Mr. John McKimm reports

SEB REPORTS FINANCIAL RESULTS FOR THE QUARTER ENDING MAY 31, 2014

Smart Employee Benefits Inc. has released its financial results for the quarter ended May 31, 2014.

The progress the company has made in 2011 through the early part of fiscal 2014 has positioned it to achieve strong growth and sustainable profitability.

Smart Employee's technology platform provides competitive advantage in benefits management

Smart Employee has spent over $6-million since 2011 automating the administration, payment processing/billing and reporting modules of its platform, and integrating these modules into an already proven leading-edge adjudication platform.

The company's technology platform manages the total business processing services for group benefit solutions and health claims processing on one fully integrated technology environment. The company's technology platform is open architecture, rules based and modular, and allows clients to utilize either a fully integrated solution or modules. Smart Employee's real-time "rules-based adjudication" environment is very unique, and when combined with the fully integrated administration, payment processing, billing and reporting modules, will provide very sophisticated and highly competitive solutions to the marketplace, both in Canada and globally. Smart Employee can administer, adjudicate and report for all benefit types in one fully integrated environment. Rules creation is an administrative, not a programming, exercise. Highly customized and flexible processing solutions can be created easily and cost-effectively. Reporting is the most detailed in the industry with self-serve functionality, including real-time access to standard reports and data mining capabilities for customized reports.

The health benefits division of SEB operates as a third party administrator and technology provider supporting unique benefit solutions. The immediate opportunity for the company is to increase the capture and retention of revenue by providing fully integrated services and solutions currently being outsourced by most TPAs and insurers to third parties.

Smart Employee's growth strategy based on acquisitions and organic initiatives

Through acquisitions, the company is acquiring the client relationships and vendor status to support a complementary organic growth model with both employers and government business opportunities. On the employee group benefit side, acquisitions and investments target TPAs, as well as broker and consultant organizations, that provide solutions and services to employers. The objective is to secure the client relationships and transition many of the front- and back-office business processes to the Smart Employee technology environment over time, in effect capturing revenue that was previously being outsourced. On the government side, Smart Employee is targeting technology companies (primarily information technology) that have established vendor relationships, security clearances and project references that are required to bid on government outsourcing contracts.

The growth plan for 2014 is acquisition based, complemented by organic growth initiatives, with the objective of reaching consolidated profitability within the 2014 fiscal year, and establishing a solid base of business and clients from which to launch stronger organic growth initiatives. From the beginning of fiscal 2013 until now, Smart Employee has closed five acquisitions and has announced a sixth that is expected to give the company a solid base of sustainable profitable revenue in excess of $25-million, and has established offices in Toronto, Ottawa, North Bay, the United Arab Emirates and India. Historically, the consolidated annual revenues for these six acquisitions exceed $25-million. These transactions bring a solid profitable base of business and clients, both corporate and government.

Company developments during the quarter ending May 31, 2014, include the following:

• On March 14, 2014, Smart Employee acquired Adeeva Nutritionals Canada Inc., and the wellness assets and business of Dr. James Meschino Health and Wellness.
• On March 18, 2014, Smart Employee's wholly owned subsidiary, Somos Consulting Group Ltd., acquired Antian Professional Services Inc.
• In May, 2014, 4,216,000 shares were issued upon exercise of share purchase warrants resulting in a cash inflow of $1,366,850. The exercise price of the warrants ranged from 30 cents to 50 cents. Insiders represented $1-million of the proceeds of the warrants exercised, of which $560,500 were proceeds from warrants executed at 50 cents.

Company developments subsequent to May 31, 2014, include the following:

• On June 11, 2014, Smart Employee acquired 100 per cent of Stroma Service Consulting Inc.

Financial results for the quarter ended May 31, 2014

For the quarter ended May 31, 2014, Smart Employee recorded a loss of $1,183,017, compared with a loss of $1,281,475 for the comparable period in fiscal 2013. The results included non-cash costs of $620,649, made up of accretion of non-cash interest of $122,960 related to the company's convertible financings, share-based compensation of $275,080 relating to options issued to employees and consultants, amortization of $194,378, and depreciation of $28,231. Results also included non-operating acquisition-related professional fees of $84,482. The adding back of the non-cash and acquisition-related items results in an adjusted loss of $477,886.

Revenue

Revenue for the quarter was $5,754,539, compared with $3,299,472 in the comparable period ended May 31, 2013. The increase in revenue was due to the inclusion of the revenues of the Inforica group, and revenues of Antian Professional Services and Adeeva Nutritionals (Canada).

Cost of revenues

The compensation portion of cost of revenues primarily reflects the cost of contractors of Somos, Inforica and Antian.

Operating costs

Of the other operations costs, the largest was salaries and other compensation costs of $1,108,346 (a portion of which was related to software development and maintenance). The next single type of expense was professional fees of $128,192, some of which was related to the one-time costs of closing of the Antian and Adeeva acquisitions, as well as some audit and valuation costs.

The major source of cash during the quarter was proceeds from the exercise of 4,216,000 warrants in the amount of $1,366,850, being an average exercise price of 32 cents per share.

The unaudited condensed interim consolidated financial statements and related management's discussion and analysis for the period ended May 31, 2014, can be found on SEDAR under the profile of Smart Employee Benefits.