Mr. Ted Mann reports

SLYCE INC. REPORTS Q3, 2016 FINANCIAL RESULTS

Slyce Inc. has released its financial results for the third quarter ended July 31, 2016.

The interim financial statements, and management discussion and analysis for the quarter ended July 31, 2016, are available on SEDAR.

Business highlights:

• Key customer announcements during the nine-month period ended July 31, 2016, include the following:
  • On Nov. 25, 2015, Slyce announced a new contract with Toys "R" Us for the provision of several of Slyce's visual search and digital coupon services.
  • On the same date, Slyce also announced its new and proprietary retail technology solution, Slyce Link, that enables retailers to show visually similar products to their customers at highly strategic points in their on-line purchasing journeys in order to increase sales and reduce cart abandonment.
  • On Dec. 8, 2015, Slyce announced a contract with leading specialty fashion retailer, Nordstrom, to power visual search for mobile commerce.
  • On Dec. 18, 2015, Slyce announced that it had integrated fully automated, 3-D search technology that is now live with on-line shoe and clothing retailer, Zappos.com, to power visual search for mobile commerce.
  • On March 22, 2016, Slyce announced that it had officially launched visual search technology with leading U.S. footwear and accessories retailer, Shoe Carnival.
  • On May 16, 2016, Best Buy expanded its relationship with Slyce to introduce 3-D search capabilities, alongside barcode and catalogue scanning, into its iOS and Android apps. The visual search functions were moved to the primary search bar of the app, accessible when a user taps on the camera icon.
  • On June 22, 2016, Slyce announced that leading apparel retailer Express had contracted to utilize Slyce's Universal Scanner, including barcode scanning, catalogue scanning and 3-D visual search.
  • On June 28, 2016, Slyce announced that American Eagle Outfitters had contracted to use Slyce's visual search technology in the retailer's app.
  • During August, 2016, key customer developments included the following:
    • Urban Outfitters expanded its contract to utilize Slyce's 3-D visual search in its scan-plus-shop feature and moved the location of its scanning features into the search bar of its Apple app.
    • Home Depot moved its Universal Scanner provided by Slyce out of beta, and into the search bar of its Apple and Android applications.
    • Slyce clients Nordstrom, Express and American Eagle Outfitters all launched Universal Scanner, adding visual search camera icons to the main screens of their app.
• The corporation continues to expand its pipeline of marque retail clients and is currently contracted with 22 brands, a few of which are in the onboarding process.
• In September, 2016, the board was pleased to appoint Ted Mann, former president of the corporation, as chief executive officer and president.

Financial highlights

• Current assets consist of cash, trade receivables, other liquid assets and amounts due from related parties. Cash and cash equivalents decreased significantly as a result of total operating costs that were much higher than the total revenues generated by the corporation.
• Non-current assets decreased to $8,232,156 as at July 31, 2016, compared with $19,516,944 as at Oct. 31, 2015. In addition to amortization of development costs, this decrease resulted primarily from a one-time, non-cash impairment charge of $10,574,715 recorded on intangible assets during the quarter ended July 31, 2016.
• Liabilities include trade and other payables, loan payable, deferred revenue, deferred consideration, and common shares held in escrow.
• The attached table presents selected operational data for the three and nine months ended July 31, 2016, and July 31, 2015.

                                        For the three     For the three      For the nine       For the nine
                                         months ended      months ended      months ended       months ended
                                        July 31, 2016     July 31, 2015     July 31, 2016      July 31, 2015
Revenue
Services rendered                           $ 310,929         $ 435,968       $ 1,573,060          $ 934,277
Other income                                   14,554            82,855           184,305             96,557
Total revenue                                 325,483           518,823         1,757,365          1,030,834
Expenses
General and                                            
administrative                              1,406,180         2,238,536         6,402,199          6,139,421
Amortization of intangible                                              
assets                                        716,947           366,110         2,177,796          1,037,405
Share-based payments                           48,797           245,025           518,622          1,425,785
Consulting fees                               107,318           385,923           488,904          1,298,829
Professional fees                             139,945           146,276         1,087,286            632,347
Amortization of property                                               
and equipment                                  27,423            38,312           316,225            110,385
Interest expense                               17,539                 -            17,539                  -
Business development                           33,355           201,506            83,304            622,121
Total expenses                              2,497,504         3,621,688        11,091,875         11,266,293
Other expenses
Exchange (gain) loss                           (1,774)           53,260           (30,119)            43,101
Changes in fair value of
contingent consideration     
held in escrow                                      -                 -          (745,475)                 -
Change as
presented       
in deferred                                         
liability
consideration                                       -           141,644          (223,001)           321,473
Impairment of intangible                  
assets                                     10,576,489                 -        10,576,489                  -
Total other expenses                       10,574,715           194,904         9,577,894            364,574
Net (loss)                                (12,746,736)       (3,297,769)      (18,912,404)       (10,600,033)
Foreign exchange (gain) loss
on translation of foreign                      
subsidiaries                                   12,826           (79,463)          (49,298)             8,768
Net and comprehensive (loss)            $ (12,733,910)     $ (3,218,306)    $ (18,961,702)     $ (10,608,801)

For the nine-month period ended July 31, 2016, revenue increased to $1,573,060 from $934,277 for the same period last year, an increase of 68 per cent. This increase was driven by onboarding new customers during the period and additional fees derived from existing customers utilizing more of Slyce's products. For the three months ended July 31, 2016, total revenue was lower by $125,039. This was due to a one-time revenue recognition in the previous quarter of $150,000 as well as a reclassification of approximately $200,000 between revenue and expenses in the current quarter. Without the reclassification, normalized revenue for the quarter would have been $510,929. Other revenues of $14,554 for the quarter and $184,305 for the nine months ended July 31, 2016, primarily comprised a scientific research and experimental development tax incentive (SRED) rebate of $140,373, a refund related to leasehold improvements of $38,249 and interest income.

Total expenses for the nine months ended July 31, 2016, were lower by $174,418 to $11,091,875. For the quarter ended July 31, 2016, total expenses were lower by $1,124,184 to $2,497,504. Without the reclassification of approximately $200,000 between revenue and expenses, normalized total expenses would have been higher during the quarter to $2,697,504.

During the quarter ended July 31, 2016, the corporation conducted impairment testing of its intangible assets. The testing considered the net present value of estimated future cash flows derived from the specific assets, taking into account the company's current strategic focus, market understanding and corresponding product road map. Those calculations indicated impairments of $4,141,441 on software and intellectual property, and $6,435,048 on goodwill, and, as a result, the corporation recorded a one-time impairment charge of $10,576,489.

Total comprehensive loss for the nine months ended July 31, 2016, was higher by $8,352,901 to $18,961,702 compared with $10,608,801 for the same period last year. Without the one-time impairment charge of $10,576,489, normalized total comprehensive loss for the nine months would have been lower by $2,223,588. Total comprehensive loss for the three months ended July 31, 2016, was higher by $9,515,604 to $12,733,910 compared with $3,218,306 for the same period last year. Without the one-time impairment charge of $10,576,489, normalized total comprehensive loss for the three months would have been lower by $1,060,885.

Loss before amortization, share-based payments, depreciation, changes in fair value of contingent consideration, fair value changes to deferred consideration and impairment of intangible assets for the nine months ended July 31, 2016, was lower by $1,413,237 to $6,291,748 compared with $7,704,985 for the same period last year, a decrease of loss by 18 per cent. For the three months ended July 31, 2016, it was lower by $1,129,598 to $1,377,080 compared with $2,506,678 for the same quarter last year, a decrease of loss by 45 per cent.

Slyce chief executive officer Mr. Mann commented: "Over the last quarter, Slyce cemented its position as the dominant force in visual search, with far more customers and deployments than any other business in our space. We also matured quite a bit as a company -- making tough, but necessary, cuts to reduce our expenses and making careful, strategic decisions to focus 90 per cent of our resources on areas where we have some product-market fit and just 10 per cent on new product development."

Conference call

On Sept. 30, 2016, at 9 a.m. EST, the company will be hosting a live audio conference to discuss this news. To dial into the call, please use the call information below:

Number:  1-888-289-4573

Code:  9683834

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 on the company's website. Slyce will be hosting and moderating a question-and-answer period on the call. Participants can submit questions for the call in advance by e-mailing erika@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.

About Slyce

Slyce, based in Calgary, Alta., delivers sophisticated visual search technologies, and is currently focused on enabling a powerful sales channel for major retailers and their customers. Consumers, wherever they are, can conveniently engage with retailers by taking pictures of desired products using their mobile devices, thereby initiating the visual search service with near-instant product recognition capability. The company delivers its technology both as a white-label visual search platform and as a suite of consumer mobile apps.

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