Mr. R. James Matthews reports
ARMADA ANNOUNCES Q2 2015 RESULTS
Armada Data Corp. has released its interim financial results for the quarter ended Nov. 30, 2014 (the fiscal second quarter of 2015). The results have been filed on SEDAR and are available to view on the company's website as well as on SEDAR.
SELECTED QUARTERLY INFORMATION
Quarter ended
Nov. 30, Aug. 31, May 31, Feb. 28, Nov. 30, Aug. 31, May 31, Feb. 28,
2014 2014 2014 2014 2013 2013 2013 2013
Total sales $ 580,517 $ 570,012 $ 456,549 $ 629,869 $ 704,626 $ 764,576 $ 731,644 $ 727,511
Cost of goods sold (53,633) (17,977) (18,619) (128,856) (85,911) (62,034) (110,123) (115,184)
Gross operating profit 526,884 552,035 437,930 501,013 618,715 702,542 621,521 612,327
Comprehensive (loss)/
income (62,120) (2,267) (331,393) (58,352) (5,338) 154,941 (519,430) 26,633
Comprehensive (loss)/
income per share 0.00 0.00 (0.02) (0.01) 0.00 0.01 (0.03) 0.01
The prior periods' comparative figures have been reclassified where necessary to conform to the current period's presentation.
Operations
The company's total sales decreased by 18 per cent in the quarter ended Nov. 30, 2014, from $704,626 in 2013 to $580,517. Gross operating profit of $526,884 in 2014 is a decrease of 15 per cent over $618,715 in 2013.
The company reported a comprehensive loss of $62,120 this quarter, compared with a comprehensive loss of $5,338 last year, due to the continuing monthly operating losses incurred by the Mister Beer division ($90,944 for this quarter).
However, Armada's core data business earned a before-tax profit of $19,730, which was allocated to absorb the continuing operating losses sustained by Mister Beer Inc.
The insurance service division experienced a 1-per-cent increase in revenue, from $250,805 in 2013 to $252,525 in 2014.
The retail service division revenue was down 24 per cent to $82,826 in 2014 from $108,876. The updated CarCostCanada.com website, as well as the new partners and discounts program, clearly helped the CarCostCanada.com membership program maintain a strong presence in the marketplace, despite increasing competition. Management believes these improvements have assisted in slowing the downward trend that the membership sales have been on, and has formulated a plan to realize sustained growth, increased market share and new partnerships. These improvements should start to be realized in fiscal 2015, and the company will keep building on these strategies in future years.
The dealer service division revenue decreased by 9 per cent, from $178,634 in 2013 to $161,981 in 2014, due to the past decreases in membership sales, which drive the dealer lead-generation program, but also due to some manufacturer intervention on the part of an automaker that discourages its dealer body from participating in any type of third party lead-generation program. This division's dealer development team has a plan to service the customers that find themselves without a dealer referral, although full implementation of this program will not be complete immediately.
The advertising/marketing service division, which derives its revenue from the sale of on-line third party advertising on CarCostCanada.com and TheCarMagazine.com, decreased from $2,320 to $100, or 96 per cent. This reduction was due to CarCostCanada's decision to further secure the websites from e-commerce fraud, site hacking and on-line intruders; management continues to look into technology that will allow it to provide customers with a fully secure website while it delivers third party advertisements.
The information technology division revenue decreased 20 per cent to $27,550, down from $34,571 in 2013. This reduction is solely due to management's decision to devote its resources to internal Web development only. IT continues to offer technical support and website hosting to hundreds of customers and develop new customer relationships on a regular basis.
The Mister Beer division's revenues are down from $129,420 to $55,535, or 57 per cent. Direct product costs and labour decreased by 38 per cent, from $85,911 to $53,633. The net revenue for Mister Beer Inc. went from $43,509 in 2013 to $1,902 in 2014, a decrease of 96 per cent. Management made the decision, subsequent to this quarter, to close the production facility on Jan 1, 2015, in order to explore options with respect to a sale or other disposition of the Bottle Brew business line.
Total expenses before amortization decreased to $561,314, compared with $597,707, a 6-per-cent decrease over last year.
Bank indebtedness decreased from $172,938 at Nov. 30, 2013, to $161,983 at Nov. 30, 2014, attributed to acquiring additional financing from a company owned by a director of Armada.
Accounts receivable decreased to $303,080 as at Nov. 30, 2014, from $512,199 last year. Related party accounts receivable increased from $4,994 to $6,770.
Accounts payable decreased to $212,765 as at Nov. 30, 2014, from $267,149 a year earlier. Related party accounts payable decreased to $8.243 as at Nov. 30, 2014, from $38,196 last year.
The company acquired additional financing in the form of a note payable from a company owned by a director of Armada. The principal amount of this note is $100,000, and the note bears interest of 12 per cent per year. Monthly payments of principal and interest will be made until Dec 31, 2016. The note matures at Jan. 30, 2017, at which time the balance of $74,000 will be due.
As a result of the loss reported by the company for this period, the company's deficit increased to $1,172,993 as at Nov. 30, 2014, compared with a deficit of $773,144 last year.
Management does not plan on issuing any dividends until further notice.
Related party transactions
Salaries and expenses are paid to an officer of the company who is also a 50-per-cent shareholder of Lease Busters Inc. Legal fees are paid to a law firm of which a partner is a (non-remunerated) director of the company. Financing was acquired from a company owned by a director of the company. All of the actual costs noted in this section are paid at fair market value in the normal course of business.
Outlook
The company's outlook is to continue to increase sales, update and improve its data service products and services, and deliver significantly better results to its shareholders by way of the following:
- Build on the historical success of the company's continuing sales and marketing efforts focused on increasing sales at the retail service, dealer service and insurance service divisions;
- Exploit market awareness and demand for new vehicle pricing information and dealer referrals that result from the additional competition within that market space, by putting more emphasis on outside partners, data outsourcing and the underused on-line magazine TheCarMagazine.com;
- Continue to improve relationships with some of the largest insurance companies in Canada and partner with some of these organizations to produce new products and services for their vast client base;
- Maintain operating expenses and achieve the economies of scales of an Internet-based business;
- Expand third party fee-based on-line advertising, by developing improved and more secure advertising methods;
- Sale of the Mister Beer business line.
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