September 8, 2011
TSXV TRADING SYMBOL: XX
TORONTO, Sept. 8, 2011 /CNW/ - Avante Logixx Inc. (TSXV: XX), an innovative security and technology company, today issued the following open letter to stakeholders.
Dear Avante Stakeholders,
Much has transpired since I joined Avante Logixx Inc. ("Avante") just over a year ago. I would like to take this opportunity to update you on the progress we have made as well as comment on our future direction.
As many of you know, Avante has had two distinct business focuses over the past several years. One is our core executive residential and commercial security offering ("Avante Security" or "Security") in which we offer industry leading response times, high touch personalized service, cutting edge security and protection products, secured transport as well as intelligent video monitoring, spanning both residential and commercial accounts. The second business is one of technology development and innovation "Technology" in which Avante has developed unique technology such as the SmartBoxx for use in security, automation and energy management applications.
For the past several years, Avante has been consuming significant cash on a net basis as investment in Technology has exceeded cash flow generated by Security which has resulted in regular capital raises to fund this shortfall along with the assumption of debt. This pattern was exacerbated in fiscal 2011 as trials of SmartBoxx for the purposes of energy management with several utilities were executed which resulted in further cash consumption despite generating revenue of $0.3 million. While the trials progressed positively, the long sales/decision cycle was proving to be very challenging given the amount of financial and human resources Avante was dedicating. Despite positive feedback, no firm order commitments arose from these trials. Avante's burn rate (which reflects net cash used) peaked at over $1.8 million annualized early in calendar 2011. Further, our Security division, while stable from a revenue perspective, was not receiving the appropriate corporate resources to pursue growth.
We needed to make some challenging decisions as a result. In the past eight months, Avante has decided to focus on achieving a cash flow positive run-rate while continuing to pursue opportunities in the Technology business on a more measured basis. The premise was that by becoming cash flow positive and renewing focus on growth in Security, it would provide us a more sustainable capability to explore growth opportunities in the Technology realm (which will continue to include Energy Management but will also include shorter sales cycle and lower financial risk endeavors) without the need to constantly raise new capital. Further we ensure the value of the core Security business is protected and enhanced.
We believe these initiatives assist investors to better understand Avante's composition and value. The core Avante Security business being a growing, primarily recurring revenue, profitable and unique operation. The Technology business being a 'venture like' technology development operation pursuing scalable growth opportunities related to Avante's core competencies. The goal is for the latter to be 'self-funded' by the former which has not been the case to date. Further our intent is to ensure Avante generates positive cash on a net basis and that this grows over time.
Lastly, by taking steps to simplify our balance sheet (including the non cash write-down of $2.6 million of capitalized costs among other recent announcements), Avante's financial position becomes clearer to current and potential investors for the purposes of valuing the company.
Through measured human resource decisions, expense containment, a focus on efficiencies, process improvements, better resource management, combined with a growth focus in Security we are close to achieving our goal of eliminating the $1.8 million annualized cash consumption. The burn rate has steadily declined since early calendar 2011 as Avante's annualized payroll has decreased by over $1 million from its peak level with the other aforementioned factors bridging the remaining gap.
We are optimistic that we are turning the corner. Today Avante is debt free and for the sixteen weeks (approximation for one quarter) ending September 1, 2011 Avante has been modestly cash flow positive - the first such period since the company went public in 2008. While this is only one quarter of data, we are on the right track. Further our rededication to Security division growth has resulted in an executive response client count growth of over 10% since January and we are working to continue this trend.
In the coming quarters, Avante will drive recurring response and monitoring revenue growth and target a positive quarterly EBITDA. Note that while net income is still reflecting certain costs of executing the changes mentioned above, most of these costs will roll off by the end of the third quarter of fiscal 2012.
System Integration and Installation continues to be a priority for the company but our effort therein will be targeted towards higher value added residential and commercial sales that can generate recurring response revenue. We have also adopted a system neutral philosophy by which we can and will provide our industry leading alarm response service to clients regardless of whom their current alarm provider is, providing the installed system can provide Avante real time and reliable alarm reporting
While the past eight months have resulted in many changes at Avante, we continue to maintain our development capability in the SmartBoxx realm and our engineering abilities remain intact. Some interesting new growth opportunities are shaping up in Technology including the PestBoxx product offering that was recently announced.
Further, we are open to and are currently pursuing certain acquisition opportunities for Security as well as additional revenue streams that build on our culture of 24/7 reliable mission critical response and which can benefit from our Avante Control Centre.
We are confident we are moving in the right direction and we will continue to push towards our ultimate goal of materially growing our revenue base, cash flow and ultimately, our valuation.
Above all our most valuable asset, which is not reflected on our balance sheet, is our loyal client base, established over fifteen years that is unmatched in our market place. Our clients demand the best protection service possible for their families and their businesses and we strive to deliver just that in our target area.
What makes Avante Security different? The short answer is that we do whatever it takes to secure our clients' families, properties and businesses.
Our operatives conduct patrols (three to six times a day) of our clients' homes or businesses looking for unusual activity, unlocked doors or windows or other indications of trouble. We provide extra patrols and other enhanced for families when a spouse is traveling. We provide vacation service where we ensure the home is secure with appropriate security protocols adhered to including lighting and vehicle rotation and mail pickup. We drive their children to school with our secured transport offering and/or discretely pick up/drop off our clients as needed 24/7 for business or personal functions. We provide a real-time flood alert system for their home or cottage which automatically shuts off the water supply if a flood is detected preserving valuable assets. We provide a real-time camera feed to our clients' iPad or Smartphone so they can watch their young children at home in real time. We send instant messages informing who has armed and disarmed the alarm system so our clients can know who is in their home at all times. We protect valuable art work with state of the art motion sensors and analytic cameras. We conduct intelligent video monitoring of homes, businesses and construction sites with real time response. We enable our clients to open the garage or unlock the door remotely via a smartphone as needed. These are a few examples but we do much more.
Our most important offering, however, is getting there first when our clients need us the most. Arriving at their homes or businesses in just minutes to respond to security conditions, often foiling break-in attempts or other threats in real time is our key offering. Discount alarm solutions use monitoring station call centres and dispatch police or guards which cannot effectively compete with our response time and can result in expensive fines for false alarms. Our clients realize that this response time differential could make the ultimate difference for their family's safety and for this reason they choose Avante. In summary, we offer the pre-eminent security solution providing a superior service level and response time and we continue to build this business through word of mouth and client referrals.
We would like to thank our loyal clients, employees, shareholders and other stakeholders for their continued support and dedication to Avante.
Co-Chief Executive Officer
Avante Logixx Inc.
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About Avante Logixx Inc.
Avante Logixx Inc. (TSXV: XX) is a Toronto based security and technology company. Its primary operating subsidiary, Avante Security Inc. (www.avantesecurity.com), provides best in class security response and other executive security services for residential and commercial applications as well as being an industry leader in designing and installing complex security systems, access control, and video analytics. The company continuously develops innovative products and applications within its core competencies. Please visit www.avantelogixx.com .
Forward Looking Statements
Certain statements in this letter may constitute forward-looking statements. Such forward-looking statements involve risks, uncertainties and other factors, which may cause actual results, performance or achievements of Avante Logixx Inc. to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. This letter does not constitute an offer to sell or solicitation of securities.
The TSX Venture Exchange Inc. has not reviewed and does not accept responsibility for the adequacy or accuracy of this release. The TSX Venture Exchange Inc. has in no way passed upon the merits of the proposed transaction and has neither approved nor disapproved of the contents of this release.