Calgary, Alberta--(Newsfile Corp. - May 28, 2024) - Katipult Technology Corp. (TSXV: FUND) ("Katipult" or the "Corporation"), provider of an industry leading and award-winning cloud-based software infrastructure for powering the exchange of capital in equity and debt markets, is pleased to announce its financial results for the three-month period ended March 31, 2024.
The following provides a summary of the results for the first quarter of 2024. The full results and related management discussion and analysis are available on the Corporation's SEDAR+ profile (www.sedarplus.ca).
Q1 2023 Summary
Revenue
Revenue consists of subscription revenue which increased by 7.2% to $506,000 in the first quarter of 2024 from $485,000 recognized in the first quarter of 2023. Notably, the revenue from enterprise customers grew by 16% in 2024 as compared to 2023.
Gross Profit Percentage (1)
Gross Profit Percentage was 79.2% in the first quarter of 2024 compared to 79.2% in the prior year quarter of 2023. The Corporation has been able to consistently maintain a gross profit percentage of close to 80% since 2017.
Adjusted EBITDA (1)
Adjusted EBITDA losses increased to ($269,000) in the three-month period ended March 31, 2024 from ($262,000) in the three-month period ended March 31, 2023, due to higher general and administrative costs offset by higher revenue.
Net loss and comprehensive loss
Net loss and comprehensive loss was ($379,000) in the first quarter of 2024 compared to net income and comprehensive income of $799,000 in the fourth quarter of 2023, the change is largely due to change in the non-cash fair value of the Corporation's outstanding 2018 Debentures (the "2018 Debentures").
Financial Position
As at March 31, 2024, the Corporation had a cash and cash equivalents balance of $0.4 million, working capital of ($4.0 million), and total assets of $0.7 million, compared to cash and cash equivalents balance of $0.6 million, working capital of ($0.8 million), and total assets of $0.8 million as at December 31, 2023. The large decline in working capital is due to the shift of the entire amount of the 2018 Debentures to current liabilities. The maturity date and other terms of the 2018 Debentures are being renegotiated subsequent to period end.
Related Party Loan
The Company is also announcing today that it has entered into a secured promissory note (the "Promissory Note") to borrow $250,000 (the "Loan") from Adventure Capital (2019) Ltd. (the "Lender"). The principal amount of the Loan under the Promissory Note shall bear interest at a rate of 15% per annum and the Loan shall mature on the earlier of 60 days from the date of the Promissory Note and the receipt of certain accounts receivable (the "Accounts Receivable") by the Corporation, following which, the interest rate will increase to 25% per annum. In connection with the Loan, the Corporation has granted the Lender security in the Accounts Receivable. In the event that the Loan is not repaid by August 31, 2024, the Promissory Note and all related security will be terminated, and the outstanding principal and interest of the Loan will be rolled over into a convertible debenture held by the Lender, subject to prior TSX Venture Exchange review and approval.
The proceeds of the Loan will be used for general working capital purposes.
The Lender is controlled by Mr. Brian Craig, a director of the Corporation. Accordingly, the Loan is considered a "related party transaction" pursuant to Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions ("MI 61-101"). The Corporation intends to rely on exemptions from the valuation and the minority approval requirements of MI 61-101 provided for in subsections 5.5(a) and 5.7(1)(a) of MI 61-101, respectively, as the fair market value of the Loan does not represent more than 25% of the Corporation's market capitalization as determined in accordance with MI 61-101. The Loan has been approved by the directors of the Corporation who are independent in connection with the Loan.
Governance Update
The Company is also announcing today the departure of George Reznik as a director of Katipult effective May 28, 2024, in order to devote his attention to other professional commitments. During his time with the Corporation, Mr. Reznik served as the Chair of the Audit Committee and as a member of the Compensation and Governance Committee. The board of directors of the Corporation will assess whether it will appoint a new member to fill this vacancy before the next annual meeting of shareholders.
"On behalf of the board of directors and the management team of Katipult, I would like to thank Mr. Reznik for his valued contributions to Katipult and we wish him all the best in his future endeavours," said Gord Breese, CEO of Katipult.
About Katipult
Katipult (www.katipult.com) is a provider of industry leading and award-winning software infrastructure for powering the exchange of capital in equity and debt markets. Our cloud-based platform and solutions digitize investment workflow by eliminating transaction redundancy, strengthening compliance, delighting investors, and accelerating deal flow. Katipult provides unparalleled adaptability for regulatory compliance, asset structure, business model, and localization requirements.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Certain disclosure in this release, including statements regarding the recovery of capital markets investment activity, expectations regarding an increase in customer growth and with respect to repayment of the Loan constitute forward-looking statements. In making the forward- looking statements in this release, the Corporation has applied certain factors and assumptions that are based on the Corporation's current beliefs as well as assumptions made by and information currently available to the Corporation, including, but not limited to, the Corporation's anticipated cash needs, that the cash available to the Corporation is as expected, the Corporation's products will continue to operate as expected, the industry will continue to see value in the Corporation's products, the Corporation will be able to recruit talented and experienced sales, support and other individuals required to execute the Corporation's plans, that the Corporation's employees, consultants, customers, suppliers and other stakeholders will be able to manage their businesses successfully and that the Corporation will be able to repay the Loan. Although the Corporation considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect, and the forward-looking statements in this release are subject to numerous risks, uncertainties and other factors that may cause future results to differ materially from those expressed or implied in such forward-looking statements. Such risk factors include, among others, the risk that cash available to the Corporation is not as expected, failure to manage growth successfully, lengthier than anticipated sales and implementation cycle, cyber risks, risks related to cloud based solutions, failure to continue to adapt to technological change and new product development, dependence on key personnel, competition, intellectual property risks, economic conditions, including any negative impacts of a slow-down in capital markets activity, privacy concerns and legislation, regulatory environment, risk associated with a change in the Corporation's pricing model, risk of defects in the Corporation's solution, dependence on market growth, operational service risk, dependence on partners and ability to obtain references, delay or failure to repay or renegotiate debt obligations, delay or failure to realize anticipated benefits of key account installations and such other risks as are noted in the Corporation's MD&A for the period ended March 31,2024. Readers are cautioned, especially in these uncertain times, not to place undue reliance on forward-looking statements. The Corporation does not intend to, and expressly disclaims any intention or obligation to, update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except as required by law.
1 Non-GAAP Financial Measures
This news release refers to certain Non-GAAP financial measures that are not determined in accordance with International Financial Reporting Standards ("IFRS"). "Gross Profit", "Gross Profit Percentage," "Working Capital", and "Adjusted EBITDA" are not measures recognized under IFRS and do not have standardized meanings prescribed by IFRS. Management considers these to be important supplemental measures of Katipult's performance and believes these measures are frequently used by securities analysts, investors and other interested parties in the evaluation of companies in its industry. See "Non-GAAP Measures and Additional GAAP Measures" in the Corporation's March 31, 2024 MD&A available on the Corporation's SEDAR+ profile at www.sedarplus.ca for a discussion of non-GAAP measures and their reconciliations.
"Gross Profit" is used by management to analyze overall and segmented operating performance. Gross Profit is not intended to represent an alternative to net earnings or other measures of financial performance calculated in accordance with IFRS. Gross Profit is calculated from the statements of operations and comprehensive income (loss) and from the segmented information contained in the notes to the financial statements. Gross Profit is defined as revenue less cost of revenue.
"Gross Profit Percentage" is used by management to analyze overall and segmented operating performance. Gross Profit Percentage is calculated from the statements of operations and comprehensive income (loss) and from the segmented information in the notes to the financial statements. Gross Profit Percentage is defined as gross profit divided by revenue.
"Adjusted EBITDA" is a measure of the Corporation's operating profitability. Adjusted EBITDA provides an indication of the results generated by the Corporation's principal business activities prior to how these activities are financed (including mark-to-market movements of the convertible debenture value), assets are depreciated and amortized or how the results are taxed in various jurisdictions, prior to the effect of foreign exchange, other income and expenses, and non-cash share-based payment expense. Adjusted EBITDA is not intended to represent net earnings as calculated in accordance with IFRS.
Adjusted EBITDA is calculated as follows:
For the three months ended March 31,
($ thousands)
2024
2023
Net loss
(379
)
(799
)
Plus:
Finance costs
280
188
Unrealized (gain) loss on convertible debentures
(26
)
490
Foreign exchange gain
(4
)
(21
)
Share-based payments
6
18
Other income
(146
)
(138
)
Adjusted EBITDA
(269
)
(262
)
"Working Capital" is used by management and the investment community to analyze the operating liquidity available to the Corporation. Working Capital is calculated based on current assets less current liabilities.
Working capital is derived from the statements of financial positions and is calculated as follows:
