Mr. Mark Elfenbein reports

SLYCE REPORTS YEAR AND FOURTH QUARTER 2015 RESULTS AND PROVIDES BUSINESS UPDATE

Slyce Inc. has released its financial results for the year and fourth quarter ended Oct. 31, 2015.

The financial statements and management discussion and analysis for the year ended Oct. 31, 2015, are available on SEDAR.

Business highlights

Key customer announcements during the three-month period ended Oct. 31, 2015, include the following:

• On Aug. 12, 2015, Slyce announced a partnership with the Shoes website, the world's fastest-growing on-line footwear retailer and the owner of the leading North American shoe retailing group, which also includes the ShoeMe and OnlineShoes websites. Slyce's mobile image recognition platform enables mobile visitors to the ShoeMe website to snap pictures of any women's footwear, either in the real world or from sources such as magazines, and be presented with all direct and closely matching products from the extensive ShoeMe product line, which can then be purchased with just a few taps.
• On Aug. 26, 2015, Slyce announced that Neiman Marcus had expanded the deployment of Slyce technology to all of its product lines. The significantly expanded "snap, find, shop" feature, available in Neiman Marcus's top-rated NM app and powered by Slyce, enables shoppers to snap 3-D images of items across any category -- women's apparel, shoes, handbags, jewellery, home furnishings, children's items, pet accessories and men's fashion -- and receive direct or closely matching items from Neiman Marcus's product offering, which can be purchased easily at the point of inspiration.
• On Oct. 6, 2015, specialty retailer Urban Outfitters signed a contract with Slyce to power visual search for mobile commerce. Founded in 1970, Urban Outfitters has more than 230 stores in the United States, Canada and Europe and operates as a division of Urban Outfitters Inc., a leading lifestyle specialty retail company that also comprises the Anthropologie, Bhldn, Free People and Terrain brands.
• On Oct. 22, 2015, Slyce and Shoe Carnival announced a signed agreement to integrate Slyce technology.

Financing update

On Feb. 10, 2016, Slyce terminated its short-form prospectus offering and proceeded with a private-placement financing of up to $7-million following agreement with a lead investor to subscribe for up to $5-million in units of the company. On Feb. 12, 2016, the lead investor subscribed for a total of $1.6-million in 6-per-cent interest-bearing unsecured promissory notes, which notes have been converted as a subscription for units pursuant to the terms of the private placement. As of Feb. 29, 2016, the lead investor subscribed for an additional $1.9-million in units of the company to bring the current lead investor's total subscriptions to $3.5-million in units of the company. The company is accepting further subscriptions from the lead investor, and others, and is now moving to close the remainder of the financing.

Technical highlights

Slyce's main product development focuses during 2015 were adding robustness around its core visual search offering and introducing new use cases for visual search. Significant attention was paid to creating a system that enables easy onboarding by minimizing the integration efforts required of new customers. This was achieved by expanding automation of product feeds and packaging the company's products to enable various capabilities within unified software development kits.

Specific technology achievements included the following:

• Universal Scanner: On Oct. 5, 2015, Slyce announced a new set of mobile visual search products. A core product of that suite is the Universal Scanner -- an integrated solution for retailers enabling automated recognition of any type of object such as physical objects, non-watermarked printed material (catalogues, flyers and in-store signage) and all types of barcodes. The Universal Scanner product is embedded in retailer apps as a native software development kit for both iOS and Android and provides a single camera interface for all types of detections. In addition, Slyce developed a mobile Web software development kit that enables the Universal Scanner capabilities within mobile browsers. This allows clients to add object-scanning capabilities to their mobile websites by integrating only a few lines of code into their existing websites. The user interface of both the native and the mobile Web software development kits is fully customizable and can be adjusted to align with the look and feel of individual client apps.
• Slyce Link: On Nov. 25, 2015, Slyce launched its proprietary retail technology solution, Slyce Link, a purpose-built platform that has been in development for over a year and is currently in beta testing with its first major retail customer. Slyce Link is a visual product recommendation system that increases shopping conversions on e-commerce websites. The system enables retailers to show visually similar products to their customers at highly strategic points in the on-line purchasing journey in order to increase sales and mitigate cart abandonment. The system is delivered to retailers in the form of JavaScript and native software development kits for both iOS and Android. By embedding a few lines of code, a retailer can add a full visual recommendation experience to their existing websites. The user interface is customizable according to customer needs. At the back end of the system, there is a product feed processing mechanism, image-matching engine, and search logic that ensures data consistency between the search results and the product catalogue in the retailer's website. Meta-data filtering is enabled in addition to visual relevancy (for example, filter according to stock availability, price range, size, product ratings).
• Enhanced 3-D object recognition: During 2015, Slyce introduced a full 3-D object recognition solution that can detect products in any category from retailer catalogues. Slyce launched the solution with retailers operating in verticals such as fashion, electronics, home decor, tools and appliances. To enable recognition of specific products in user-generated content (UGC) images, Slyce built a system that combines fully automated image recognition flows alongside human-assisted flows. In a typical use case, the recognition process starts with a fully automated attempt to detect the product and, if a match is not identified, the search proceeds to human-assisted flow where hints to the algorithms are proved, in real time, such that the most relevant set of products can be matched to the reference image. The fully automated flow utilizes a statistical matching approach, where the reference image is compared against a large database of preindexed images (including multiple images of the same item taken at different angles). The human-assisted flow utilizes the retailer's existing search mechanism to pull a set of potentially relevant items in real time and then performs a refinement process to pinpoint the most similar items. The combined approach enables Slyce to find similar products corresponding to a UGC image within a retailer catalogue in almost any retail category.
• 2-D content management system: One of the capabilities of the Universal Scanner solution is detecting images in printed media such as catalogues, flyers and in-store signage. The detection is performed on a mobile device and is a 1:1 image matching against preindexed image data. The use case for this content activation is typically campaign based, where new material is published on a periodic basis. Slyce created a content management system to automate new content activation in a continuing manner, eliminating the need to change anything on the client's app or website. Clients simply send any print material to be activated in a digital format, and the activation proceeds seamlessly without any further action by the client.
• Coupon Author: On Aug. 4, 2015, Slyce launched its enterprise-level coupon management platform for retailers -- Coupon Author. Coupon Author enables retailers and agencies to create coupons optimized for mobile redemption, distribute them at scale, and enable their consumers to easily find and save such offers. Retailers can target special offers to specific customer segments depending on their loyalty or affinity to certain brands. The platform has been adopted by retail giants Toys "R" Us and BazaarVoice to power all of their digital and mobile coupons.

Other technology developments included the following:

• On July 14, 2015, Slyce launched its latest visual-search-enabled consumer app, Craves, a boutique, fashion-focused shopping app, available for iOS in the U.S. and Canadian iTunes stores.
• On Aug. 13, 2015, Slyce expanded its 3-D visual shopping app, Pounce, to the Android platform.
• On Sept. 17, 2015, Slyce introduced Slyce Insights, a new analytics platform for retailers. The system is capable of collecting data related to visual search from various sources such as the Universal Scanner and Link, and providing detailed key performance indicators to retailers.
• On Oct. 28, 2015, Slyce introduced a new money-saving concierge service, Scout, into its leading coupons app, SnipSnap.

Financial highlights for the year ended Oct. 31, 2015

 
                                                         Year ended Oct. 31,
                                                      2015             2014
Revenue
Services rendered                            $   1,417,872    $      31,627
Other income                                       274,420           58,176                                             
                                                 1,692,292           89,803
Expenses
Business development                               795,170          327,124
Consulting fees                                  1,605,186        2,336,086
General, administrative and filing fees          8,093,620        3,285,603
Professional fees                                1,145,454          951,497
Amortization, share-based payments,
deferred tax and other                           2,122,328       10,766,069                                            
                                                13,761,758       17,666,379
Net (loss)                                   $ (12,069,466)   $ (17,576,576)

• Revenue for the year ended Oct. 31, 2015, totalled $1,692,292 compared with $89,803 for the year ended Oct. 31, 2014, a 1,784-per-cent increase. Recurring revenue follows client integration and deployment and is now beginning to expand as a percentage of total revenue. Recurring revenue increased to $408,595 in the quarter.
• Operating expenses for the year ended Oct. 31, 2015, totalled $11,639,430 as compared with $6,900,310 for the year ended Oct. 31, 2014. The increase in expenses is primarily due to expanded operations as a result of acquisitions and increased sales and marketing initiatives.
• Net loss for the year ended Oct. 31, 2015, was $12,069,466 as compared with $17,576,576 for the year ended Oct. 31, 2014.
• Total comprehensive loss for the year ended Oct. 31, 2015, was $12,065,685, or a nine-cent loss per share based on 129 million shares, compared with a total comprehensive loss of $17,578,347, or a 29-cent loss per share based on 60 million shares for the previous year.
• Loss before amortization, share-based payments, depreciation and other expenses was $9,947,138 for the year ended Oct. 31, 2015, compared with $6,810,507 in 2014.

Financial highlights for the fourth quarter ended Oct. 31, 2015

                                               Fourth quarter ended Oct. 31,
                                                      2015             2014
Revenue
Services rendered                            $     483,595    $      27,127
Other income                                       177,863           51,433                                             
                                                   661,458           78,560
Expenses
Business development                               173,049          327,124
Consulting fees                                    306,357          695,661
General, administrative and filing fees          1,954,199          939,650
Professional fees                                  513,107           38,625
Amortization, share-based payments,
deferred tax and other                            (815,821)       1,394,497                                            
                                                 2,130,891        3,395,557
Net (loss)                                   $  (1,469,433)   $  (3,316,997)

• Revenue for the quarter ended Oct. 31, 2015, totalled $661,458 compared with $78,560 for the quarter ended Oct. 31, 2014, a 1,683-per-cent increase.
• Revenue for the quarter ended Oct. 31, 2015, totalled $661,458 compared with $518,823 for the third quarter ended July 31, 2015, a 27-per-cent increase.
• Operating expenses for the quarter ended Oct. 31, 2015, totalled $2,946,712 as compared with $2,001,060 for the quarter ended Oct. 31, 2014. The increase in expenses is primarily due to expanded operations as a result of acquisitions and increased sales and marketing initiatives.
• Loss before amortization, share-based payments, depreciation and other comprehensive expenses was $2,285,254 for the quarter ended Oct. 31, 2015, compared with $1,922,500 in 2014.

Comment from the chief executive officer

Mark Elfenbein, chief executive officer of Slyce, commented: "Growing retailer interest in visual product search and acknowledgment of Slyce as an emerging visual search leader reinforces our confidence in the company's potential. Revenue growth continued in the fourth quarter. Based on experience gained during the initial months of commercial operation, we are now vigorously refining our sales process and expense stewardship. Despite investor interest, securing additional financing in the current market environment proved challenging, and the recently announced private-placement financing enables continued execution of Slyce's strategy."

Conference call

On March 1, 2016, at 4 p.m. EST, the company will be hosting a conference call to discuss this news, featuring a live question-and-answer session. Access to the live conference call will be available by on-line registration. Once registered, participants will be e-mailed their call-in information and access code to the call. The conference call is open to any investor or stakeholder, including shareholders, broker dealers and other securities professionals. The call will be recorded and available for review at the company's website. Slyce will be hosting and moderating a question-and-answer period on the call. Participants will be able to enter a moderated queue to ask a question live on the call or to submit a question via e-mail. To submit one or more questions to the chief executive officer, please e-mail your question to roy@slyce.it with the words "investor question for conference call" in the subject line. Slyce management will endeavour to address as many questions as possible in the hour allocated to the call.

We seek Safe Harbor.