ePals 2013 Fourth Quarter and Year-End Results
Focus and Growth From Media Assets Supported by Rebranding as
"Cricket Media"
WASHINGTON, DC--(Marketwired - Apr 16, 2014) - ePals Corporation
(TSX-VENTURE: SLN) ("ePals" or the "Company"), an education media
company and global social learning network, today released its
operating results for the fourth quarter and year ended December
31, 2013. Results were prepared by management in accordance
with International Financial Reporting Standards ("IFRS"). All
figures are in U.S. dollars unless otherwise stated.
In a separate news release today, the Company announced that it
has rebranded and will operate under the name Cricket Media
effective immediately. The new brand identity reflects the
Company's core business of providing award-winning educational
content in multiple languages (English, Spanish and Mandarin) on a
child-safe social learning network worldwide. Coinciding with the
rebranding of the Company as Cricket Media, effective as of the
opening of trading on Monday, April 21, 2014, the Company's voting
common shares will commence trading on the TSX Venture Exchange
under the new stock symbol "CKT". The Company will seek the
approval of its shareholders to effect a legal name change at the
Company's next annual meeting of shareholders later this year.
Conference call today at 10:00 a.m. Eastern Time
To participate in the call, please dial +1-719-325-2144 or
1-888-364-3109 approximately 10 minutes prior to the conference
call, and enter passcode 5503886. A recording of the conference
call will be available through April 30, 2014 by dialing
+1-719-457-0820 or 1-888-203-1112 and entering the passcode
5503886.
"We have prioritized the focus of our business over the past
months on our education media," stated CEO Katya
Andresen. "'Cricket Media' reflects this evolution. We
are leveraging our media assets under the well-respected Cricket
brand and making them natively collaborative through the social
networking platform we have built over the past five
years. Think digital media company meets safe social
networking for the kind of learning that children around the world
need to work in tomorrow's economy -- digital, collaborative,
global. We are unique in that this approach is global and
takes advantage of the worldwide demand for cultural exchange and
language learning practice."
Year-over-year Q4 Highlights
- Total media revenue (subscriptions, licensing, commerce,
sponsorship) increased 8%
- New sales program doubled media
licensing revenue
- Operating expenses net of impairment decreased 16%
- 30% of Q4 media subscriptions were digital or hybrid
(digital plus print), up from 6%
- Successful commercial launch in China of "NeuPals" joint
venture
In the fourth quarter, total revenue increased to $4.7 million
as ePals focused on its media revenue business lines, driving a
year-over-year increase in media revenue of 8%. Media revenue, the
core revenue producing business of the Company, consists of revenue
from annual subscriptions, advertising, e-commerce, product sales
and content licensing.
The 8% increase in media revenue for the quarter was driven
primarily by increased licensing and commerce revenue for the
period. The media licensing revenue more than doubled
year-over-year in the fourth quarter as a result of new licensing
contracts with both new and existing customers. Media licensing
continues to grow significantly and will continue to be a primary
point of focus for the media business. Fourth quarter commerce
revenue increased 27% year-over-year due to increased sales related
to consumer media products.
At the end of 2013 ePals media subscriptions had increased to
approximately 429,000, 13% above the 2012 year-end. In the fourth
quarter, ePals enabled digital subscribers to access its products
via the platform of their choice -- IOS, Android, or browsers. This
resulted in increased adoption of digital products, with 30% of
subscriptions purchased in digital or hybrid (digital plus print)
formats in the fourth quarter of 2013, compared to 6% in the fourth
quarter of 2012. The Company's focus on offering high-quality
physical and digital children's media products has allowed the
business to increase its active subscribers (those who purchase
both a media subscription and also some form of commerce) by 20%
year-over-year.
In 2013 ePals undertook expense control and reduction
initiatives to reduce non-revenue generating costs. Departmental
restructurings and increased product focus have enabled the Company
to eliminate a number of senior positions and in general
substantially reduce fixed costs. Approximately $0.9 million in
annual costs were reduced as ePals ceased its direct U.S.
enterprise platform sales force in order to transition to an
indirect model. The result is a more variable cost structure versus
the fixed cost structure of a direct sales force. Associated cost
reductions were also realized with certain related marketing costs.
At December 31, 2013 the Company had reduced overall headcount by
approximately 12% from Q4 2012 levels, primarily in the sales and
technology areas. During 2013, the Company also started
experiencing cost savings from its new three-year printing
contract. Coupled with new paper sourcing, the Company expects to
see savings of up to $1.5 million over the life of the contract.
Due to a combination of these efforts, the Company estimates that
it has eliminated approximately $3.0 million in annualized costs.
Additionally, the Company continues to evaluate additional
outsourcing opportunities related to technology based functions to
further reduce costs.
During the fourth quarter, ePals continued to develop its
application programming interfaces ("APIs") to further enable
third-party developers to build products on top of the ePals
platform to improve product features and functionality and enhance
revenue opportunities. The Company's Chinese joint venture,
NeuPals, is the first customer to actively use the API's.
Through NeuPals, the Company launched enterprise services in a
district of 10,000 students in the city of Shenyang. NeuPals' new
products, the result of two years of planning and pilots, provide
Chinese schools with curricula, media products and collaborative
experiences with other schools around the world. The product line
promotes cultural understanding, provides language learning
practice and builds skills that meet the new innovative teaching
and learning goals set by China's Ministry of Education as well as
U.S. Common Core State Standards. ePals is expanding its
international footprint with a launch of additional product lines
for collaborative learning in China including policy managed mail
utilizing ePals APIs to offer the mail service using locally
deployed mail servers.
Q4 Financial Review
Total revenue for the three months ended December 31, 2013 was
$4.7 million, compared to $4.6 million in the fourth quarter of
2012. Media revenue increased $0.4 million, or 8%, to $4.6 million
for the fourth quarter primarily as a result of increases in
licensing, up $0.2 million to $0.4 million, and commerce revenues,
up $0.2 million to $1.0 million. License revenue was driven by new
licensing deals with new and existing customers resulting from
shifting resources from the unprofitable direct sales model.
Commerce revenue was driven by an increase in sales of product and
back issues to consumers as well as increased book sales. A
year-over-year decrease in platform business revenue during the
fourth quarter of 2013 was primarily due to a shift away from a
direct sales approach in the U.S.
Operating expenses for the fourth quarter of 2013 were $9.8
million, a decrease of $8.5 million, or 47%, compared to the prior
year period. The Company did not recognize any impairment losses
during the fourth quarter of 2013 compared to the impairment loss
of approximately $6.7 million during the fourth quarter of 2012.
Excluding the impairment loss, operating expenses decreased $1.9
million, or 16%, year-over-year. This decrease was due to decreases
in general and administrative, stock-based compensation and
technology, research and development costs, partially offset by an
increase in operations and support costs. General and
administrative expenses decreased $1.2 million during the period
due to lower legal costs compared to those incurred in 2012
associated with the litigation related to the acquisition of Carus
Publishing Company, as well as lower personnel related costs due to
decreases in bonus and recruiting expenses. Stock-based
compensation decreased $0.3 million during the three months ended
December 31, 2013 compared to the prior year period due to equity
awards carrying lower fair value during the current year, as well
as an increase in forfeitures during 2013. Technology, research and
development costs, which consist of expenses related to the
development and maintenance of the technology associated with the
Company's platform and media business, decreased $0.2 million due
primarily to headcount reductions in this area resulting from a
shift of focus to products expected to generate near-term revenue.
Operation and support costs increased $0.2 million due primarily to
increased expenses related to development of our e-commerce
offering and the distribution of our media products.
2013 Financial Review
For the year ended December 31, 2013, total revenue increased 8%
to $16.4 million driven by a media revenue increase of $2.1
million, or 15% compared to the prior year, partially offset by a
decrease in platform revenues. Media licensing revenue increased
$0.8 million compared to the prior year driven by new licensing
deals with new and existing customers resulting from shifting
resources from the unprofitable direct sales model. Media
subscription revenue increased $0.6 million as the Company
increased its subscription base. Through a series of steps
including introducing several digital editions, offering hybrid
print and electronic subscriptions, and bringing on affiliates and
new channels such as the ePals Global Community, the Company
experienced a 13% year-over-year increase in media subscriptions.
Advertising revenue increased $0.4 million compared to the prior
year primarily due to new advertising relationships and increased
revenue from existing relationships. The increase in commerce
revenue of $0.3 million was driven by an increase in sales of
product and back issues to consumers as well as increased book
sales. Decreasing platform business revenue during the year ended
December 31, 2013 compared to the prior year was primarily due to a
shift away from a direct sales approach in the U.S.
Operating expenses for the year ended December 31, 2013 were
$39.3 million, a decrease of $2.3 million or 5% from the prior year
period. This change was primarily due to decreases in expenses
related to impairment losses, acquisition investigation and general
and administrative expenses, partially offset by changes in the
fair value of acquisition consideration, increased operations and
support expenses and higher marketing and promotion costs.
Acquisition investigation expenses, which represent legal, audit
and tax fees related to business acquisitions and joint ventures
that the Company is considering and/or negotiating, decreased for
the year ended December 31, 2013 compared to the prior year
primarily due to legal work in 2012 relating to the negotiation of
agreements for our joint venture in China and because of several
business acquisitions that were being contemplated to accelerate
the launch of the Company's European initiatives. General and
administrative expenses decreased $1.2 million due primarily to the
reduction in legal and bonus expenses. The Company recorded a $0.3
million loss for the year ended December 31, 2013 for the change in
the estimated fair value of the share consideration related to the
acquisition of Carus Publishing Company in 2011, compared to a gain
of $2.2 million that was recorded in 2012. Operation and support
expenses increased $1.7 million during the year ended December 31,
2013 compared to the prior year period primarily due to additional
costs incurred to support expansion of international operations in
China and increased costs related to the functionality and support
of the ePals Global Community. Marketing and promotion expenses
increased $1.9 million during the year ended December 31, 2013
compared to the prior year due to a larger investment in online
marketing acquisition efforts and expenses related to new marketing
initiatives for the media portion of our business.
Additionally, the Company did not recognize any impairment
losses during the year ended December 31, 2013 compared to the
impairment loss of approximately $6.7 million during the year ended
December 31, 2012.
The net loss for the year ended December 31, 2013 was $22.5
million, or ($0.12) per share, compared to a net loss of $26.8
million, or ($0.20) per share for the year ended December 31, 2012.
In addition to the factors discussed above, increases in gains
associated with the fair value of the Company's derivatives and
foreign currency exchange contributed to the lower net loss in
2013. These increased gains were offset by increased interest
expense during 2013 related to the debentures issued in
2013.
At December 31, 2013 ePals had $3.6 million in cash and cash
equivalents. In the fourth quarter of 2013, the Company closed
multiple tranches of a non-brokered private placement and issued
approximately 109 million units of the Company ("Units") at a price
of CAD$0.075 per Unit for gross proceeds of approximately CAD$8.2
million. Each Unit consisted of one common share of the Company and
one-third of one common share purchase warrant ("Warrant").
Subsequent to year-end, the Company has raised an additional $3.7
million through a combination of private placements and borrowings
under its revolving credit facility. The Company intends to use the
net proceeds for general corporate purposes and working
capital.
As of April 15, 2014, ePals had a total of 344,145,116 common
shares outstanding, of which 108,308,886 are voting common shares
and 235,836,230 are restricted voting common shares.
Important factors, including those discussed in ePals'
regulatory filings (www.sedar.com), could cause actual results to
differ from ePals' expectations and those differences may be
material. ePals' financial statements for the three and twelve
months ended December 31, 2013, together with the related
management's discussion & analysis, will be filed at
www.sedar.com on April 16, 2014.
About ePals Corporation
ePals Corporation, operating under the brand Cricket Media is an
education media company that provides award-winning content on a
safe and secure learning network for children, families and
teachers across the world. Cricket Media's 14 popular media
brands for toddlers to teens include Babybug, Ladybug, Cricket® and
Cobblestone® with multiple language editions and apps in English,
Spanish and Chinese. The Company's innovative web-based K12
tools for school and home include the ePals community and virtual
classroom for global collaboration as well as In2Books®, a Common
Core eMentoring program that builds reading, writing and critical
thinking skills. Cricket Media serves approximately one million
classrooms and millions of teachers, students and parents in over
200 countries and territories through its platform and NeuPals, its
joint venture with China's leading IT services company Neusoft.
Cricket Media also licenses its content and platform to top
publishing and educational companies worldwide. For more
information, please visit www.Cricketmag.com, www.ePals.com and
www.In2Books.com.
Cautionary Statement Regarding Forward-Looking
Information Certain statements contained in this press
release constitute forward-looking information within the meaning
of applicable securities laws, including statements with respect to
customers, ventures such as ePals China and Europe; partnerships;
and ePals' strategy, prospects and success in pursuing domestic or
international markets for the platform or media businesses; and
ePals' anticipated plans to increase its subscription base, ARPU,
and media and platform businesses. These statements relate to
future events or future performance. Often, but not always,
forward-looking information can be identified by the use of words
such as "plans", "expects", "is expected", "budget", "scheduled",
"estimates", "forecasts", "intends", "anticipates", or "believes"
or variations (including negative variations) of such words and
phrases, or statements formed in the future tense or indicating
that certain actions, events or results "may", "could", "would",
"might" or "will" (or other variations of the forgoing) be taken,
occur, be achieved, or come to pass. Forward-looking information is
necessarily based upon a number of assumptions and factors that,
while considered reasonable, are subject to known and unknown
risks, uncertainties, and other factors which may cause the actual
results and future events to differ materially from those expressed
or implied by such forward-looking information. Those assumptions
and factors are based on information currently available to ePals.
Such material factors and assumptions include, but are not limited
to: ePals' ability to execute on its business plan; the acceptance
of ePals' products and services by customers globally; that ePals
affiliated entities will be able to secure distribution partners
for sale of ePals' products and services; ePals' subjective
assessment of the likelihood of success of a sales lead or
opportunity; that sales will be completed at or above ePals'
estimated margins; that the demand for webhosting and secure email
communication, as well as education media related products
domestically, in Europe and in China will continue to grow; that
the demand for ePals' products and services globally will develop
and grow; the receipt of all requisite regulatory approvals
throughout venture territories for the sale of ePals' products and
services; the availability of additional financing, if and when
required and market conditions generally. Although ePals has
attempted to identify important factors that could cause actual
actions, events or results to differ materially from those
described in forward-looking information, there may be other
factors that cause actions, events or results to differ from those
anticipated, estimated or intended. The forward-looking information
contained in this press release is made as of the date hereof and
ePals is not obligated to update or revise any forward-looking
information, whether as a result of new information, future events
or otherwise, except as required by applicable securities laws.
Because of the risks, uncertainties and assumptions contained
herein, investors should not place undue reliance on
forward-looking information. The foregoing statements expressly
qualify any forward-looking information contained herein.
Neither TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in policies of the TSX Venture
Exchange) accepts responsibility for the adequacy or accuracy of
this release
Refer to the notes of ePals
Condensed Consolidated Interim Financial Report for the three and
twelve months ended December 31, 2013 filed at www.sedar.com on
April 16, 2014 as these notes are an integral part of these
financial statements.
|
|
ePals Corporation |
|
Consolidated Statements of Financial Position |
|
December 31, 2013 and 2012 |
|
|
|
|
|
|
|
|
|
|
December 31, 2013 |
|
|
December 31, 2012 |
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
|
Cash & cash equivalents |
|
$ |
3,641,985 |
|
|
$ |
3,948,499 |
|
|
Accounts receivable, net of allowance for doubtful
accounts |
|
|
1,265,834 |
|
|
|
1,581,300 |
|
|
Inventory |
|
|
538,163 |
|
|
|
417,702 |
|
|
Other current assets |
|
|
1,139,455 |
|
|
|
875,618 |
|
|
|
Total
current assets |
|
|
6,585,437 |
|
|
|
6,823,119 |
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
|
449,208 |
|
|
|
502,025 |
|
Investment in NeuPals |
|
|
811,929 |
|
|
|
1,164,523 |
|
Goodwill |
|
|
14,419,953 |
|
|
|
14,419,953 |
|
Other intangible assets, net |
|
|
7,876,341 |
|
|
|
8,031,165 |
|
Restricted cash |
|
|
75,966 |
|
|
|
75,663 |
|
Other assets |
|
|
63,503 |
|
|
|
84,519 |
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets |
|
$ |
30,282,337 |
|
|
$ |
31,100,967 |
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders' Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
|
$ |
6,929,566 |
|
|
$ |
6,951,523 |
|
|
Acquisition consideration liabilities, current |
|
|
584,178 |
|
|
|
182,390 |
|
|
Deferred revenue, current |
|
|
6,422,165 |
|
|
|
6,185,628 |
|
|
Bank line-of-credit |
|
|
1,500,000 |
|
|
|
1,500,000 |
|
|
Notes payable to related parties |
|
|
1,500,000 |
|
|
|
- |
|
|
Finance lease obligations, current |
|
|
65,716 |
|
|
|
72,789 |
|
|
Other current liabilities |
|
|
90,795 |
|
|
|
24,719 |
|
|
|
Total
current liabilities |
|
|
17,092,420 |
|
|
|
14,917,049 |
|
|
|
|
|
|
|
|
|
|
Secured convertible debentures |
|
|
18,399,596 |
|
|
|
11,117,161 |
|
Deferred revenue, less current portion |
|
|
851,854 |
|
|
|
917,881 |
|
Finance lease obligations, less current portion |
|
|
117,507 |
|
|
|
32,554 |
|
Acquisition consideration liabilities, less
current |
|
|
- |
|
|
|
122,911 |
|
Other liabilities |
|
|
11,440 |
|
|
|
11,440 |
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities |
|
|
36,472,817 |
|
|
|
27,118,996 |
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity (deficit) |
|
|
|
|
|
|
|
|
|
Share capital |
|
|
104,912,731 |
|
|
|
94,609,838 |
|
|
Additional paid-in capital |
|
|
7,352,232 |
|
|
|
5,312,802 |
|
|
Accumulated deficit |
|
|
(116,809,681 |
) |
|
|
(94,295,643 |
) |
|
Unvested voting common stock |
|
|
(1,876 |
) |
|
|
(3,752 |
) |
|
Accumulated other comprehensive loss |
|
|
(151,838 |
) |
|
|
(149,226 |
) |
|
Less: Treasury stock (719,998 shares) |
|
|
(1,492,048 |
) |
|
|
(1,492,048 |
) |
|
|
|
|
|
|
|
|
|
|
|
Total
stockholders' equity (deficit) |
|
|
(6,190,480 |
) |
|
|
3,981,971 |
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders' equity (deficit) |
|
$ |
30,282,337 |
|
|
$ |
31,100,967 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ePals Corporation |
|
Consolidated Statements of Comprehensive Loss |
|
Years Ended December 31, 2013 and 2012 |
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2013 |
|
|
2012 |
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
16,412,256 |
|
|
$ |
15,201,910 |
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
Cost of sales |
|
$ |
10,671,488 |
|
|
|
9,934,572 |
|
|
Technology, research & development costs |
|
|
5,350,347 |
|
|
|
4,831,631 |
|
|
Operations and support expenses |
|
|
4,939,259 |
|
|
|
3,280,187 |
|
|
General and administrative expenses |
|
|
6,153,711 |
|
|
|
7,358,876 |
|
|
Marketing and promotion expenses |
|
|
8,603,246 |
|
|
|
6,728,407 |
|
|
Stock-based compensation |
|
|
1,490,826 |
|
|
|
1,753,397 |
|
|
Depreciation & amortization |
|
|
1,305,768 |
|
|
|
1,552,530 |
|
|
Loss on investment in NeuPals |
|
|
352,594 |
|
|
|
60,477 |
|
|
Acquisition investigation expenses |
|
|
- |
|
|
|
1,279,128 |
|
|
Financing transaction costs |
|
|
137,238 |
|
|
|
300,225 |
|
|
Change in estimated fair value of acquisition share
consideration |
|
|
278,877 |
|
|
|
(2,204,107 |
) |
|
Impairment of goodwill and intangible assets |
|
|
- |
|
|
|
6,671,355 |
|
Total operating expenses |
|
|
39,283,354 |
|
|
|
41,546,678 |
|
|
|
|
|
|
|
|
|
|
Loss from operations |
|
|
(22,871,098 |
) |
|
|
(26,344,768 |
) |
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
Gain from change in fair value of derivatives |
|
|
3,130,000 |
|
|
|
- |
|
|
Interest expense, net |
|
|
(3,444,090 |
) |
|
|
(521,617 |
) |
|
Other income |
|
|
6,400 |
|
|
|
9,600 |
|
|
Net foreign currency exchange gains |
|
|
664,750 |
|
|
|
36,103 |
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
(22,514,038 |
) |
|
|
(26,820,682 |
) |
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
Items that may be subsequently reclassfied into net
income/loss |
|
|
|
|
|
|
|
|
|
|
Foreign currency translation |
|
|
(2,612 |
) |
|
|
(42,618 |
) |
|
|
|
|
|
|
|
|
|
Total comprehensive loss |
|
$ |
(22,516,650 |
) |
|
$ |
(26,863,300 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per common share: |
|
|
|
|
|
|
|
|
Basic and diluted |
|
$ |
(0.12 |
) |
|
$ |
(0.20 |
) |
|
|
|
|
|
|
|
|
|
Weighted average number of common shares: |
|
|
|
|
|
|
|
|
Basic and diluted |
|
|
186,869,411 |
|
|
|
135,797,002 |
|
|
|
|
|
|
|
|
|
|
|
|
ePals Corporation |
|
Consolidated Statements of Cash Flows |
|
Years Ended December 31, 2013 and 2012 |
|
|
|
|
|
2013 |
|
|
2012 |
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(22,514,038 |
) |
|
$ |
(26,820,682 |
) |
|
Adjustments to reconcile net loss to net cash used in
operating activities: |
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
1,305,768 |
|
|
|
1,552,530 |
|
|
|
Stock-based compensation |
|
|
1,490,826 |
|
|
|
1,753,397 |
|
|
|
Write off of patent costs |
|
|
- |
|
|
|
6,561 |
|
|
|
Change in acquisition consideration liability |
|
|
278,877 |
|
|
|
(2,204,107 |
) |
|
|
Impairment of goodwill and intangible assets |
|
|
- |
|
|
|
6,671,355 |
|
|
|
Loss on investment in NeuPals |
|
|
352,594 |
|
|
|
60,477 |
|
|
|
Bad debt expense and write-off of accounts
receivable |
|
|
14,512 |
|
|
|
331,604 |
|
|
|
Net foreign currency translation (gains) losses |
|
|
(664,750 |
) |
|
|
(36,103 |
) |
|
|
Increase in restricted cash |
|
|
303 |
|
|
|
404 |
|
|
|
Gain from change in fair value of derivatives |
|
|
(3,130,000 |
) |
|
|
- |
|
|
|
Amortization of financing costs |
|
|
1,949,160 |
|
|
|
593,675 |
|
|
|
Restricted share vesting |
|
|
1,876 |
|
|
|
3,217 |
|
|
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
557,632 |
|
|
|
(793,210 |
) |
|
|
|
Inventory |
|
|
(120,460 |
) |
|
|
(51,266 |
) |
|
|
|
Other current assets |
|
|
(263,837 |
) |
|
|
(67,712 |
) |
|
|
|
Accounts payable and accrued expenses |
|
|
(53,453 |
) |
|
|
633,036 |
|
|
|
|
Deferred revenue |
|
|
170,511 |
|
|
|
(791,454 |
) |
|
|
|
Other |
|
|
952 |
|
|
|
(260,261 |
) |
|
|
|
|
Total
adjustments |
|
|
1,890,511 |
|
|
|
7,402,143 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash used in operating activities |
|
|
(20,623,527 |
) |
|
|
(19,418,539 |
) |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
Cash used for business acquisitions, net of cash
acquired |
|
|
- |
|
|
|
(1,525,000 |
) |
|
Investment in NeuPals |
|
|
- |
|
|
|
(1,225,000 |
) |
|
Purchase of equipment |
|
|
(383,952 |
) |
|
|
(305,047 |
) |
|
Increase in other intangible assets |
|
|
(717,074 |
) |
|
|
(545,076 |
) |
|
Decrease in other assets |
|
|
21,016 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash used in investing activities |
|
|
(1,080,010 |
) |
|
|
(3,600,123 |
) |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
Proceeds from private placement transactions, net of
expenses |
|
|
7,536,729 |
|
|
|
9,228,798 |
|
|
Proceeds from debentures, net of expenses |
|
|
9,282,672 |
|
|
|
10,805,600 |
|
|
Proceeds from notes payable from related parties |
|
|
6,500,000 |
|
|
|
1,500,000 |
|
|
Payments of notes payable to related parties |
|
|
(2,000,000 |
) |
|
|
(1,500,000 |
) |
|
Proceeds from exercise of stock options |
|
|
- |
|
|
|
54,516 |
|
|
Proceeds from exercise of warrants |
|
|
- |
|
|
|
40,960 |
|
|
Payments on finance lease obligations |
|
|
(78,342 |
) |
|
|
(113,706 |
) |
|
Proceeds from finance lease financing |
|
|
163,742 |
|
|
|
63,510 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by financing activities |
|
|
21,404,801 |
|
|
|
20,079,678 |
|
|
|
|
|
|
|
|
|
|
(Decrease) increase in cash & cash equivalents |
|
|
(298,736 |
) |
|
|
(2,938,984 |
) |
Effect of exchange rates on cash |
|
|
(7,778 |
) |
|
|
(8,346 |
) |
Cash & cash equivalents at the beginning of the
year |
|
|
3,948,499 |
|
|
|
6,895,829 |
|
Cash & cash equivalents at the end of the year |
|
$ |
3,641,985 |
|
|
$ |
3,948,499 |
|
|
|
|
|
|
|
|
|
|
|
ePals Corporation |
Consolidated Statements of Cash Flows |
Years Ended December 31, 2013 and 2012 |
|
|
|
|
|
2013 |
|
2012 |
Non-cash financing activities: |
|
|
|
|
|
|
Issuance of common shares to former shareholders of Carus |
|
$ |
- |
|
$ |
6,663,779 |
Issuance of common shares to consultants for payment of
services |
|
|
- |
|
|
23,500 |
Issuance of common shares to repay credit facility from
insider |
|
|
3,000,000 |
|
|
109,349 |
Issuance of warrants to brokers for payment of services |
|
|
- |
|
|
64,406 |
Issuance of warrants in connection with private placement |
|
|
189,491 |
|
|
- |
Supplemental disclosures of cash flow information: |
|
|
|
|
|
|
Cash
paid for interest |
|
$ |
864,875 |
|
$ |
79,894 |
Cash
paid for income taxes |
|
|
48,208 |
|
|
21,979 |
|
|
|
|
|
|
|
FOR FURTHER INFORMATION PLEASE CONTACT: Chief Financial Officer
Aric Holsinger ePals Corporation Phone: (703) 885-3400
aholsinger@cricketmedia.com Investor Relations Cory Pala E.vestor
Phone: (416) 657-2400 cpala@cricketmedia.com
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