ADX: TSX
TORONTO, Nov. 14 /CNW/ - Advantex Marketing International Inc. (TSX:ADX), a leading specialist in merchant funding and loyalty marketing programs, today announced its results for the three months ended September 30, 2007.
"Our achievements this quarter will establish a base for future expansion." said Kelly E. Ambrose, Advantex's Chief Executive Officer and President.
A conference call will be held for analysts and investors at 4.30 pm EST, on Tuesday, November 27, 2007. Details are available at the end of this News Release.
Financial Performance - Highlights
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Three months Three months
ended ended
September 30, September 30,
2007 2006 Improvement
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Revenue $ 2.8 million $ 2.2 million $ 0.6 million +
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Contribution from
Operations $ (45,000) $ (127,000) $ 82,000 +
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Loss before
Amortization &
Interest $ (61,000) $ (138,000) $ 77,000 +
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The improvement of $0.1 million at the operating level was offset by increase in interest cost of $0.1 million, which arose from the increased debt levels and the associated carrying costs. Consequently the Net Loss for the current quarter at $0.4 million was unchanged from the corresponding period previous year.
Outlook
The Company is operating close to break even at the contribution from operations level, and it continues to evolve into a stronger and more competitive company, with a clear focus on profitable growth in the programs and areas in which it enjoys a leadership position.
The Company is experiencing strong demand for its Advance Purchase Marketing Program and has a backlog of merchants wishing to join this program.
About Advantex Marketing International Inc.
Advantex is a specialist in the marketing services industry, managing white-labelled rewards accelerator programs for major affinity groups through which their members earn bonus frequent flyer miles and/or other rewards on purchases at participating merchants. Under the umbrella of each program, Advantex provides merchants with marketing, customer incentives, and secured future sales through its Advance Purchase Marketing model. Advantex partners include more than 700 restaurants, online retailers, golf courses, small inns and resorts, and major organizations including CIBC, United Airlines, Delta Air Lines, Alaska Airlines and Lufthansa Airlines. Advantex is a public company, traded on the Toronto Stock Exchange under the symbol "ADX". For additional information on Advantex, please visit www.advantex.com.
This press release contains certain "forward-looking statements". All statements, other than statements of historical fact, that address activities, events or developments that the Company believes, expects or anticipates will or may occur in the future (including, without limitation, statements regarding financial and business prospects and financial outlook) are forward-looking statements. These forward-looking statements reflect the current expectations or beliefs of the Company based on information currently available to the Company. Forward-looking statements are subject to a number of risks, uncertainties and assumptions that may cause the actual results of the Company to differ materially from those discussed in the forward-looking statements, and even if such actual results are realized or substantially realized, there can be no assurance that they will have the expected consequences to, or effects on the Company. Factors that could cause actual results or events to differ materially from current expectations include, among other things, changes in general economic and market conditions, changes to regulations affecting the Company's activities, uncertainties relating to the availability and costs of financing needed in the future, and delays in finalizing retail contract. Any forward-looking statement speaks only as of the date on which it is made and, except as may be required by applicable securities laws, the Company disclaims any intent or obligation to update any forward-looking statement, whether as a result of new information, future events or results or otherwise. Although the Company believes that the assumptions inherent in the forward-looking statements are reasonable, forward-looking statements are not guarantees of future performance and accordingly undue reliance should not be put on such statements due to the inherent uncertainty therein.
Analyst/Investor Conference Call
Analysts and investors are invited to participate in a conference call at 4.30 pm EST, on Tuesday, November 27, 2007 with Mr. Kelly E. Ambrose, Advantex Chief Executive Officer and President.
To participate in the conference call, please call 1-800-926-6198. A recording of the call will be available until December 4, 2007 at 416-626-4100 or 1-800-558-5253, Reservation No. 21356590.
ADVANTEX MARKETING INTERNATIONAL INC.
CONSOLIDATED FINANCIAL STATEMENTS
For the three month period ended September 30, 2007
The accompanying consolidated financial statements have been prepared by
management and approved by the Board of Directors of the Company. Management
is responsible for the information and representations contained in these
consolidated financial statements and other sections of this report.
An auditor has not performed a review of these financial statements.
ADVANTEX MARKETING INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
(unaudited - note 1)
Sept 30, 2007 June 30, 2007
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ASSETS
Current:
Cash and cash equivalents $502,380 $910,995
Accounts receivable 795,836 737,485
Transaction credits 5,155,968 5,390,412
Prepaid expenses and sundry assets 165,432 185,955
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6,619,616 7,224,847
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Long-term:
Property, plant and equipment and
other assets 881,309 775,733
TOTAL ASSETS $7,500,925 $8,000,580
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LIABILITIES
Current:
Accounts payable and accrued liabilities $3,573,628 $3,707,243
Long-term:
Other liabilities 336,724 450,856
Convertible debenture payable 4,140,514 4,042,335
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4,477,238 4,493,191
8,050,866 8,200,434
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SHAREHOLDERS' (DEFICIENCY) EQUITY
Capital Stock
Class A preference shares 3,815 3,815
Common shares 24,106,281 24,106,281
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24,110,096 24,110,096
Contributed surplus 428,423 412,223
Equity portion of convertible debenture 2,114,341 2,114,341
Deficit (27,202,801) (26,836,514)
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(549,941) (199,854)
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TOTAL LIABILITIES AND SHAREHOLDERS'
(DEFICIENCY) EQUITY $7,500,925 $8,000,580
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(see accompanying notes)
ADVANTEX MARKETING INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF LOSS
THREE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006
(unaudited - note 1)
Sept 30, 2007 Sept 30, 2006
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REVENUE $2,844,687 $2,261,784
Direct expenses 1,153,234 725,645
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GROSS PROFIT 1,691,453 1,536,139
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OPERATING EXPENSES
Selling and marketing 791,408 804,912
General and administrative 945,048 857,805
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1,736,456 1,662,717
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CONTRIBUTION FROM OPERATIONS (45,003) (126,578)
Stock-based compensation 16,200 11,400
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LOSS BEFORE AMORTIZATION AND INTEREST (61,203) (137,978)
Amortization of property, plant
and equipment 47,433 55,971
Interest expense
Stated interest on convertible debenture 159,472 95,453
Accretion charge on convertible debenture
and amortization of deferred
financing charges 98,179 79,859
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NET LOSS AND COMPREHENSIVE LOSS
FOR THE PERIOD $(366,287) $(369,261)
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NET LOSS PER COMMON SHARE $ (0.00) $ (0.00)
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(see accompanying notes)
ADVANTEX MARKETING INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF DEFICIT
THREE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006
(unaudited - note 1)
Sept 30, 2007 Sept 30, 2006
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BALANCE AT THE START OF PERIOD $(26,836,514) $(24,242,213)
Net loss for the period (366,287) (369,261)
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BALANCE AT THE END OF PERIOD $(27,202,801) $(24,611,474)
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(see accompanying notes)
ADVANTEX MARKETING INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006
(unaudited - note 1)
Sept 30, 2007 Sept 30, 2006
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OPERATING ACTIVITIES
Net loss for the period $(366,287) $(369,261)
Items not affecting cash
Amortization of property, plant
and equipment 47,433 55,971
Accretion charge on convertible debenture 76,813 53,727
Amortization of deferred financing charges 21,366 26,132
Stock-based compensation 16,200 11,400
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(204,475) (222,031)
Changes in non-cash working capital items
Accounts receivable (58,351) (103,537)
Transaction credits 234,444 (1,085,455)
Prepaid expenses and sundry assets 20,523 22,454
Accounts payable and accrued liabilities (133,615) (206,755)
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63,001 (1,373,293)
Decrease in long-term other liabilities (114,132) -
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(255,606) (1,595,324)
INVESTING ACTIVITIES
Purchase of property, plant and equipment (153,009) (70,382)
DECREASE IN CASH AND CASH EQUIVALENTS
DURING THE PERIOD (408,615) (1,665,706)
Cash and cash equivalents at the start
of period 910,995 1,807,042
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $502,380 $141,336
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ADDITIONAL INFORMATION
Interest paid $ nil $198,000
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(see accompanying notes)
ADVANTEX MARKETING INTERNATIONAL INC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Three Months Ended September 30, 2007
(Unaudited - note 1)
1. SIGNIFICANT ACCOUNTING POLICIES
The accompanying interim consolidated financial statements of Advantex
Marketing International Inc. and its subsidiaries ("Advantex" or the
"Company") have been prepared in accordance with Canadian generally
accepted accounting principles ("Canadian GAAP") for interim financial
information. Accordingly, they do not include all of the information and
footnotes required by Canadian GAAP for annual consolidated financial
statements.
The accompanying financial information reflects all adjustments,
consisting primarily of normal recurring adjustments, which are, in the
opinion of management, necessary for a fair presentation of results for
interim periods. Operating results for the three months ended
September 30, 2007 are not necessarily indicative of the results that may
be expected for the fiscal year ending June 30, 2008. The accounting
policies used in the preparation of these interim consolidated financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto for fiscal 2007.
These interim consolidated financial statements follow the same
accounting policies and methods of application as the consolidated
financial statements for the year ended June 30, 2007, except as
described in Note 2 below. Certain prior period amounts have been
reclassified to conform to the current period's presentation.
2. CHANGES IN ACCOUNTING POLICIES
As required by the Canadian Institute of Chartered Accountants ("CICA"),
on July 1, the Company adopted CICA Handbook Section 1530, Comprehensive
Income; Section 3251, Equity; Section 3855, Financial Instruments -
Recognition and Measurement; Section 3861, Financial Instruments -
Disclosure and Presentation and Section 3865, Hedges. The prospective
adoption of these new standards resulted in changes in the accounting and
presentation for financial instruments. The principal changes in the
accounting for financial instruments due to the adoption of these
accounting standards are described below.
a. Section 1530, Comprehensive Income
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Section 1530 requires a statement of comprehensive income, which
consists of net income and other comprehensive income ("OCI"). The
Company did not have OCI during the three months ended September 30,
2007 and its comprehensive loss comprised its net loss.
b. Section 3251, Equity
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Section 3251 describes the changes in how to report and disclose
equity and changes in equity as a result of the new requirements of
Section 1530, including the changes in equity for the period arising
from OCI. Accumulated changes in OCI are included in accumulated
other comprehensive income ("AOCI") and are presented as a separate
component of shareholders' equity. The Company did not have a balance
of AOCI at September 30, 2007.
c. Section 3855, Financial Instruments - Recognition and Measurement
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Section 3861, Financial Instruments - Disclosure and Presentation
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Under the new standards, all financial instruments were classified
into the following categories: held for trading held to maturity
investments, loans and receivables, available for sale financial
assets or other liabilities. All financial instruments within the
scope of the standard are included in the consolidated financial
statements and are initially measured at fair value. Subsequently,
all financial instruments are re-measured to fair value at each
reporting period except for loans and receivables, held to maturity
investments and other financial liabilities which are measured at
amortized cost. Held for trading financial investments are
subsequently measured at fair value and all gains and losses as a
result of measurement are included in net income in the period in
which they arise. Available for sale financial instruments are
subsequently measured at fair value with revaluation gains and losses
included in other comprehensive income until the instrument is
derecognized or impaired.
As a result of the adoption of this standard, the Company has elected
to classify each of its significant categories of financial
instruments outstanding during the three months ended September 30,
2007 as follows:
Cash and cash equivalents are classified as held-for-trading. Changes
in fair value for the period are recorded in earnings as interest
income.
Accounts receivable and other receivables are classified as loans and
receivables.
Borrowings under accounts payable and accrued liabilities are
classified as other financial liabilities
Convertible debentures are classified as other financial liabilities
and recorded at amortized cost using the effective interest method.
Debt issuance and transaction costs related to other financial
liabilities are added to the carrying value of the debt and amortized
over the term of the debt using the effective interest method.
d. Section 3865, Hedges
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Section 3865 specifies the criteria that must be satisfied in order
for hedge accounting to be applied and the accounting for each of the
permitted hedging strategies: fair value hedges and cash flow hedges.
Hedge accounting is discontinued prospectively when the derivative no
longer qualifies as an effective hedge, or the derivative is
terminated or sold, or upon the sale of early termination of the
hedged item. The Company did not have any hedges during the three
months ended September 30, 2007.
3. STOCK OPTIONS
As at September 30, 2007 there were 8,500,000 employee stock options
outstanding at exercise prices between $0.045 to $0.20, expiring
between July 9, 2008 and December 21, 2011.
On September 19, 2007 the Company issued 800,000 stock options to certain
employees at exercise price of $0.045, vesting equally over three years,
and expiring September 19, 2011. The Company calculated the fair value of
the stock options issued using the Black-Scholes option-pricing model and
determined their fair value to be $21,840. The assumptions used in the
model were risk free rate of 5%, an expected life of 4 years, an expected
volatility of 78% and no expected dividends on the common shares.
During the period 280,000 stock options were forfeited or expired.
The Company has recorded $16,200 of stock option expense in these
financial statements as this quarter's expense with respect to fair value
of stock options issued during current and prior years.
4. DEFERRED COSTS
During the period the Company continued development of new processing
systems for its CIBC Advantex programs. The costs incurred to date on
this project approximate $359,530, and are included in property, plant,
equipment. Amortization will commence when systems are in use.
%SEDAR: 00004122E