RE:RE:RE:Advantex Expects to Sign Multi-Year Aeroplan Deal(Renewal)It's at the bottom of p.4. Annual report on sedar.;)
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The company qualified for lower ($395,990) federal wage and rent subsidies in Fiscal 2022 vs Fiscal 2021 and
this is reflected in higher general and general & administrative expenses of $364,570 in Fiscal 2022 (Fiscal
2022 $1,650,314 vs Fiscal 2021 $1,285,744). Controlling for federal wage and rent subsidies and certain one-
time adjustments the company continued its cost control and Fiscal 2022 selling and general & administrative
expenses were flat vs Fiscal 2021 (Fiscal 2022 $1,837,409 vs $1,833,766).
Consequently the loss from operations before depreciation, amortization and interest in Fiscal 2022 is
$227,912 higher (Fiscal 2022 $652,426 vs Fiscal 2021 $424,514).
The stated interest cost comprised:
a. interest paid on the line of credit provided by Accord which was $120,975 higher in Fiscal 2022 (Fiscal
2022 $476,961 vs Fiscal 2021 $355,986). The interest rate from September 2021 is 8.80% (9.05% until
August 2021) + prime rate of a certain Canadian Bank. The increase in interest cost reflects higher
activity level in Fiscal 2022 on the MCA program leading to higher utilization of the line of credit with the
lower interest rate from September 2021 offset by the increase in prime rates since March 2022
b. interest payable to 9% 2025 debentures. The increase in Fiscal 2022 cost of $218,845 (Fiscal 2022
$773,733 vs Fiscal 2021 $554,888) reflects the higher principal outstanding during Fiscal 2022
consequent to the capital raise in September 2021 and March 2022, full year impact of capital raise in
March 2021, and interest payable on unpaid interest and deferred interest. Fiscal 2021 reflects increase in
principal outstanding from capital raise in March 2021 and interest payable on unpaid interest. The
interest in Fiscal 2022 and Fiscal 2021 was not paid. The holders of 9% 2025 debentures agreed to defer
the interest payments.
The balance of costs are non-cash and are $48,139 higher in Fiscal 2022 (Fiscal 2022 $804,718 vs Fiscal 2021
$756,579). The non-cash interest on 9% 2025 debentures – comprising accretion charges arising on the
attribution of fair value to debentures between debt and equity, restructuring bonus and amortization of
transaction costs – are $154,160 higher in Fiscal 2022 (Fiscal $798,958 vs Fiscal 2021 $644,798) reflecting
the amendment of terms in March 2021 and capital raises of March 2021, September 2021 and March 2022.
Other non-cash expenses, an outcome of accounting for the head office lease, were $106,021 lower in Fiscal
2022 (Fiscal 2022 $5,760 vs Fiscal 2021 $111,781) primarily reflecting complete write-off of right of use asset
in Fiscal 2021.
Despite strides made to re-build the business post Covid-19 pandemic, from above it is evident the company
used cash in operations exceeding its revenues during Fiscal 2022 and Fiscal 2021. In addition, the company
continued to pay back arrears due to Aeroplan.
The company could have made greater progress in re-building its MCA program but for want of capital.
At the end of June 2022 the company is in need of capital to maintain its current MCA program activity level,
to continue to re-build its MCA program, and continue operations.
Outlook
The company believes its core business - MCA program - is a growth industry because institutional lenders are
not focused on meeting working capital needs of independent merchants, even more so because of impact of
Covid-19 pandemic and the currently prevailing economic uncertainties. Independent merchants are the
engines of significant economic activity and although there are several competitors in the MCA space the
company believes its strategy of transparent and competitive pricing give it an ability to grow its MCA
portfolio if it has access to growth capital.
The loyalty marketing program the company provides is dependent on its agreement with Aeroplan.
Operating this program gives the company a significant secondary business line and an advantage over
competition in the MCA space. The current agreement expires December 2022. The company expects to sign a
multi-year renewal.