Versatile Reports Second Quarter Results

Versatile Reports Second Quarter Results
  
 

MECHANICSBURG, PENNSYLVANIA--(Marketwired - Feb 24, 2014) - Versatile Systems Inc. (TSX-VENTURE:VV), announces its results for the second quarter of the 2014 fiscal year.

Revenue for the three months ended December 31, 2013 was $9,857,689, generating a gross profit of $1,686,298 or 17.1 percent of sales compared to $9,550,579, generating a gross profit of $1,842,628 or 19.3 percent of sales for the same quarter last year. The net loss for the quarter amounted to $951,894 ($0.01 per share), which includes non-recurring expenses of $407,419, compared to a net loss of $494,389 ($0.00 per share) for the same quarter last year.

Highlights for the quarter included:

• Revenue for the three months ended December 31, 2013 was $9,857,689 compared to $9,550,579 for the same quarter last year, an increase of $307,110;
• The gross profit for the three months ended December 31, 2013 was $1,686,298 or 17.1 percent of sales compared to $1,842,628 or 19.3 percent of sales for the same quarter last year;
• The research and development expense for the quarter amounted to $239,981 compared to $322,849 for the same quarter last year; and
• Deferred revenue at December 31, 2013 was $6,577,606 (of which $5,661,284 is expected to be recognized in the next four quarters) compared to $6,835,938 at June 30, 2013.

During the current quarter, the company appointed Kenny Kahn as the chief executive officer and Kelly Boyer as the interim chief financial officer. The company also announced that it will close its Vancouver, Canada head office in order to centralize finance and administrative functions at its operations facility, located in Mechanicsburg, Pa.

Revenue for the six months ended December 31, 2013 was $16,497,164 generating a gross profit of $2,967,155 or 18.0 percent of sales compared to $17,466,427 generating a gross profit of $3,675,407 or 21.0 percent of sales for the same period last year. The net loss for the period amounted to $2,201,315 ($0.01 per share) compared to $898,683 ($0.01 per share) for the same period last year.

About Versatile

Versatile is a multi-disciplinary technology company with solutions across the mobile, digital signage, IT infrastructure, software and hardware landscape. The company's products are utilized by Fortune 500 companies, leading financial institutions and large and small retail organizations. For more information, please visit www.versatilecredit.com, www.versatilemobile.com and www.versatile.com.

Forward-Looking Statements

This document may contain forward-looking statements relating to Versatile's operations or to the environment in which it operates, which are based on Versatile's operations, estimates, forecasts and projections. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict or are beyond Versatile's control. A number of important factors including those set forth in other public filings could cause actual outcomes and results to differ materially from those expressed in these forward-looking statements. Consequently, readers should not place any undue reliance on such forward-looking statements. In addition, these forward-looking statements relate to the date on which they are made. Versatile disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

Neither TSX Venture Exchange nor its Regulation Service Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release. All amounts are expressed in U.S. dollars unless otherwise stated. © 2014 Versatile Systems Inc. All rights reserved.

Versatile Systems Inc.
Condensed Consolidated Statements of Financial Position
(Unaudited - Prepared by Management)
Expressed in U.S. dollars		December 31, 2013			June 30, 2013
			(unaudited	)
ASSETS
Current Assets
	Cash and cash equivalents	$	63,111		$	83,724
	Investment in Equus		1,798,203		$	1,798,203
	Accounts receivable		7,228,114			6,379,629
	Prepaid expenses		5,028,710			4,588,012
	Inventory		1,778,501			2,406,355
			15,896,639			15,255,923
Long-term accounts receivable			1,140			14,368
Long-term prepaid expenses			831,568			1,140,311
Capital Assets			155,430			189,274
Intangible assets			166,936			169,959
Deferred income tax assets			336,275			336,275
Goodwill			2,718,970			2,718,970
		$	20,106,958		$	19,825,080
LIABILITIES
Current Liabilities
	Line of credit and bank overdraft	$	4,126,960		$	3,602,269
	Accounts payable and accrued liabilities		8,413,006			6,963,126
	Bridge Loan		739,376			-
	Current portion of deferred revenue		5,661,284			5,586,738
			18,940,626			16,152,133
Deferred Revenue			916,322			1,249,200
			19,856,948			17,401,333
SHAREHOLDERS' EQUITY
	Share Capital		54,433,709			54,433,709
	Equity Reserve		4,637,968			4,637,968
	Deficit		(58,514,351	)		(56,313,036	)
	Accumulated other comprehensive loss		(307,315	)		(334,894	)
			250,011			2,423,747
		$	20,106,958		$	19,825,080

Versatile Systems Inc.
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
(Unaudited - Prepared by Management)
Expressed in U.S. dollars		Three months ended December 31					Six months ended December 31
			2013		2012			2013		2012
SALES		$	9,857,689	$	9,550,579		$	16,497,164	$	17,466,427
COST OF SALES			8,171,391		7,707,951			13,530,009		13,791,020
			1,686,298		1,842,628			2,967,155		3,675,407
EXPENSES
	Selling and marketing		784,437		1,085,949			1,655,226		2,148,492
	General and administrative		1,148,195		845,714			2,364,583		1,654,730
	Research and development		239,981		322,849			624,756		559,095
	Non recurring expenses		407,419		-			407,419		-
	Amortization of capital assets		19,945		36,753			40,947		77,001
	Share-based compensation		-		2,187			-		4,373
	Foreign exchange (gain) loss		(5,293)		(2,588)			(2,669)		9,546
			2,594,684		2,290,864			5,090,262		4,453,237
LOSS FROM OPERATIONS			(908,386)		(448,236)			(2,123,107)		(777,830)
	Interest expense		(42,376)		(19,899)			(75,620)		(38,814)
	Equity loss from Investment in Equus		-		(25,259)			-		(78,899)
	Loss on sale of capital assets		-		-			(461)		-
LOSS BEFORE INCOME TAXES			(950,762)		(493,394)			(2,199,188)		(895,543)
Current income tax expense			(1,132)		(995)			(2,127)		(3,140)
NET LOSS		$	(951,894)	$	(494,389)		$	(2,201,315)	$	(898,683)
Other comprehensive income (loss)
	Foreign exchange translation		18,085		(1,015)			27,579		(97)
Total comprehensive loss		$	(933,809)	$	(495,404)		$	(2,173,736)	$	(898,780)
LOSS PER SHARE (basic and diluted)			($0.01)		($0.00)			($0.01)		($0.01)
Weighted average number of common shares oustanding, basic and diluted			157,285,643		157,285,643			157,285,643		157,285,643

Versatile Systems Inc.
Condensed Consolidated Statements of Changes in Shareholders' Equity
(Unaudited - Prepared by Management)
Expressed in U.S. dollars
								Accumulated
								other
	Share		Equity					comprehensive
	Capital		Reserve		Deficit			loss			Total
Balance, June 30, 2012	$	54,433,709	$	4,629,219	$	(52,458,434	)	$	(337,622	)	$	6,266,872
Net loss		-		-		(898,683	)		-			(898,683	)
Foreign exchange on the translation of VMS-UK		-		-		-			(97	)		(97	)
Share-based compensation expense		-		4,373		-			-			4,373
Balance, December 31, 2012		54,433,709		4,633,592		(53,357,117	)		(337,719	)		5,372,465
Balance, June 30, 2013		54,433,709		4,637,968		(56,313,036	)		(334,894	)		2,423,747
Net loss		-		-		(2,201,315	)		-			(2,201,315	)
Foreign exchange on the translation of VMS-UK		-		-		-			27,579			27,579
Balance, December 31, 2013	$	54,433,709	$	4,637,968	$	(58,514,351	)	$	(307,315	)	$	250,011

Versatile Systems Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited - Prepared by Management)
Expressed in U.S. dollars		Three months ended December 31						Six months ended December 31
			2013			2012			2013			2012
OPERATING ACTIVITIES
Net loss		$	(951,894	)	$	(494,389	)	$	(2,201,315	)	$	(898,683	)
Items not involving cash
	Amortization of capital assets		19,945			36,753			40,947			77,001
	Share-based compensation		-			2,187			-			4,373
	Loss on sale of capital assets		-			-			461			-
	Equity loss from Investment in Equus		-			25,259			-			78,899
	Unrealized foreign exchange loss		991			1,092			991			1,092
Cash flow used in operations before other items			(930,958	)		(429,098	)		(2,158,916	)		(737,318	)
	Net change in non-cash working capital		(56,169	)		(462,265	)		867,861			(584,966	)
			(987,127	)		(891,363	)		(1,291,055	)		(1,322,284	)
INVESTING ACTIVITIES
	Proceeds from disposition of capital assets		-			-			1,418			-
	Intangible assets - contract cost additions		(67,033	)		(59,574	)		(109,895	)		(137,979	)
	Intangible assets - contract cost recognized		61,041			60,797			118,753			145,373
	Purchase of capital assets		(2,458	)		(7,938	)		(6,762	)		(27,504	)
			(8,450	)		(6,715	)		3,514			(20,110	)
FINANCING ACTIVITIES
	Proceeds from the bridge loan		742,237			-			742,237			-
	Proceeds from line of credit and bank overdraft		160,168			703,174			524,691			978,449
			902,405			703,174			1,266,928			978,449
Decrease in cash and cash equivalents			(93,172	)		(194,904	)		(20,613	)		(363,945	)
Cash and cash equivalents, beginning of period			156,283			265,684			83,724			434,725
Cash and cash equivalents, end of period		$	63,111		$	70,780		$	63,111		$	70,780

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