Mr. John McKimm reports

SEB REPORTS SECOND QUARTER 2015

Smart Employee Benefits Inc. (SEB) had its second consecutive positive quarter since being founded in January, 2011. The results support SEB's strategic direction of penetrating the $60-billion health benefits business in Canada, through the provision of software-enabled services in the areas of health care transaction processing, software solutions and professional services for its corporate and government clients. Since inception, SEB has completed 13 acquisitions and joint ventures, which form a national network of offices and professionals across Canada, in addition to having an established presence in the United Arab Emirates, India and Australia. SEB's existing sustainable revenue base is currently tracking an estimated $55-million in fiscal 2015 (up from $20-million in fiscal 2014).

Recent significant events:

• On March 10, 2015, SEB announced the closing of new credit facilities with a major Canadian Schedule I bank in the amount of $8,775,000. The credit facilities include a $4.2-million term loan and up to $4.5-million of operating credit facilities. At May 31, 2015, the term loan was $3.9-million.
• On June 10, 2015, SEB entered into an agreement to acquire 100 per cent of Maplesoft Consulting Group Inc., an Ottawa-based corporation with regional offices in Calgary, Montreal and Toronto. The acquisition of Maplesoft is expected to increase the consolidated annual revenue of SEB by over $50-million and contribute substantially to the overall profitability of SEB. On closing the Maplesoft transaction, SEB's consolidated sales are forecast to exceed $105-million.

Financial results for the quarter

Revenue for the quarter was $13,342,530, compared with $5,754,539 in the same quarter of the previous year. The increase in revenue was due to the inclusion of the acquired/controlled companies' revenues and organic growth initiatives. These include Banyan ($2,228,541) and Paradigm ($6,328,314). SEB's first-half 2015 revenues stand at $24,624,110, meeting expectations.

For the quarter ended May 31, 2015, SEB recorded income from continuing operations before interest and non-cash expenses of $611,223, versus a negative $432,744 for the same quarter the previous year.

Non-cash expenses include stock-based compensation cost of $373,603 ($275,080, second quarter of 2014), accretion of interest related to SEB's convertible financings of $187,892 ($122,960, second quarter of 2014), amortization of $724,802 ($194,378, second quarter of 2014) and depreciation of $65,714 ($28,231, second quarter of 2014).

At May 31, 2015, SEB had firm debt of $11,139,762, of which $5,126,532 was convertible note financing, 80 per cent held by insiders. Additionally, insiders (chairman and president/chief executive officer) have provided approximately $2.1-million of short-term debt financing. The repayment terms of this financing is tied to new financing be arranged by the company. The funds were primarily used for acquisition purposes.

The unaudited condensed interim consolidated financial statements, and the related management discussion and analysis, for the period ended May 31, 2015, can be found on SEDAR under the profile of Smart Employee Benefits.

Management comments

John McKimm, president, CEO and chief information officer of SEB, states:

"SEB's acquisition program continues to deliver profitable results as it enhances our benefits processing annuity revenue model. Over $20-million has been spent over the past four years on the acquisition and development of software solutions, hosting infrastructures, and acquiring core companies. The second quarter ending May 31, 2015, is SEB's second consecutive positive quarter. Sales are tracking at $55-million annually with a fast-growing backlog and pipeline. SEB has now reached the point where management expects, ongoing, a positive and growing EBITDA from continuing operations. SEB subsidiaries have enjoyed more than 10-per-cent organic growth in the past year, largely through RFP wins in both the government and private sector. Cost structure of the acquisitions has been optimized through amalgamations and cost reduction initiatives. Backlog has grown substantially with over 12 months of sales. Transactions in the acquisition and joint venture pipeline for 2015 are well advanced. The acquisition of Maplesoft is expected to increase the consolidated annual revenue of SEB by over $50-million (leading consolidated annual revenues to exceed $105-million), contribute substantially to the overall profitability and increase sales backlog by $300-million. SEB's technology division supports our corporate strategy of becoming a leading provider of technology solutions and expertise to the benefits business in Canada. The acquisition of Maplesoft will build on our previous technology acquisitions (Somos Consulting Group Ltd., Logitek Technology Ltd., Inforica Inc., Stroma Service Consulting Ltd., APS-Antian Professional Services Inc. and Paradigm Consulting Group Inc.) and will establish SEB as a leading Canadian company in the cyber/IT security, information management, IT infrastructure management, data centre management, project management and professional services sectors, capable of delivering a broad portfolio of services and solutions to government and corporate clients, with specialty practices in health care and benefits. We are very confident of our ability to materially improve on the revenue and cash flow, which we experienced in fiscal 2014, into the second half of fiscal 2015 and on into fiscal 2016."