Retail locations across North America. Under the terms of the agreement, we've already shipped and installed 24 Welcoming G.A.T.E. systems in 12 retail locations across 11 states. We're very pleased with the amazing start we've had with this retailer as we've quickly established a presence in numerous cities around the United States. These Welcoming G.A.T.E.s provide us with a clear upgrade path to Welcoming Systems in the near future. Our presence in these initial stores uniquely positions INEO for future expansion with this well-recognized name brand retailer. I'm also pleased to announce that we were recently selected as a preferred vendor for electronic article surveillance products by a retail dealer association that has approximately 500 franchise locations across Canada.
We won this contract through a competitive bidding process, and we're very excited about landing this very important account, as this is a major retail chain with enormous brand recognition across Canada. As a preferred vendor, INEO products and pricing have been pre-approved by the dealer association, and this paves the way forward for the individual franchisee stores to work with INEO on their loss prevention needs. This agreement encompasses all of INEO's products, including the patented Welcoming Pedestal, Welcoming G.A.T.E., Clarity traditional EAS systems, and our new Media Player, as well as security tags and labels. We've already started having discussions with several franchise locations in this retail chain. We're expected to announce the names of both retail chains associated with the North American Master Services Agreement and the Canadian Franchise Preferred Vendor Agreement in the coming weeks.
In addition, our direct sales team has begun working with several smaller Canadian retail chains. We hope to announce some of these developments in the coming months. We're very pleased with the results that our direct sales team has produced this year. Meanwhile, our partnership with Prosegur has resulted in expanding INEO's sales activities with numerous retail chains across the globe, including grocery, home hardware, apparel, and wholesale club retail chains. Since we announced our partnership with Prosegur last year, Prosegur has been actively marketing INEO's Welcoming System under the brand name EVO. Prosegur has launched its own website and marketing campaign to promote the EVO product. Prosegur is an ideal partner for INEO. They have a very strong brand name, significant financial means, and an enormous distribution network. We're very pleased to be working with Prosegur, who have established relationships with some of the largest retailers in the world.
Our partnership with Prosegur is a significant validation of INEO's technology, and we believe it positions the company for substantial future growth. We've already shipped more than a dozen Welcoming G.A.T.E.s and Systems to Prosegur, which are destined for customer trials and for Prosegur's own sales and marketing purposes. Prosegur is making substantial progress with a large retailer in Central America, a retailer in Mexico, and several customers in North America and Europe. INEO expects to convert these trials to customer wins in the coming quarters, leading to substantial expansion of INEO's Media Network. Recently, Kyle Hall had the opportunity to attend the Retail Asset Protection Conference in Orlando, where we showcased the INEO Welcoming System within the Prosegur booth. Prosegur was a major exhibitor at the conference, and INEO's Welcoming System was a leading product, prominently displayed at the front of Prosegur's booth.
The INEO Welcoming System stood out amongst the crowd. We did not see anything equivalent to our innovative Welcoming System product at the entire show. We look forward to reporting on our future sales opportunities with both our direct sales and our Prosegur partnership in the coming quarterly calls. Before I turn the call over to Kyle, I'd like to recognize the appointment of Bernadette Ryle as our INEO's new Chief Financial Officer, as announced on March 15th, 2022. Bernie has been with INEO since November 2019 and was instrumental in preparing INEO's financial reporting every quarter and led the company through the last two annual audits. Bernie has assumed responsibility for all finance, accounting, financial reporting, audit, tax, and capital planning functions at INEO. We congratulate Bernie on her promotion.
With that, I'd like to turn it over to our CEO, Kyle Hall, who will review the financials for the quarter and provide traditional, additional commentary on our outlook.
Thanks, Greg. Hi, everyone. I'm pleased to report INEO had strong results for our third quarter, which ended March 31st, 2022. Our Q3 results are as follows. We achieved quarterly revenue of CAD 336,000 during the fiscal Q3 2022 compared to revenue of CAD 196,000 in Q3 2021, an increase of 72% year-over-year, driven by the higher sales of our own loss prevention products. We achieved gross profit of CAD 204,000 in fiscal Q3 2022 compared to gross profit of CAD 67,000 in Q3 2021, an increase of 202%.
This substantial increase was again primarily due to the revenue mix and the higher gross margin of the loss prevention products we sold in the quarter. During fiscal Q3 2022, INEO had an EBITDA loss of CAD 726,000 compared to an EBITDA loss of CAD 540,000 in Q3 2021.
The increased EBITDA loss was as a result of higher marketing and sales expenses as we ramped up our go-to-market activities and also higher R&D expenses as we supported the development of the INEO Welcoming G.A.T.E., the INEO Media Player, and a new product which we haven't announced yet, and we will be announcing as soon as we get our patent application filed. As at March 31st, 2022, we had CAD 2.6 million in cash and cash equivalents compared to CAD 5.2 million in cash and cash equivalents as at June 30th, 2021. As of March 31st, 2022, the company had 60.2 million common shares issued and outstanding. In summary, INEO is in an enviable financial position with a healthy balance sheet and revenues beginning to ramp up.
With regards to the current macroeconomic conditions that we face in the market, thus far INEO has experienced only a minimal impact to our business from the supply chain disruptions, inflation, and other macroeconomic challenges currently affecting other industries around the globe. We have pre-ordered various parts or components, increased our inventory over the past quarter, ensure we can meet our customer requirements. Furthermore, we recognize the need to control operating expenses in the current capital markets environment, and hence INEO will continue to monitor our cash burn. Our ramping revenue and improving gross margins will assist our cash flow in the coming quarters. In addition, our partnership with Prosegur has not only accelerated our go-to-market opportunities, but has also enabled us to have significantly lower marketing costs than we would have otherwise.
That concludes my financial update, and now I'll give you some of the business highlights from the quarter. During Q3, INEO acquired the assets of e-commerce company Securitytags.com. Under the terms of the purchase agreement, INEO acquired the Securitytags.com domain name, website, inventory, customer list, and social media accounts. Securitytags.com offers convenient and cost-effective online ordering and fulfillment for U.S.-based retailers, which allows us to actually really push our brand forward in the U.S. It's a recognized brand name itself. It has a strong list of U.S.-based customers, and we now own and operate the website Securitytags.com, and we offer a full line of products, including tags, labels, deactivators, plus our own systems.
The INEO Clarity system is already for sale on the Securitytags.com site, and we plan to add additional INEO products in the coming weeks, including the next generation Welcoming G.A.T.E. pedestal, and we also are gonna use Securitytags.com to promote the patented INEO Welcoming System. In the third quarter, INEO announced the unveiling of its new U.S.-based staging warehouse located in Vancouver, Washington. U.S.-based warehouse became a necessity for us to ensure the timely delivery to U.S. retailers, including some of the retailers Greg has spoken about earlier in this call. The new Securitytags.com website will be fulfilled from this facility as well. This will give us an emerging e-commerce platform that allows us to ship anywhere in the continental U.S. within 48 hours for products ordered online or for products ordered from our large new partners.
On March 30th, 2022, we unveiled the INEO Media Player, our next generation digital out-of-home advertising system designed to be a companion product with the patented INEO Welcoming System. The INEO Media Player works in tandem with the Welcoming Pedestal to provide another level of digital advertising within retail stores. We installed many of these INEO Media Players within several retailers within our home base here in Western Canada, and we tested it out for a few months. We ran our trials, and they did what we expect them to do, and we're now expanding these the implementation of these to allow INEO to have more placements of screens within our retailers. Adding Media Player screens enhances the presence of INEO within the retailer.
We get a Welcoming System placement at the front door, and then we get screens elsewhere in the retailer as well. I will now provide some commentary on the overall industry. The key industry and marketing trends that are progressing in INEO's favor. Retailers are emerging from the trough of the pandemic. They're coming back with a strong commitment to invest in technology and improve the customer experience. Data and analytics are becoming increasingly important to be successful in business. On top of this, we're seeing digital out-of-home advertising and especially retailer-owned Media Networks surging. Just we've caught wind in our sails with these two markets behind us, just pushing forward and taking large growth sections in their own industries, which we are now entering with our products.
We're well-positioned to take advantage of these trends with market-leading technology and products that enhance the company's future growth. On February 10th, we announced the partnership with Vistar Media. They're a leading provider of programmatic technology for digital out-of-home, very strong in the U.S., strong in Canada. This is the company's second such partnership, as our first programmatic advertising partnership was with Hivestack. With these two agreements in place, we get a broader group of brands and marketers who will now be able to purchase INEO's unique advertising inventory, located at the front entrance of the retail store. With these two partnerships in place, we will continue to raise the profile of INEO within the digital out-of-home advertising market. Our objectives and outlook as we go forward. One, we're gonna invest in the growth of INEO as a premier Media Network for retail stores.
Two, we're gonna increase the revenues through the sale of data analytics and advertising on the INEO Media Network within those stores. We're gonna expand. Three, we're gonna expand the INEO Media Network in key geographical markets across Canada and the United States. Four, we're gonna support Prosegur with its growth and initiatives with key retailers across the globe. The overall outlook for INEO remains very positive. The company has now entered in the next phase of our development with commercialization of our technology, landing wins with large retailers, and ramping up our revenues. INEO's short- to medium-term strategy is to continue to invest in R&D, customer deployments, and strategic marketing partnerships to create critical mass of systems on the INEO Media Network. Our INEO technology has been proven out through the independent liquor store network, and has been validated by a global partnership with Prosegur.
INEO has created a healthy sales pipeline consisting of both direct sales customers and Prosegur's customers, including grocery, home hardware, apparel, and wholesale club chains from North America, Central America, South America, and Europe. INEO has seeded the market with trial systems, and we expect to convert these trials into full-scale rollouts in the coming months. As retailers continue to invest in retail tech for improving the customer experience, advertising and analytics are gonna be increasingly important in the modern retail environment. We're well-positioned to take advantage of those trends with our market-leading technology, our programmatic advertising partners, and our relationship with Prosegur. This will all enhance the company's future growth. Despite the challenging macroeconomic environment, we are experiencing an increase in our sales activity, leading to record quarterly revenue in fiscal Q3.
This puts us in an enviable financial position with a clean balance sheet and revenues ramping up. We look forward to announcing customer wins in the coming quarters leading to substantial expansion of INEO's Media Network. In summary, we're quite optimistic still with our outlook for fiscal 2022, given our unique distribution partnership with Prosegur, numerous customer trials, and a large pipeline of additional opportunities. Before we take questions, I'd like to provide some additional commentary on our current share price. As most of you on the call are aware, our share price has experienced a rapid decline over the past month. We do not believe this drop in our share price is warranted given the size of our sales opportunities and our positive future outlook.
Our current market cap of approximately CAD 11 million is not reflective of our opportunity, and is in fact overshadowed by the size of our sales pipeline, which is over CAD 20 million in annual recurring revenue if we closed everything on our pipeline today. Our recently signed master services agreement and preferred vendor agreement with the brand-name brand retailers is further validation of our progress and our market opportunity, which we believe are not represented in our current valuation. We believe the general poor capital market conditions are the primary cause for the weakening in our share price, as small-cap tech stocks have suffered the worst in this market correction. As management, we have a significant ownership in the company. Our interests are aligned with shareholders.
We are not happy with the share price, and we're working diligently to sign up customers, expand the Welcoming network, and let people know what we are doing as a corporation. With that, I wanna thank you for listening to us on this call today. We look forward to providing an update next quarter, and I will hand it now back to Pardeep.
Thank you, Kyle. Thank you, Greg. Once again, you can submit your questions through the Q&A button at the bottom of your screen. We'll first be taking questions from analysts. First question comes from Gabriel Leung, from, Beacon Securities. Can you provide any details around the deployment schedule for the master services agreement with your large retailer?
We're gonna announce more information on that shortly. As everyone on this call probably is aware, when you're dealing with a very large entity, and we're the small entity, the timing and scheduling of announcements gets controlled by them a little bit. We've requested, at this point in time, to release more information to the market. We're working on that with them, and as soon as we get full approval on it, we will release it.
Any further comments around the deployment schedule and anything you can say on that?
It's pretty methodical. I guess that's the right word I'm looking for. Methodical right now. We're adding new stores consistently every month. I think we added three right this month, but it's gonna accelerate shortly. Not much more I can say until we can put that public announcement out.
All right. Next question also from Gabriel Leung. Do you have sufficient liquidity to get to neutral cash flow or positive free cash flow?
I think everybody's, you know, watching us closely. They see that the sales are increasing, our gross margins are increasing. We're seeing an acceleration of that in the last two quarters. All great signs. The other side is we traditionally run a fairly lean ship here. We've expended more cash in the last few quarters than we probably would have otherwise. Some is to overcome supply chain worries, to make sure we have parts and inventory on hand so that we can build all these systems to look after these customers. The other is we had some big R&D initiatives that we're pushing ahead.
I alluded to that we're gonna have another patent announcement here shortly, and we're getting requests from our partner Prosegur for certain things that we've invested in. Some of that's controllable. We see the lines intersecting where we can not have to go to the markets again with everything lined up right. If they don't, we will tell everybody on the next call where we need to go with that. We feel like we're in control of those costs and can, you know, massage them to where we need them to be to get to where we have to be.
Oh, yeah. Next question from Daniel Rosenberg from Paradigm Capital. Gross margins' impressive increase, could you help us understand what sustainable levels of gross margins will look like?
Yeah. You know, as the mix changes, we're gonna see that upward trend. Margins were hit for a while there 'cause advertising was just ramping up. We were also getting hit with supply chain stuff, supply chain woes out of, you know, getting product here, shipping costs have gone hugely up, of course, but we're overcoming some of that right now. I think in the short term, Daniel, you know, look at this quarter as indicative of, you know, where we should be, and it will improve as we scale. It's gonna take a few more quarters before that improves too much more. I would say, you know, this quarter, again, is indicative of where you should model it right now.
A follow-up question from Daniel Rosenberg from Paradigm Capital. Could you provide an update on some of the pilot programs you have with large retailers?
We've got a lot of systems out there now, guys, which also, you know, added to our costs in the short term. Prosegur is helping us now on those. They're acquiring those systems off us, paying for the hardware where they're placed in, but we placed in quite a few on our own. I'd love to say a lot more, but there's two reasons why. One is, you know, they're pilots. We've always said that. They're going in not under contractual long-term things. We also don't want to enlighten the competition to where we are at so that they can fight back and try to keep us out of those accounts. We're displacing incumbents in those accounts.
You know, two sides of why we're fairly quiet on them. We'd like to just announce to the market when we have a deal and the deal is done and we're rolling out. I know we're always a little bit coy on that, and I apologize for that, but we have to do, we have to be that way.
Yeah. Just, you did mention that you are planning to announce the master services agreement as well as the preferred vendor. Those two retailers you are planning on announcing in the next couple of weeks is kinda what you mentioned already.
Correct. Yes. You know, we've got requests in. We've got pre-written press releases on them. As soon as they get approved, we will push those out there.
Okay.
You know, it's one of those things where we know we have a responsibility as a public company, but at the same time we have to, you know, do things contractually correct with our partners. If for some reason something leaked, we would make sure it was out there as soon as possible.
Right.
We wouldn't want the market to not be reflective of it. I think we're pretty good at keeping our cards close to the vest to make sure that we're not leaking out information.
Right. One more question from Daniel Rosenberg from Paradigm Capital. Can you speak to the go-to-market plan with the Media Player product? Will this only be sold through direct channel or will it also be through Prosegur as well?
Yeah. With the retail Media Networks, it's like a blossoming thing in the market right now. I would say if anybody else is any way in doubt about what our opportunity is, do a search right now for retail Media Networks and see what's going on there. It, you know, mostly online, but it's pushing into the store. It's accelerated rapidly for us from the point of us being, you know, the screen at the front of the store because of our position with the Welcoming Pedestal and being able to, you know, land that real estate because nothing else can go there besides loss prevention, which now with a Welcoming System, it happens to have a nice big bold advertising display in it.
Those conversations with the retailers just accelerating to a point where they, "Well, can we put one of these here? Can we put one of these here?" Well, we don't wanna put a full Welcoming Pedestal everywhere. It's just too costly, right? There's a lot in there that makes it work as a loss prevention unit. We just did an extension where our system, which we have another device in the store we call an inside edge processing device, which controls all the media going to within all the devices, it can control other screens. The Welcoming Player is another extension of that so that we can put screens in other areas of the store.
Think about, you know, a screen in bakery, or a screen in deli, a screen in, you know, the poultry section, the meat section, whatever, right? Be able to have different messaging on those different devices. That was the genesis of it. The retailers' eyes open up wide when we say, "We can come in and put a screen in at your front door where your loss prevention is, but we can also give you five more screens throughout the store." Prosegur will receive their first units next week. We're taking some to the show. There's a show called NRF, National Retail Federation, in Cleveland at the end of June that we're doing with them.
They have five INEO Welcoming Systems within their booth, and they have INEO Media Players and INEO G.A.T.E. Systems as well being displayed at that show.
Okay. Great. Question from Philippe. I think this is more of a technical side, so maybe Greg can take this one. On the technical side, you're working on getting two screens, one on each side of a Welcoming Pedestal. Just give us an update on that. I think you're doing some trials on that. Maybe also just, Greg, if you can comment about all the different iterations that you kind of have of the different screens and systems. That'd be useful, I think.
Yes. Thanks. Thanks, Philippe. With regards to the double-sided screen, I gotta be careful about what I talk about because sometimes when you say too much, it can jeopardize your patent applications. There will be an announcement forthcoming fairly soon on the device. I can say that we are working with our patent agent right now to protect some other devices, and a double-sided screen is one of the things that we're currently looking at. But I don't wanna say too much because anything that I put into the public domain could be used or could create problems as we work to secure patents on this stuff. We've iterated through a lot of different products.
You know, I'd like to say that we've figured out 1,000 different ways to not build a system, which, in and of itself, creates barriers for competition in addition to our patent portfolio. One of the advantages that we have is our ability to rapidly prototype when we get new ideas, to be able to put things together, connect all the pieces. We've also built a number of building blocks in our technology that's allowing us to be able to bring things out, so when we get demands for things like a double-sided screen, we're able to respond fairly quickly to it. Very pleased with the development team and the progress we're making.
There will be some announcements in the near future once we've spent a little bit more time with our patent agent.
All right, great. Follow-up question from Philippe. Who will finance the hardware and installation of Welcoming Systems for the larger U.S. retailer? Is it INEO or Prosegur? Perhaps Kyle, if you can just sort of go, you know, give the overall picture in all of these situations, sort of who finances hardware, who does the installations in the various different scenarios where it's direct and also where it's with the channel, right?
Yeah. If it's direct, we fund it obviously ourselves, right? We're putting it out there. We're doing a direct deal with a retailer. There's nobody else involved, so we're funding it. Like I say, that's taken up a little bit of cash, which is, you know, increased that burn. It's one of those things that we can control, of course. If Prosegur lands a customer, they are funding the hardware. So whether it's still being produced by us in our Surrey facility or it's gonna be produced by them at their facility, they will fund it. If it's being produced by us, they will pay us for the hardware and the labor to create it.
We share in the revenue off of the placement of the system. The interesting question around this and the subtlety of some of this is, as we've landed a big retailer, do we bring Prosegur in on that or not? We're having those discussions right now because that would obviously alleviate a lot of cash needs from us as if if they were our partner at a retailer that we actually landed directly. You know, factor that in when you're looking at that cash burn, when you're looking at where we're how much cash we will need to roll out these customers, is that we have the option of bringing our partner in with us.
Basically, there's many different iterations here and it can vary from customer to customer, basically.
Correct.
Great. A question from Christopher. Is the managed services agreement currently generating any revenue?
It is. Yes. I'm just trying to think how meaningful that is. We'd have to do the math on it, but it is. We actually have revenue coming in from it, and we've actually received payment already on some of it.
That's great. Follow-up question from Philippe. INEO has been promoting the business at various venues, I guess conferences. Can you comment on the interest generated? Maybe comment on both, on two sides. One is investor conferences, and second is, I think, you know, industry conferences. You've been doing both of those.
Yeah. On the investor side, Greg and I went to an investor conference in Phoenix about a month ago, and it was one of the best investor conferences I've ever been to. We had significant interest in us. We had, you know, great interactions. The problem is, right, we expected some buying to come out of that, and the problem is right after that, the market just really went down, right? There were forces beyond our control that were, you know, we're heading down, you know, obviously our share price headed down. We're still having some discussions with individuals from that conference, and I believe we'll see some input there.
We've got a focus on getting some following in the U.S. market, getting some traction in the U.S. market, getting some, you know, some volume through the OTC side of the listing. We think we've got some things in place to do that that are coming up as well. I'm also presenting at the LD Micro event in three weeks. Two weeks? Three weeks, I guess. Two weeks. I don't know. It's a blur.
It's next week, actually.
Oh, is it next week?
Yeah.
Oh, geez. It's next week. I better get there. That will help us in some regard. We're doing the work. The markets aren't being friendly to us right now, and I don't think it's anything in particular of us, as we said earlier in the prepared remarks. We're riding that out, and we will do our best to get some new interest into the company. On the industry side, we did that one show with Prosegur in Florida. Met a who's who of retailers at that. It was incredible, the people that came by the Prosegur booth to see our product. They were coming to Prosegur to see our product.
that was a lot of work by the Prosegur sales team, of course, to get people to say, "You gotta come and see this. You gotta come and see." They call it EVO. It's our Welcoming System. We were able to present, and I was presenting to them. Same thing's gonna happen, that's the one that's in three weeks, NRF in Cleveland. They've already got a good booking of customers to come and check out our systems. It's a bit of a groundswell for us right now as a lot of interest, a lot of follow-up. We're doing lots of presentations weekly with Prosegur, with their sales team, with interested retailers.
All right, a question from Sarfraz. What is the feedback from the pilot programs? Has any pilot program been canceled?
I think we already kind of touched on you know answer some of that on the feedback. Things are good. You know, we're moving forward on a lot of them. At this point in time, we have not had one canceled, no. There's not been anybody that said they're not you know they're not moving forward or they're not doing it. That's been a very good thing.
Question from Philippe again, a follow-up. You mentioned that Prosegur partnership has expanded INEO's sales activities. Does it include EAS and other products as well? Maybe just comment on that, how that works.
Not so much on the standard EAS other than the Welcoming G.A.T.E. is part of the mix now. At a retailer in Colombia where we put in three EVO systems, Welcoming Systems, we also put in three Welcoming G.A.T.E.s. They're utilizing our other products as companion products for this versus their own products that they have been selling in past experience. Outside of that, they have their own EAS products that they sell in terms of tags, labels, that type of thing, so we don't see much crossover with them on that.
Okay, great. I did see a couple other questions here related to cash flow, but I think, Kyle, you kind of mentioned that when in Gabriel's question right at the top. Beyond that, I think we've covered every question here. With that, I'll turn it back over to Kyle again and Greg.
Great. Well, thank you everybody for once again joining us for our call. Thank you to the analysts for the questions. Thank you to our other shareholders and supporters who asked questions today. We love answering and we do our best to give you the information that we can disclose and that we have. So we really appreciate you guys still digging in and continue to ask, and we'll answer as best we can. We wanna thank our shareholders for the support they provide us. We wanna wish everyone to stay safe, and thank you again. Let's look forward to hopping on a call with you again next quarter. Pardeep?
Thank you everyone. With that, we'll be concluding the call. Thank you.