ADX: TSX
TORONTO, May 15 /CNW/ - Advantex Marketing International Inc. (TSX:ADX)
today reported its operating results for the three and nine month periods
ended March 31, 2006.
"The third quarter of fiscal 2006 was a pivotal period for Advantex
during which time the Company completed a number of critical corporate
initiatives," said G. Randall Munger, Chairman and Chief Executive Officer of
Advantex. "Our focus is shifting, with greater emphasis on providing stronger
working capital products for our customers and this shift is being met with
strong demand."
The following highlights the achievements in the quarter:
- The Company completed a Private Placement common share offering on
March 14, 2006, raising $3,000,000. The size of the offering was
increased from the original $2,000,000 to $3,000,000 as a result of
over-subscriptions.
- Proceeds from the Private Placement have enabled the Company to begin
accelerating the growth of its Cash Funded Marketing programs. The
Company's Purchased Receivables increased by $1.3 million or 68% over
the corresponding quarter in the previous year, and by $ 1.1 million
or 55%, compared with December 31, 2005. Purchased Receivables are a
strong indicator of future revenue.
- A seasonal Cash Funded Marketing product was successfully piloted with
golf courses late in the quarter, advancing approximately $1 million.
The positive response to this initiative sets the stage for a
multifold increase in golf for the 2007 season as well as an
aggressive launch into other seasonal categories.
- The commitment to deliver $1.5 million of annualized cost reductions
initiated during the second quarter is on target. During the quarter,
Advantex realized ongoing General & Administrative and Selling and
Marketing expense reductions of $365,000 compared with the
corresponding period in the previous year, of which $53,000 was
reinvested during the quarter in improved merchant marketing.
- The sales organization was reorganized, consolidating the sales and
sales service responsibilities. New sales personnel were added to
address expansion into ethnic and geographic markets. These
initiatives will increase productivity, customer focus and sales in
future quarters.
Revenue for the three months ended March 31, 2006 was $15,418,000; net of
advances to merchants, revenue from the Company's Canadian Credit Card-based
program was flat, while online mall revenue increased 9.5%, 19% excluding the
impact of the increase in value of the Canadian dollar versus the US dollar.
Revenue for nine months ended March 31, 2006 was $51,344,000; net of
advances to merchants revenue was marginally higher in fiscal 2006 versus the
same period in the previous fiscal year and revenue from the Company's Online
Shopping Mall programs increased by $51,000, or 3.1% over the previous year,
or 12% excluding the impact of currency exchange rates.
Margins in the Company's core business increased one full percentage
point from 8.2% in the third quarter fiscal 2005 to 9.2% in the same period in
fiscal 2006, a 10% increase. Gross Contribution was $1,414,000 in fiscal 2006,
compared with $1,307,000 in the third quarter of the previous fiscal year.
This core business improvement was offset by a net decrease of $291,000 in
Gross Contribution from non-core, discontinued and one-time factors during the
same three-month periods in fiscal 2006 and 2005. On a consolidated basis,
Gross Contribution for the quarter was $1,482,000 in fiscal 2006 compared with
$1,666,000 in the previous year.
Year-to-date Gross Contribution from the Canadian Credit Card Loyalty and
Online Shopping Mall programs increased to $4,377,000 in fiscal 2006 versus
$4,292,000 in fiscal 2005. On a consolidated basis, the Gross Contribution
year to date in 2006 was $4,588,000 versus $5,243,000 in the previous year.
The decrease in Gross Contribution is attributable to a decline of $740,000
associated with non-recurring and/or discontinued programs last year.
The Net Loss from Continuing Operations for the three months ended March
31, 2006 was $541,000. Results from the Company's ongoing business improved by
$171,000 during the third quarter of 2006, reflecting business growth and
costs reductions in general and administrative expenses. However, in 2005
there was a positive margin impact of $243,000 from non-recurring revenue
recorded in the third quarter of the previous year, resulting in a reduced Net
Loss from Continuing Operations of $469,000 for that period.
The year-to-date Net Loss from Continuing Operations was $2,103,000 in
2006. In 2005, a positive margin impact of $578,000 from non-recurring revenue
recorded in the same period in previous year, resulted in a reduced
year-to-date loss of $1,937,000.
Outlook
Advantex is aggressively expanding its Purchased Receivable base through
new Cash Funded Marketing programs. A seasonal Cash Funded Marketing product,
successfully piloted with golf merchants in February 2006, will be expanded
for the 2007 golf season, and will be quickly adapted to the needs of other
seasonal categories. The Company is working with Notre-Dame Capital Inc. to
secure a debt facility to support Advantex's Cash Funded Marketing programs
over the coming 24 months.
"Advantex Cash Funded Marketing Programs address the needs of independent
merchants, a large but overlooked market segment with limited resources for
promotion and working capital," said Kelly Ambrose, President and Chief
Operating Officer of Advantex. "We are very encouraged by the success of our
seasonal Cash Funded Marketing programs and are also seeing strong demand for
greater working capital support in our core dining business. We will be
aggressively targeting both of these opportunities in the coming year."
There are more than 28,000 full-service restaurants in Canada, generating
approximately $16.7 billion in sales (source: Canadian Restaurant and
Foodservices Association). Two-thirds of these restaurants are owner-operated,
the ideal target market for Advantex Cash Funded Marketing programs.
Golf courses and ski resorts are excellent examples of seasonal
businesses with a need for off-season working capital. Through Advantex Cash
Funded Marketing programs, these seasonal businesses receive working capital
advances during the off-season, recovered by Advantex during the high-season
as cardholders make purchases. There are approximately 2,000 golf courses and
260 ski resorts in Canada.
There are also more than 6,500 hotels, motels, inns and resorts in
Canada. (Source: The Hotel Association of Canada). Advantex will be developing
tailored Cash Funded Marketing programs to better meet the needs of
independent and small chain properties.
Advantex is planning the expansion of its Cash Funding Marketing programs
to additional retail categories in the latter half of calendar 2006. There are
more than 200,000 retailers in these verticals, generating $73 billion in
revenue.
The Company is also expanding its sales coverage into additional
geographic areas, and ethnic markets.
Online Shopping Malls continue to grow in popularity. In 2005, the non-
travel online retail market surpassed US$80 billion, a 24% increase over the
previous year, and spending on online advertising increased by 30% over the
same period to exceed US $12 billion.
Advantex is developing new Interactive Marketing capabilities, including
an expansion of the Company's email delivery and promotional tracking systems,
an extension of online advertising and target marketing opportunities,
improvements in user interfaces, and the utilization of new interactive
technology, media and communication channels.
"The Internet has become an important communication channel for both
e-commerce and storefront merchants. New Interactive Marketing products will
have positive far-reaching implications for all areas of the Company," said
Mr. Munger.
About Advantex Marketing International Inc.
Advantex Marketing International Inc. is a leading marketing services
company, offering a range of products and services including its Cash Funded
Marketing programs for merchants, coalition loyalty rewards programs, online
shopping malls, direct marketing, online and email promotion; and data capture
and award processing systems. Advantex loyalty partners include CIBC, United
Airlines, Delta Air Lines, The New York Times, and other major North American
corporations, as well as a growing list of restaurants, online retailers, golf
courses, small inns and resorts. 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 may include statements about expected future events
and/or financial results that are forward-looking in nature and subject to
risks and uncertainties. Advantex cautions that actual performance will be
affected by a number of factors, many of which are beyond its control. Future
events and results may vary substantially from what Advantex currently
foresees. Discussion of the various factors that may affect future results is
contained in Advantex's recent filings with Canadian securities regulatory
authorities.
<<
ADVANTEX MARKETING INTERNATIONAL INC.
CONSOLIDATED FINANCIAL STATEMENTS
For the three-month and nine-month periods
ended MARCH 31, 2006
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)
MARCH 31, JUNE 30,
AS AT NOTE 2006 2005
(in thousands) ($) ($)
ASSETS
Current:
Cash and cash equivalents 2,705 2,971
Accounts receivable 1,333 1,239
Purchased receivables 3,218 2,363
Prepaid expenses and sundry assets 193 225
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7,449 6,798
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Long term:
Capital and other assets 669 874
Deferred financing charges 215 293
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884 1,167
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TOTAL ASSETS 8,333 7,965
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LIABILITIES
Current:
Accounts payable and accrued liabilities 3,350 3,804
Deferred revenue 73 40
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3,423 3,844
Long term:
Convertible debenture payable 5 3,463 3,460
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TOTAL LIABILITIES 6,886 7,304
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SHAREHOLDERS' EQUITY
Capital Stock
Class A preference shares 4 4
Common shares 2 24,232 21,463
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24,236 21,467
Contributed surplus 4 112 60
Equity portion of convertible debenture 5 848 880
Deficit (23,749) (21,746)
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1,447 661
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 8,333 7,965
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(see accompanying notes)
ADVANTEX MARKETING INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF NET LOSS (unaudited - note 1)
Three Months Ended Nine Months Ended
March 31 March 31
2006 2005 2006 2005
(In thousands except net loss
per common share) ($) ($) ($) ($)
REVENUE
Sales and fees 15,418 16,441 51,344 52,496
DIRECT COSTS 13,936 14,775 46,756 47,253
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Gross Contribution 1,482 1,666 4,588 5,243
OPERATING EXPENSES
Selling and marketing 845 708 2,441 2,519
General and administrative 913 1,152 3,473 3,871
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1,758 1,860 5,914 6,390
(LOSS) BEFORE AMORTIZATION
AND INTEREST (276) (194) (1,326) (1,147)
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Amortization 84 103 236 288
Interest 181 172 541 502
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265 275 777 790
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NET (LOSS) - CONTINUING
OPERATIONS (541) (469) (2,103) (1,937)
NET (LOSS) / PROFIT
- DISCONTINUED OPERATIONS - (258) 100 (19)
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NET (LOSS) FOR THE PERIOD (541) (727) (2,003) (1,956)
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NET (LOSS) PER COMMON SHARE
- Continuing Operations (0.01) (0.01) (0.03) (0.04)
- Discontinued Operations 0.00 (0.01) 0.00 0.00
ADVANTEX MARKETING INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF DEFICIT (unaudited - note 1)
Three Months Ended Nine Months Ended
March 31 March 31
2006 2005 2006 2005
(In thousands) ($) ($) ($) ($)
BALANCE AT THE BEGINNING OF THE
PERIOD (23,208) (21,971) (21,746) (20,742)
Net (loss) (541) (727) (2,003) (1,956)
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BALANCE AT THE END OF THE PERIOD (23,749) (22,698) (23,749) (22,698)
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(see accompanying notes)
ADVANTEX MARKETING INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited - note 1)
Three Months Ended Nine Months Ended
March 31 March 31
2006 2005 2006 2005
(In thousands) ($) ($) ($) ($)
OPERATING ACTIVITIES
Net (loss) - continuing
operations (541) (469) (2,103) (1,937)
Items not involving cash:
Amortization of capital assets 84 103 236 288
Accretion charges 53 45 153 132
Amortization of deferred
financing charges 26 25 78 65
Issue of common shares - - 35 -
Employee stock options 52 - 52 -
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(326) (296) (1,549) (1,452)
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Changes in non-cash working
capital items (1,550) 525 (1,237) 735
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Cash (used in) / provided by
operating activities (1,876) 229 (2,786) (717)
FINANCING ACTIVITIES
Proceeds from issue of common
shares, net 2,552 - 2,552 -
Proceeds from sale of assets 16 - 16 -
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2,568 - 2,568 -
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INVESTING ACTIVITIES
Purchase of capital assets (8) (24) (48) (159)
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NET MOVEMENT IN CASH AND CASH
EQUIVALENTS
CONTINUING OPERATIONS 684 205 (266) (876)
DISCONTINUED OPERATIONS - (258) - (19)
Cash and cash equivalents at
the beginning of the period 2,021 1,495 2,971 2,337
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CASH AND CASH EQUIVALENTS AT
THE END OF THE PERIOD 2,705 1,442 2,705 1,442
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ADDITIONAL INFORMATION
Interest paid, semi-annually,
on the Convertible Debenture 206 203 412 403
(see accompanying notes)
ADVANTEX MARKETING INTERNATIONAL INC.
Notes to Financial Statements
For the nine months ended March 31, 2006 (unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
The interim unaudited financial statements for the nine months ended
March 31, 2006 have been prepared on a consistent basis with the
Company's annual consolidated financial statements for the year ended
June 30, 2005 and should be read in conjunction with the accounting
policies and other disclosures in those consolidated financial
statements. The enclosed consolidated financial statements do not
include all the disclosures required by generally accepted accounting
principles applicable to annual financial statements.
2. CAPITAL STOCK
Number Amount
Balance as at June 30, 2005 58,493,831 $ 21,462,938
Issue of common shares - a 500,000 35,000
Issue of common shares - b 37,037,037 2,552,351
Issue of common shares on
Conversion of Convertible
Debentures - note 5 1,000,000 150,000
Transfer from equity portion
of Convertible Debenture
- note 5 32,011
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Balance as at March 31, 2006 97,030,868 $ 24,232,300
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a. On July 12, 2005, the Company issued 500,000 common shares to
CIBC, by way of a private placement, in consideration of the
signing of a long-term agreement to continue Advantex's merchant -
based loyalty programs, and the agreement to cancel CIBC's rights
under a previous agreement to receive additional Incentive
Warrants to purchase Advantex common shares. The value assigned to
the shares issued was based on the Company's share price at that
time.
b. On March 14,,2006 the Company issued 37,037,037 common shares by
way of a private placement for net proceeds of $2,552,351 (gross
proceeds of $3,000,000).
3. STOCK OPTIONS AND WARRANTS
Stock Options
On January 26, 2006, the Company received approval from shareholders
to amend its Stock Option Plan from a fixed maximum number of Common
Shares issuable to a rolling maximum number of Common Shares
issuable, not to exceed 10% of the aggregate number of Common Shares
issued and outstanding (calculated on a non-diluted basis).
As at March 31, 2006, there were 5,982,500 employee stock options
outstanding at exercise prices between $0.07 and $0.33, expiring
between November 15, 2006 and February 7, 2011. During the period,
635,000 options were forfeited or expired.
The following stock options were issued to certain directors' of the
Company
Grant Number of Exercise
Date Options Expiry Vesting Period Price
27 October, 2,000,000 October 26, Equally over $ 0.07
2005 2010 3 years
7 February, 1,800,000 February 6, Immediate $ 0.075
2006 2011
The Company calculated the fair value of the stock options issued
during the period using the Black-Scholes option pricing model and
determined their value to be $ 51,993. Accordingly, expense of
$ 51,993 has been recorded in these financial statements upon the
granting of the options. The assumptions used in the model were a
risk free rate of 5.0%, an expected life of five years, an expected
volatility of 15% and no expected dividends on the common shares.
Warrants
There are 124,185 warrants outstanding as at March 31,2006, with each
warrant entitling the holder to purchase one common share of the
Company on a 1:1 basis for $0.32 per share up to January 2, 2007. The
warrants arose as a result of an incentive program whereby Air Canada
and CIBC were able to earn up to 55 million warrants over a five year
period ended December 31, 2005. The Company issued a total of 175,974
warrants under this agreement, of which 51,789 expired during the
three months ended March 31, 2006.
In addition, pursuant to a warrant agreement, CIBC and Air Canada
held 15,000,000 warrants entitling them to purchase 15,000,000 common
shares at $1.08 per share. These warrants expired on February 6,
2006.
Agent Compensation Warrants
In connection with the private placement completed during the
quarter, the Company awarded 3,552,716 warrants to the agent. Each
warrant entitles the holder to purchase one common share at a price
of $0.081 per share until March 13, 2008.
4. CONTRIBUTED SURPLUS
Balance as at June 30, 2005 $ 59,992
Employee Stock Option expense - note 3 51,993
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Balance as at March 31, 2006 $ 111,985
5. CONVERTIBLE DEBENTURE PAYABLE
During March 2006, $150,000 of Convertible Debenture was converted at
the exercise option price of $0.15 for 1,000,000 Common shares of the
Company.
Consequent to the above conversion, a proportionate share, $32,011,
was transferred from the Equity portion of Convertible Debenture to
Capital Stock.
Debt Portion Equity Portion
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Balance as at 30 June, 2005 $ 3,460 $ 880
Accretion charge 153 -
Conversion of $ 150,000 Convertible
Debenture for 1 million
Common Shares (note 2) (150) (32)
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Balance as at 31 March, 2006 $ 3,463 $ 848
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6. COMPARATIVE FIGURES
Certain of the comparative figures have been reclassified to conform
to the presentation adopted in the current year.
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%SEDAR: 00004122E
