TKX TrackX Holdings Inc

TrackX Holdings Inc. (TSX.V:TKX | FRANKFURT:3TH) (“TrackX” or the “Company), a Software-as-a-Service (SaaS)-based enterprise asset management solution provider, announces the financial and operational highlights from its second quarter ended March 31, 2022 (“Q2 2022”). All results are reported in Canadian dollars unless otherwise specified. A complete set of the Q2 2022 Consolidated Financial Statements and Management’s Discussion & Analysis has been filed on SEDAR (www.sedar.com).

During the three months ending March 31, 2022, the Company continued to focus on its strategy of delivering its enterprise scalable, IoT-enabled technology platform in response to demand by companies for better supply chain tracing, tracking, execution and sustainability solutions. These solutions coincide with four key market trends that have resulted in customers needing to accelerate their digital transformation, sustainability and ESG efforts in order to remain competitive in today’s global supply chain environment:

1. The most recent pandemic has heightened the awareness of supply chain challenges faced by companies across all industries. Companies must invest in technologies that provide improved visibility, transparency and trust throughout their supply chain in order to become more efficient and resilient to the next major disruption. Many supply chain solutions focus on addressing inefficiencies within a single enterprise and are unable to provide the information flow across all supply chain partners that is required in order for companies to remain competitive in today’s global economy. While efficiency remains important it is no longer enough as enterprises need more timely data, better visibility and proof of accountability across all supply chain partner activity in order to protect their products, their customers and their brands. Over the past year, the developments made to the TrackX platform support this current shift from traditional linear supply chains, where supply chain data and collaboration has been largely manual, untimely and limited to only adjacent partners, to a digital supply network, where pertinent information is captured electronically and shared simultaneously with all supply chain partners across the across the entire partner ecosystem in real-time.
2. Consumers are demanding to know more about the products they are purchasing, where they originate from and how they are produced. They are insisting that companies they purchase products from provide proof of environmental, social and governance (ESG) compliance initiatives and practices. At the epicenter of ESG is supply chain and in both Q1 22 and Q2 22 TrackX made significant developments to its core supply chain platform to support proof of ESG and sustainability claims.
3. Regulatory compliance and industry mandates are increasing and companies that don’t comply are facing significant penalties. This is forcing companies to implement better tracing, tracking, collaboration and sustainability solutions. TrackX’s IOT-enabled platform and supply chain focus is positioned to deliver in response to this need.
4. Finally, companies must continue to drive efficiencies within their own supply chains. Supply chain management solutions are imperative to helping them speed information flow, to safely and securely share data across their entire supply chain ecosystem and to leverage their assets and labor much more effectively.

“The Company’s strategy remains to focus on improved and increased supply chain tracing tracking and sustainability solutions. This resulted in the necessary re-allocation of engineering resources from consulting billable hours to the development of features, functions, and analytics necessary to enable expansion opportunities with existing customers and to support the business requirements of several new customer opportunities which resulted in a small decrease in revenue’s quarter over quarter. The development work completed in Q1 and Q2 was necessary to drive additional revenue in subsequent quarters and will be highly leverageable as the Company executes on its supply chain strategy,” said Tim Harvie, TrackX CEO.

In Q2 2022, the impact of the pandemic was still evident as large accounts struggle to return to full capacity and allocate the labor necessary to support implementations. For TrackX, this resulted in additional delays in new account activity. In spite of these delays, the Company did experience an increase in pipeline activity and, through significant enhancements to the core platform, the Company was able to generate additional expansion opportunities within existing customers including Do Good Foods, Shifflet Brothers, a large Global Powersports leader and one of the largest insurance companies in the industry. We anticipate revenue from these opportunities will be realized over the balance of 2022.

Financial Highlights for the three months ended March 31, 2022 (“Q2 2022”)

• Revenue for Q2 2022 of $0.369 million vs $0.428 million for the three months ended March 31, 2021 (“Q2 2021”). This decline is largely attributable to the decrease in services revenue as the engineering team focused on new feature and function enhancements which were not billable to existing customers;
• Q2 2022 gross margin of 16%, as compared to 18% in Q2 2021 largely due to:
  • Investment in engineering and technical consulting in Q2 2022 to support the Company’s new supply chain focused strategy;
  • Decline in high margin revenue associated with the transition services provided to FourKites in Q2 2022, which ended Q2 2021;
• Q2 2022 net loss improved at $0.480 million or $(0.00)/share compared to a net loss of $0.503 million or $0.00/share for the three months ended March 31, 2022;
• Adjusted EBITDA improved with a loss for the Q2 2022 of $0.366 million compared to a $0.387 million loss for Q2 2021;
• Recurring revenue of $0.125 million, a 26% decrease over $0.168 million for Q2 2021, largely due to contract renegotiation with a large insurance company.
• Hardware revenue increased to from 6% in Q2 21 to 24% in Q2 22 resulting from the sale of existing RFID scanning technology to SpotLite360 to support a new customer engagement.

Annual Revenue Mix

Revenue	Q2 22		Q2 21
Recurring and Software License	34%		39%
Hardware	24%		6%
Setup, implementation, and other fees	42%		55%
TOTAL	100%		100%

Selected Financial Information

C$(000s) (except per share)	Three-month Period Ended March 31
	2022			2021
Revenue	$369			$428
Gross Margin %	16%			18%
Income (loss) for the period	($480)			$(170)
Income (loss) per share	($0.00)			($0.00)
Adjusted EBITDA (Loss)*	($0.366)			($0.387)

Business Outlook

TrackX will continue its focus on delivering highly configurable, scalable, partner friendly SaaS-based solutions that improve clients’ supply chain processes and drive operational efficiencies. In today’s environment, most all industries have been impacted by disruptions resulting from the most recent pandemic. Recent developments to the TrackX Keychain platform have further strengthened its ability to drive digital transformation and supply chain efficiency, while providing proof of product origin, chain of custody, location, ownership, contents and sustainability claims. These developments have evolved the TrackX solution platform from delivering efficiencies within a singular enterprise account to providing visibility and collaboration across multiple enterprises and throughout the entire partner ecosystem. Recent enhancements to the TrackX Mobile application enable the Company to extend reach beyond enterprise accounts all the way to the consumer where transparency, trust and proof of ESG are necessary in order for companies to prove sustainability claims and protect their brands.

While the TrackX solution platform has evolved to support of both existing customer expansion and new customer opportunities, the Company has experienced several challenges:

• Sales cycles have been longer than anticipated as a result of the impact that Covid has had on our customers, their priorities and implementation timelines
• The Company has had to cut operating expense and in response to the impact of Covid. In order to support new opportunities, new resources will have to be onboarded. With people working from home, the Company is no longer competing for resources with companies in Colorado but with companies across the nation.
• The current economic situation has had on impact on capital markets. This, combined with delays in closing on new customer opportunities, has created working capital constraints for the Company.

To address these challenges, The Company has made a strategic decision to address broader market opportunities and expand its pipeline by more effectively leveraging its partner and reseller network. While that has taken longer than anticipated, the Company did generate revenue through its partners, most notably with FourKites and SpotLite360. TrackX anticipates additional revenue opportunities and new strategic partnerships to be announced over subsequent quarters. TrackX is also expanding its focus on those industries where regulatory mandates, legal compliance and sustainability is growing. As we execute in this strategy, TrackX anticipates new opportunities to emerge in food services, automotive, healthcare, agriculture, pharmaceutical and retail in fiscal 2022.

About TrackX

TrackX, Inc. (TSX.V: TKX), based in Denver, Colorado, is the SaaS-based enterprise tracing, tracking and collaboration solution that leading brands trust to achieve more sustainable and better performing supply chains. TrackX solutions are built on an enterprise scalable and fully customizable platform that leverages a broad array of RFID, IoT (Internet of Things) and Sensor Technologies to provide item level visibility to customers across a broad array of industries, including food, beverage, brewery, automotive, retail, financial services, technology and government. For more information, visit www.trackx.com.

For more information, please contact:

Tim Harvie, TrackX Holdings Inc.investor@trackx.com303-325-7300

Neither TSX Venture Exchange nor its Regulations 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.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION: This news release includes certain “forward-looking statements” under applicable Canadian securities legislation. Forward looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable, are subject to known and unknown risks, uncertainties, and other factors which may cause the actual results and future events to differ materially from those expressed or implied by such forward-looking statements. All statements that address future plans, activities, events or developments that the Company believes, expects or anticipates will or may occur including the Company’s anticipated pipeline and value of current and customer deployments and future opportunities are the managements best estimates and cannot be guaranteed or relied upon and is forward-looking information. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. The Company disclaims any intention or obligation to update or revise any forward-looking statements in this news release, whether as a result of new information, future events or otherwise, except as required by law.