined Panasonic's booth at the prestigious ISTE (International Society for Technology in Education) show in Philadelphia from June 28 to July 1. EXO U set up five mini classrooms to showcase its new digital education platform.
• During the quarter the Company's contract with the Institute of Economics and Management, a university located in the Russian Federation, was cancelled, after the completion of the pilot phase, by the University due to political sanctions against the Russian Federation and the deficiency in their IT infrastructure equipment.
• On May 11, 2015, the Company announced that it has entered into a partnership agreement with Clever, Inc., a provider of secure single sign-on access for school-based learning software and student information systems.
• On May 6, 2015, the Company announced that it has entered into a strategic partnership agreement with SIGMAnet, Inc., a leading provider of IT infrastructure consulting, solutions and services. This non-exclusive agreement, for an initial term of one year, is expected to strengthen EXO U's sales and distribution network.
• Launch of the Company's New Digital Education Platform on April 6, 2015, at the ASU-GSV conference in Scottsdale, Arizona. Over two thousand attendees from around the world in the education field as well as investors attended the three day event.

"Though we continue to build our technology and partner base, we still have not generated, as of yet,  any orders for our product offering since the start of the fiscal year" said Shan Ahdoot, President and CEO of EXO U  "This, as well as the difficult financial markets, has impacted our ability to raise much needed capital. Until the financing takes place, we will actively manage our expenses and staffing levels. The external feedback we have received for our product offering has been strong and we hope to translate that into orders in the near future."

Financial Results

EXO U had no revenue in the first quarter ended June 30, 2015 compared to revenues of $503,189 one year earlier. 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. As at June 30, 2015, the Company has $386,925 of deferred revenues recorded on the unaudited interim condensed consolidated statement of financial position.  These deferred revenues are related to a contract signed with the Government of Panama to deliver, among other services, licenses of EXO U's solution.  As of June 30, 2015, the Company did not recognize any revenue from this license agreement as the revenue recognition criteria were not fully fulfilled. 

Research and development ("R&D") expense was $1,039,220 for the first quarter of fiscal 2016, an increases of $534,517 compared to the same periods of last year.  This increase is mainly due to increased staffing in the engineering group as the Company drives its product development.

Selling, general, and administrative expenses for the first quarter were $879,328, down $222,088 from that incurred in the same period last year.

Stock-based compensation in the first quarter decrease from $299,375 to $169,776 for the first quarter of fiscal 2016.

Adjusted negative EBITDA was $1,868,446 for the quarter, compared to negative $1,135,747 in the same period last year, an increase of $732,699. These increases in the adjusted negative EBITDA are due to higher spending in R & D.

As of June 30, 2015, the Company had a cash balance of $2,647,559, a decrease of $1,444,584 from the position it had as at March 31, 2015.

Subsequent Event and Financing Update

The Company announced on July 8, 2015 that it had engaged Mackie Research Capital Corporation as agent for a convertible debt financing of up to $5,000,000 that was to close on or about July 29, 2015. The Company subsequently reported on August 5, 2015 that due to seasonality and market conditions, the closing of the offering was then targeted for on or about August 19, 2015.

As at August 31, 2015, the offering has not yet closed. While the Company and the agent are continuing to work towards completing the offering on acceptable terms, there is currently no certainty that the offering will be completed on the terms previously announced or at all. See "Going Concern".

Going Concern

These unaudited interim condensed consolidated financial statements of the Company for the three-month period ended June 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 June 30, 2015, the Company had not yet achieved profitable operations nor positive cash flows from operating activities and has accumulated losses of $23,873,422 since inception, including the net loss of $2,101,648 for the three-month period ended as at the same date. The Company used $1,444,584 of cash from its operating activities for the three-month period ended June 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.  Furthermore, as at June 30, 2015, the Company's committed cash obligations and expected level of expenses for the next twelve months exceed its actual cash resources. 

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 expects to further reduce the Company's 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 may be forced to cease operations. The current cash balance will allow the Company to continue operations to approximately the end of October 2015 and then, if required, would also provide sufficient funds for an orderly dissolution of the Company.

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 quarter ended June 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 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. 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

Certain statements made in this press release that are not historical facts are forward-looking information within the meaning of application securities laws.  These forward-looking statements are subject to important risks, uncertainties and assumptions. The results or events predicted in these forward-looking statements may differ materially from actual results or events and there is no assurance that current opportunities being pursued or discussions with any government authorities will result in any definitive agreements being entered into or that the Company will be able to obtain financing to continue its operations on acceptable terms or at all. Readers are cautioned not to place undue reliance on these forward-looking statements. 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 quarter ended June 30, 2015 available under the Company's profile on SEDAR at www.sedar.com. The forward-looking information contained in this press release represents EXO U's current expectations. EXO U disclaims any intention and assumes no obligation to update or revise any forward-looking information, except as required by applicable securities laws.

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-month periods ended June 30, 2015 and 2014

 

(in Canadian dollars)	Three months ended June 30, 2015	Three months ended June 30, 2014
Net Loss and Comprehensive Loss	(2,101,648)	(1,485,066)
Financials expenses (income), net	(5,885)	(4,187)
Depreciation of property & equipment	13,037	12,120
Amortization of intangible assets	37,066	37,065
Negative EBITDA	(2,057,430)	(1,440,068)
Stock-based compensation	169,775	299,375
Net loss (gain) on foreign exchange	19,209	4,946
Listing costs	—	—
Adjusted Negative EBITDA	(1,868,446)	(1,135,747)

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 (including impairment charge) ("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) and other one-time and unusual items.

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 investor or media inquiries, please contact: Doug McCollam, [email protected], 514.592-1126