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John Polomny is an individual investor and speculator seeking unique, overlooked, and well researched opportunities and speculations from all over the world.
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  • Stock Of The Year 2013 16 comments
    Dec 13, 2012 4:24 PM | about stocks: CTPNF

    It is time for my annual ritual of selecting one particular stock that I think has the possibility of rising 100% or more over the next twelve months. Last years selection was Mart Resources (MMT.V). Here is the initial writeup on Mart. The stock more than fulfilled my goal of at least 100% in capital gains and in this case has become a dividend payer. I continue to hold the stock.

    The stock I have chosen for 2013 is Cortex Business Solutions (CBX.V). The company website says that;

    Cortex Business Solutions is an enterprise eProcurement solutions company that improves efficiencies, reduces costs and streamlines procurement and supply chain processes for its customers.

    The Cortex Trading Partner Network enhances the exchange of business critical documents, such as purchase orders, receipts and invoices, resulting in improved cash flow management and business controls while reducing days outstanding and administrative costs.

    Cortex is a low cost, low risk cloud-based solution that can be implemented quickly by leveraging its customers' existing business environment.

    Basically the company business is to provide a platform for managing the payment of invoices with an initial emphasis in the oil and gas business. What attracted me to this business is the revenue model which consists both of an upfront payment and a reoccurring revenue stream. Here is a link to the company's presentation which will give a more in depth explanation of the business and the hub and spoke system and how this networking is growing exponentially. In fact that exponential or hockey stick type breakout upwards in revenue is the catalyst that I expect to bring attention to this stock and a consummate increase in share price.

    The company has moved past the early adopters phase and is now reaching the stage of market acceptance where the product has been proven and is now mainstream. This is proven by the customer base of companies that have adopted the product like; Suncor, Apache, Husky, Nabors, Clean Harbors to name a few. These are not the type of company's that just adopt any system or product on a whim and especially a new system for payment and procurement. The company continues to show increases in hubs, network traffic, and invoices processed as indicated on its most recent monthly report. Also take a look at the company factsheet where one clients experience with Cortex resulted in $6 million in yearly savings along with a myriad of other benefits. The company is not currently profitable but I am hopeful that it will become cashflow positive in 2013. The other catalyst will be the continued viral growth of the network and exponential growth in invoices will continue. I also expect them to branch out into other industries such as Utilities and construction. The company reports earnings on 12/20/12 so it would probably behoove any prospective speculators to listen to the call and see if the company is still on track business wise. I am an owner of shares of Cortex Business Solutions in the $.15 to $.165 cent range. This is a highly risky speculation suitable for those with a large tolerance for risk but the potential for at multi-bagger return is certainly possible. This is not advice please do your own due diligence.

    Disclosure: I am long CTXZF.PK.

    Themes: Stock of the Year Stocks: CTPNF
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Comments (16)
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  • How's that 'Stock of the Year' doing, John? Cortex continues to crumble and it's reputation with it's customers is dwindling. Why are they no longer releasing networks stats? Likely because it doesn't tell a good story and after spending a ton of money on an Investor Relations company to try and drum up more money, they still haven't moved. They are still burning through cash - at a slower rate, yes, but there's no 'break even' anytime soon. The only thing they are amazing at is tricking investors into giving them more money SEVEN times. This ballon is going to pop.
    19 Oct 2013, 09:30 AM Reply Like
  • Author’s reply » The article was written on 12/13/12. The stock closed at $.22 on that day. It looks like the close on last Friday was $.215. Not necessarily crumbling. You say its reputation with its customers is "dwindling". Do you have any evidence to confirm this? Are you a customer? Do you work for a company that is a customer? In fact the number of hubs, customers, and transactions has increased. I have no idea why the company stopped reporting monthly figures. You infer that because they have stopped reporting monthly network statistics is because "it doesn't tell a good story". The next earnings report comes out in November and we will see if progress has been made on network growth and if that translates into continued revenue growth. The company is in fact growing, although I will admit slower than I anticipated. Nevertheless this is a speculation and the stock of the year is always a higher risk pick and only suitable for people that understand the risks. I would also note that you only have one comment on SA, this one. You spent the time to register just so you could come on here and make unsubstantiated allegations for which you give no evidence. Thanks for you input, I wish you well.
    21 Oct 2013, 09:07 AM Reply Like
  • I'd have to agree with Mr. ChowMain.

     

    The O&G industry in alberta has begun taking an 'ABC' policy when doing analysis for eInvoicing solutions. "Anything-But-Cortex".

     

    I've personally working for a very reputable oil & gas service company for a decade and we, unfortunately, have to use Cortex's services. Their solution is a re-hashed version of email in a lot of cases...

     

    Regardless of opinion, the facts speak for themselves. Cortex loses over $500,000 per month. That's an atrocious burn-rate for a company who has been given several life-lines, from mislead investors. It would appear that their management team is just trying to pocket as many salary dollars as they can.

     

    Perhaps the author knows more than I do. But I would personally rather invest in a company that makes money...
    4 Nov 2013, 09:49 PM Reply Like
  • This stock is not necessarily growing either...something a 'stock of the year' would likely need to do to claim that title. I work for a company that is a customer, and I can tell you first hand, there aren't many happy people when we speak to some of our peers across the market about Cortex. Sure - it's easy to increase your customer base when you request 'hubs' to create a 'mandatory letter' that threatens your business relationship if you don't sign up to use Cortex. Cortex will sell it as a 'shared cost model' where the supplier gets to pay for the system that automates a Hub's invoicing system. Lucky us! And what do I get in return? I get to pay $2.50 an per invoice that I send through the so called 'network' and still get paid in the same 30 day period that I was before. Their network is limited and I recently found out they are hijacking other e-invoicing connections (like simple email) and charging their happy customers for it. I decided to comment on your nice little blog after trying to search a little more on this company since I feel any further investment to them is risky. As they seemed to have gone dark in the last few months, it only solidified my opinion that they are heading to the 'flop of the year'. I sure hope those hubs can find a new replacement without pissing their suppliers off even more.
    4 Nov 2013, 09:17 PM Reply Like
  • Author’s reply » As I said to your first post, "this is a speculation and the stock of the year is always a higher risk pick and only suitable for people that understand the risks. I would also note that you only have one comment on SA, this one." High risk, get it. It is interesting that you post under the heading ChowMain on 11/04/13 at 9:17 PM and then someone was so inspired by your post that they took the time to register and post a supporting comment at 9:49 PM. I guess it could be a different person who would as their first post come here and make remarks about an obscure Vancouver penny stock. Or more likely it is ChowMain being a troll.

     

    ChowMain, you could be correct in your assessment. However your facts are incorrect. The company, as of its last report, is growing its customer base. That is a fact. Whether the customers are happy with the product remains to be seen. That is why this is A SPECULATION THAT IS ONLY SUITABLE FOR THOSE THAT UNDERSTAND THE RISKS AND ARE PREPARED TO DEAL WITH THE RISKS. Get it, it has only been repeated many times. Speculations are not investments. From the original article, "This is a highly risky speculation suitable for those with a large tolerance for risk but the potential for at multi-bagger return is certainly possible. This is not advice please do your own due diligence."

     

    I get it you do not like the company or its products. Thanks for letting us know your view.
    5 Nov 2013, 08:27 AM Reply Like
  • Hey John, I don't infact know the other guy. I just stumbled upon your article via google and thought I would comment. In the past, I held a few thousands shares, so I was cruising the internet for any updates because they (CBX) haven't communicated too well in the past.

     

    John, do you think there is potential for the company still, or no? I can definitely see the potential for a large return based on their customer growth (reading last report)... but what about their terrible track record of poor capital management? Maybe you know something I don't.

     

    Let me know John.
    5 Nov 2013, 02:37 PM Reply Like
  • Author’s reply » Driller43,

     

    I talked with IR recently and here is where I am with this company. The costs are under control, and have been for a while. A slide on the recent presentation shows a base cost run rate of approximately $2.5 per quarter. They are in fact adding hubs and customers on a quarter to quarter basis. That is also plainly shown in the presentation and website. IR has not been told of any need to do a capital raise in the near future, take that for what it is worth. The next network status report is 11/14/13. The next quarterly report should be near the end of November. The bottom line is this is a small company and it is losing money as they grow out the business. If they continue to grow the customer base at some point they get to a point where they are profitable and cash flow positive.

     

    The question is when does this happen? The next few weeks will answer this question. Another question is how is the Finning roll out going? If the network stats show continued growth then the next quarterly report will answer how much cash they have and how close they are to being cashflow positive. It is risky as they may end up needing to do a raise. But I it is incorrect to say they are not growing and that costs are out of control. The next few weeks could confirm my expectations or get me to change them based on the numbers.
    5 Nov 2013, 03:39 PM Reply Like
  • Hey John - I think you can change your expectations now. Listen to the conference call from the year end earnings release. No sign of break even - no dates given - just a lot of 'I don't have that information in front of me right now'.
    One comment of concern that got me was when Art Smith was asked if he could report back on the actual transacting suppliers in 2012, as they started doing in 2013, versus the number of suppliers with a contract (and not necessarily transacting) - he replied that he'd have to check with his legal team before he could answer. That tells me the numbers they reported on customer growth - weren't necessarily customers actually using the system. Maybe I'm speculating - but when one reverts to the 'lawyer card' - doesn't seem promising. Anyway, as you mentioned, yes, it is a speculation that comes with high risk. The IR materials were well crafted to raise the last round of financing, and they claim they will not need anymore in the foreseeable future, which will hopefully be the case since they don't really have new answers to the same old questions anymore.
    22 Nov 2013, 02:15 PM Reply Like
  • Author’s reply » Well I also listened to CC and you left a few material pieces of information. I will cover your points first:

     

    " No sign of break even - no dates given - just a lot of 'I don't have that information in front of me right now."

     

    My response: Revenue up y-o-y 25%; Net loss down 21%, Cash used down from $7.4 million in 2012 to $6.2 million in 2013. Smith did say that they see, "No need for future capital at this time". You either believe him or you don't. I read the MD&A. I did not see an ongoing concern statement.

     

    In addition the CFO said that if you take out the one time charges their quarterly burn cash burn was $1.5 million and they see no more charges after Q1 2014 and expect burn to be below a starting point $1.5 million per quarter as they move through 2014.

     

    Yes Smith was coy about giving an exact date for breakeven but it is obvious from the increased revenue and lowered expenses that we are getting close. I thought it would happen by the calendar end 2013 but I am fine with the direction right now.

     

    "One comment of concern that got me was when Art Smith was asked if he could report back on the actual transacting suppliers in 2012, as they started doing in 2013, versus the number of suppliers with a contract (and not necessarily transacting) - he replied that he'd have to check with his legal team before he could answer. That tells me the numbers they reported on customer growth - weren't necessarily customers actually using the system."

     

    My response: Smith gave out his email address to the one analyst. If this bothers you that much why don't you email him and ask him directly. The bottom line is that the company has reported increased traffic on the network as of the last report.

     

    Now here is some other info you left out:

     

    Smith said they "expect 2014 to exceed 2013" with respect to the business. Finning rollout is "live" and "heading for a full rollout". As on 11/012013 they are recognizing revenue from this customer.

     

    They also said they signed Sunbelt Rentals in the US and Smith said they are "double " the size of Finning. He also says he has been traveling in the US the last 12 weeks and that "There is a great deal of interest in the US for this solution." They also said oilfield spending is picking up and that will be reflected in the numbers going forward.

     

    I will grant you have a couple of minor points but it appears that the business continues to grow and they are signing more customers. The comment about the lawyers was a bit bizarre but I am not to worried about it. This is still a speculation which you admit and of course they are spending more than they are taking in as they build the business. However as of now they do not appear to need another raise. I am not changing my view on this company at this time.
    28 Nov 2013, 02:37 PM Reply Like
  • As of Feb 21st - they do seem to need another raise. As far as Finning goes, I'd like to see what Cortex is actually 'recognizing' as revenue, as they tend to drop their pants with signing customers in new areas, if they actually charge anything at all. Additionally, the e-Billing bit is not a new thing, it's been done, and is being done by many companies out there that probably do it just as well, if not better. They will continue to gain market share, slowly but surely as companies look for a 'free' solution. Perhaps they are taking the Facebook approach and building a network of customers/users before they actually figure out how to make money. As long as investors are willing to dump money, more power to them, but based on actual dollars and cents - too risky for me considering how many competitors they have.
    26 Feb, 03:38 AM Reply Like
  • If Cortex breaks even before having to raise more capital at least two more times I'll eat my shirt. They're not even close. They lost 1.5 million last quarter - down from 1.7 year over year I believe.
    3 Jan, 01:13 AM Reply Like
  • Well the year is over and the verdict is in... Cortex was NOT the stock of the year.

     

    Given their track record, there is little doubt they will need to raise more capital to survive. Losing 1.5 million a quarter is not even close to breaking even and the rate of improvement on that number is sloooow.

     

    I think at this point the big boys just want to stretch this out and collect their pay checks for as long as possible - while lining their pockets with many many shares.

     

    At some point down the road those shares will be worth something when the company is sold. It won't be for much but when you don't pay for the shares who cares?
    3 Jan, 01:22 AM Reply Like
  • Author’s reply » From the Dec 18 earnings report:

     

    "The solid momentum we built throughout fiscal 2013 continued into the first quarter of 2014," said Art Smith, president and CEO of Cortex. "During the first quarter, total revenues grew by 28% and were the highest in the company's history. The quarter was highlighted by the continued growth in our Cortex Trading Partner Network, which resulted in our record quarterly revenue and transaction volume. In fact, we were able to achieve these results while keeping expenses nearly flat.

     

    "We continue to gain market share throughout the U.S. and Canada, supplemented by the introduction of new revenue and industry opportunities, such as our 100% e-billing solution, which is experiencing strong demand in the marketplace. In fact, we recently went live with our first e-billing customer and the rollout is progressing as planned, with revenues expected to materialize as we move though fiscal 2014.

     

    "So far in our fiscal second quarter, overall activity in the marketplace remains strong, both in terms of transaction volume and the onboarding of new customers."

     

    The company continues to grow along with revenues. They have enough cash for two more quarters at present rates of cash burn. So yes it appears they will probably need to raise more capital. This will more than likely weigh on the stock. The risk averse should probably sell.
    3 Jan, 08:50 AM Reply Like
  • Author’s reply » I went back and read the management discussion and the cash used last quarter was around $990k so they have about 3.5 quarters of cash burn at current rates. However as their revenue is increasing and their expenses stay virtually static cash used should decrease over time. It will depend on how quickly revenue increases as to whether they will need to do another raise.
    3 Jan, 09:25 AM Reply Like
  • What a shame this management team is...
    Such a wasted opportunity. They have north of 100 employees... the problem is simple... trim the fat... And it starts with an upper management overhaul.

     

    MORE shares issued... I wonder how all the other ten trillion share holders must feel about their ownership getting diluted once every 9 months....
    6 Mar, 02:27 AM Reply Like
  • Well, I hope for no rollback or more dilution in the future. We took down a size position in the recent 10 cent financing so 11 bid actually looks not bad. It was nice to see the insiders took down almost a third of the issue, and just the other day Edgecrest Capital came out with a bullish report and a 20 cent target price. Being a new shareholder, the offers at 11.5 look cheap.
    12 Mar, 02:34 PM Reply Like
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