"As mentioned last week, we are pleased to have reached a settlement with Prakash Hariharan, Chaith Kondragunta, and Jith Veeravalli that enables us to turn the page for the company," said Natalie Hirsch. "However, before announcing our next steps, it is important to update our shareholders about the performance of the business, monies spent and the inherent value of its assets. The company remains in a challenging position and it is important to have a candid update as we strive to get the business moving in the right direction."
AnalytixInsight’s management & current board continue to review the greater company’s financials, operations and existing counterparty relationships, in an effort to map out a viable path forward. We provide a summary of our findings thus far below, broken down by parent company and each underlying business unit.
-Revenues and Profitability for ALY were $3.0M revenue in 2021 (net loss of $3.2M), $1.7M revenue in 2022 (net loss of $4.0M), and revenue of $0.5M in 2023 (net loss of $4.0M). This drop in revenue represented a 93% decline.
- Management salaries and reimbursements for expenses for ALY were $1.7M in 2021, $1.4M in 2022, and $1.3M in 2023.
-Despite having raised net proceeds of $9.1 million in 2021, our cash spend over the last few years was substantial with $4.4M spent in 2021, $3.6M spent in 2022 and $3.2M spent in 2023
-The company has spent $11.2M over the past 3 years after losing an average of ($3.7M) per year (net loss), which represented a monthly cash burn of approximately $0.3M
- Subsequent to the June 2021 capital raise, ALY sent $2.1M to MarketWall for what was described as development work associated with adjusting MarketWall software for use in the North American market and related items. Management has yet to receive any technology related to this work and there are no board approvals or formal documentation to indicate that the effort was ever initiated.
- In 2023 MarketWall distributed approximately $2.0M to ALY from its extraordinary reserves, despite operating at a (consolidated) loss. These funds helped to fund ALY in 2023 as the company had an average monthly burn of $0.3M. Unfortunately, this irregular distribution appears to have been a one off event, contributing to the company’s current liquidity issues.
- In the past year, the company has incurred legal costs of approximately $0.5M. These costs include those related to legal proceedings filed in the Ontario Superior Court of Justice in relation to allegations against Mr. Prakash Hariharan, including with respect to alleged insider trading, tipping, self-dealing, and lack of disclosure of material information to the Company and its shareholders, and against Chaith Kondragunta relative to his alleged assistance to Mr. Hariharan by approving the Company paying for Mr. Hariharan’s personal expenses.
MarketWall
- Previous management surrendered ALY’s rights and privileges in the MarketWall partnership to the detriment of ALY shareholders. The extent and true nature of Intesa Sanpaolo’s ("ISP") veto rights were discovered in the MarketWall shareholder agreement in H2 2023. Despite being a 33% shareholder, it was found that ISP has what can be described as a super-qualified voting right, which gives it blocking control over most matters. This makes monetizing MarketWall to the benefit of ALY shareholders a daunting challenge and creates uncertainty about the true value of ALY’s 49% interest in the company.
- These blocking rights coincide with ISP being MarketWall’s biggest client by revenue. We believe that this is a fundamentally flawed business arrangement as ISP has blocking control on any initiatives that it may deem outside of its own interests. Furthermore, in theory, ISP can set the terms of business between itself and MarketWall as it desires, as the veto rights essentially negate MarketWall's bargaining power. This creates further uncertainty about the prospects of MarketWall and the true value of ALY’s 49% interest in the company.
- AnalytixInsight has contributed approximately $5.0M to MarketWall since 2014 which surpasses its 49% pro rata ownership when balanced against the modest cash contribution from other shareholders.
- Management has seen no formal agreements, contracts, share allotments or related billing to suggest that ALY or its management team has contributed to the development of MarketWall, or provided strategic guidance to its underlying clients, in the recent past. Efforts made by current management to contribute to MarketWall strategy have been rebuffed.
- We have seen no evidence to indicate that ALY’s technology or intellectual property is incorporated into MarketWall’s products.
- By all indications, InvestoPro is not ISP’s dedicated discount broker and we are unaware of any noteworthy migration of ISP’s clients, if any, to the platform. This apparent lack of commitment by ISP puts in question both the value of InvestoPro and its viability going forward.
- We estimate that InvestoPro currently has less than 1000 active users and €125.0M AUM since obtaining its license over 3 years ago.
Euclides
- Over the past 3 years, Euclides revenue has dropped from $2.8M to nil and its operating margin decreased from 58% in 2021 to -600% by the end of 2023.
- Despite plummeting revenue, SG&A increased from $1.2M in 2021 to $1.9M in 2023, representing a 63% increase.
- A sizable portion of the operating costs were in conjunction with Euclides’ assumed CEO whose combined annual salary and business expense account averaged roughly $0.6M per year over the past 3 years. Curiously, during the time that these costs were incurred, it appears as if said CEO was the founder and CEO of another AI company called Velotix, based in Israel.
- All of Euclides revenue was derived from IT professional services with apparently no proprietary technology or dedicated product of its own.
- Management chose to close the business with the last remaining employee exiting in H1 2024.
Capital Cube.
- At the time of the former management team's departure, CapitalCube had approximately $0.24M in revenue and was losing $1.2M per year.
- CapitalCube currently has 3 institutional users and under 20 paying retail subscribers after more than 10 years in operation.
- There were no formal contracts, billing or paid for development work to suggest that CapitalCube’s technology was ever utilized by either MarketWall or Euclides. Due to stagnant product innovation, CapitalCube has fallen behind its competitors with respect to more modern AI functionality beyond just rules-based decision models. This creates uncertainty about the value of the product and the ability to leverage it.
- The Refinitiv (now LSEG Data & Analytics) relationship is a business arrangement between the two entities where ALY publishes several auto-generated research reports (company earnings, dividend quality and pre-revenue company analysis) to the Refinitiv research portal which has historically provided less than $1,000 in gross revenues/month. These payments are not netted against our data costs owing to Refinitiv, which average approximately C$13,000/month. We have seen no supporting documents to suggest that this was a strategic partnership of any sort.
- CapitalCube currently costs about $0.4M per year to run (down from over $0.6M) with the majority of costs associated with data feeds & servers.
In light of the above disclosed information, the company has been driven into a difficult position. Going forward, we will be undertaking the following actions:
- Cash Management: We are keenly focused on cash management to bring costs inline with where the business is at. Accordingly, the cash burn has dropped from $300K/month to approximately $65K/month, since the new management team took over.
- Resourcing: minimal staff is being retained with a renewed focus on stock compensation as opposed to cash, to better align the company’s interest to those of its shareholders.
- Corporate Governance: enhanced corporate governance and internal controls are being put in place to ensure transparency & accountability at all levels.
- CapitalCube: Despite its previously poor performance as a retail facing product (B2B), we continue to see value in CapitalCube on an enterprise level (B2B) and have resurrected the original sales team (dating back to 2010) of the product which has enabled us to target some prospective US-based enterprise clients including quantitative funds.
- MarketWall: We are actively working to have our shareholders rights and privileges properly respected in MarketWall and to unlock value for our shareholders. Although InvestoPro has underperformed expectations, we see value in the brokerage license and the potential for expansion across other European jurisdictions. This business could be quite attractive to a financial services company looking to expand its footprint in Europe. Furthermore, MarketWall’s B2B business, including its flagship products Cardea (with its projects supporting Banca IMI) & Gemina (with its Morningstar partnership and 3 key bank clients) makes up approximately 30-50% of MarketWall revenue in the last few years.
MarketWall as an organization has value, with revenues of $6.1M in 2022 and $10.7M in 2023 with some industry leading underlying clients. Monetizing that value, in light of the lopsided shareholder agreement, remains a significant challenge. Management remains focused on protecting our shareholders interests in MarketWall and attempting to realize value on their behalf after funding the business for years.
- Strategic Alternatives: We continue to vet numerous companies for a potential strategic transaction or collaboration. Our focus is towards those companies in big data, machine learning and wealthtech sectors that may be synergistic to the company.
We would like to thank our shareholders for their continued support during a challenging period and we look forward to providing additional updates in the near future.
The issuance of this news release has been approved by the Board, and more specifically Messrs. Kadar (independent), and Gardner (independent).
About AnalytixInsight Inc.
AnalytixInsight is a data analytics and enterprise software solutions provider. AnalytixInsight develops and markets cloud-based platforms providing financial content, company analysis and stock research solutions to the financial services industry. AnalytixInsight holds a 49% interest in MarketWall S.R.L., a developer of fintech solutions for financial institutions in Italy.
Cautionary Note Regarding Forward-Looking Statements
Certain statements contained in this news release constitute "forward-looking information" within the meaning of applicable securities laws and the respective policies, regulations and rules under such laws ("forward-looking statements"). These forward-looking statements generally are identified by words such as "anticipate", "expect", "intend", "will" and similar expressions, although not all forward-looking statements contain these identifying words. Specific forward-looking statements in this news release include, but are not limited to, statements regarding the Company’s ability to continue and rebuild, develop a go-forward strategy, raise capital, and extract value from MarketWall. Although the Company believes that the expectations and assumptions on which such forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because the Company can give no assurance that they will prove to be correct. Since forward-looking statements and information address future events and conditions, by their very nature they involve inherent risks and uncertainties. Many factors could cause actual future events to differ materially from the forward-looking statements in this news release including, without limitation, general business, economic, competitive, geopolitical and social uncertainties; the Company’s technology and revenue generation; risks associated with operation in the technology sector; the Company’s ability to successfully develop a go-forward strategy, raise capital, and extract value from MarketWall; foreign operations risks; the risk that funding options are not available to the Company, on reasonable terms or at all, to address its funding needs; the receipt of necessary regulatory, court, and corporate approvals to pursue funding options; the risk that the previously disclosed court-ordered inspector may uncover unexpected issues and/or the investigation may not be completed in a timely manner or at all, the risk that the issues to be addressed by the previously disclosed interim orders and the court-ordered inspector are not resolved in a timely manner or at all, and other risks inherent in the technology industry. Additionally, there are uncertainties inherent in forward-looking information, including factors beyond the Company’s control. Readers are cautioned that the foregoing list of factors is not exhaustive. The forward-looking statements included in this news release are expressly qualified by this cautionary note. The forward-looking statements contained in this news release are made as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless so required by applicable laws.
Regulatory Statements
NEITHER THE TSX VENTURE EXCHANGE NOR ITS REGULATION SERVICES PROVIDER (AS THAT TERM IS DEFINED IN THE POLICIES OF THE TSX VENTURE EXCHANGE) ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE.
View source version on businesswire.com: https://www.businesswire.com/news/home/20241007982731/en/
Contacts
Natalie Hirsch
Interim CEO
AnalytixInsight Inc.
[email protected]
Tel: 647-955-2933
