Versatile Reports Third Quarter Results

Versatile Reports Third Quarter Results
  
 

MECHANICSBURG, PENNSYLVANIA--(Marketwired - May 30, 2014) - Versatile Systems Inc. (TSX-VENTURE:VV) announces its results for the third quarter of the 2014 fiscal year.

Revenue for the three months ended March 31, 2014 was $11,386,580, generating a gross profit of $1,974,726 or 17.3% of sales compared to $10,222,371, generating a gross profit of $1,697,798 or 16.6% of sales for the same quarter last year. The Net Loss for the quarter amounted to $560,852 ($0.00 per share), which includes non-recurring expenses of $27,286, compared to a Net Loss of $780,888 ($0.00 per share) for the same quarter last year.

Highlights for the quarter included:

• Revenue for the three months ended March 31, 2014 was $11,386,580 compared to $10,222,371 for the same quarter last year, an increase of $1,164,209;
• The gross profit for the three months ended March 31, 2014 was $1,974,726 or 17.3% of sales compared to $1,697,798 or 16.6% of sales for the same quarter last year;
• The research and development expense for the quarter amounted to $214,976 compared to $366,890 for the same quarter last year; and
• Deferred revenue at March 31, 2014 was $5,613,780 (of which $4,930,662 is expected to be recognized in the next four quarters) compared to $6,835,938 at June 30, 2013.

During this current quarter the Company continued to actively pursue its goal of improved financial and operational performance. "I am proud of the management team and the improving performance is the direct result of effectively remodeling the business," said Kenny Kahn the Company's Chief Executive Officer. "Since assembling this management team, Versatile has been able to improve operational performance quarter over quarter. I feel confident we can continue this trend and get our Company back to profitability."

Revenue for the nine months ended March 31, 2014 was $27,883,744 generating a gross profit of $4,941,881 or 17.7% of sales compared to $27,688,798 generating a gross profit of $5,373,205 or 19.4% of sales for the same period last year. The Net Loss for the period amounted to $2,762,167 ($0.02 per share) compared to $1,679,571 ($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 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		March 31, 2014			June 30, 2013
		(unaudited)
ASSETS
Current Assets
	Cash and cash equivalents	$	110,904		$	83,724
	Investment in Equus		1,798,203			1,798,203
	Accounts receivable		5,078,239			6,379,629
	Prepaid expenses		4,262,076			4,588,012
	Inventory		1,988,191			2,406,355
			13,237,613			15,255,923
Long-term accounts receivable			568			14,368
Long-term prepaid expenses			618,955			1,140,311
Capital Assets			138,113			189,274
Intangible assets			139,194			169,959
Deferred income tax assets			336,275			336,275
Goodwill			2,718,970			2,718,970
		$	17,189,688		$	19,825,080
LIABILITIES
Current Liabilities
	Line of credit	$	4,083,417		$	3,602,269
	Accounts payable and accrued liabilities		6,435,267			6,963,126
	Current portion of deferred revenue		4,930,662			5,586,738
			15,449,346			16,152,133
Deferred Revenue			683,118			1,249,200
Convertible Loan			475,816			-
			16,608,280			17,401,333
SHAREHOLDERS' EQUITY
	Share Capital		55,175,946			54,433,709
	Equity Reserve		4,798,636			4,637,968
	Deficit		(59,075,203	)		(56,313,036	)
	Accumulated other comprehensive loss		(317,972	)		(334,894	)
			581,408			2,423,747
		$	17,189,688		$	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 March 31						Nine months ended March 31
		2014			2013			2014			2013
SALES		$	11,386,580		$	10,222,371		$	27,883,744		$	27,688,798
COST OF SALES			9,411,854			8,524,573			22,941,863			22,315,593
			1,974,726			1,697,798			4,941,881			5,373,205
EXPENSES
	Selling and marketing		910,969			1,183,700			2,566,195			3,332,192
	General and administrative		1,267,490			859,206			3,632,073			2,513,936
	Research and development		214,976			366,890			839,732			925,985
	Non recurring expenses		27,286			-			434,705			-
	Amortization of capital assets		20,118			24,408			61,065			101,409
	Share-based compensation		-			2,188			-			6,561
	Foreign exchange (gain) loss		(14,679	)		(7,348	)		(17,348	)		2,198
			2,426,160			2,429,044			7,516,422			6,882,281
LOSS FROM OPERATIONS			(451,434	)		(731,246	)		(2,574,541	)		(1,509,076	)
	Interest expense and financing costs		(108,218	)		(24,766	)		(183,838	)		(63,580	)
	Equity loss from Investment in Equus		-			(23,881	)		-			(102,780	)
	Loss on sale of capital assets		-			-			(461	)		-
LOSS BEFORE INCOME TAXES			(559,652	)		(779,893	)		(2,758,840	)		(1,675,436	)
Current income tax expense			(1,200	)		(995	)		(3,327	)		(4,135	)
NET LOSS		$	(560,852	)	$	(780,888	)	$	(2,762,167	)	$	(1,679,571	)
Other comprehensive income (loss)
	Foreign exchange translation		(10,657	)		6,075			16,922			5,978
Total comprehensive loss		$	(571,509	)	$	(774,813	)	$	(2,745,245	)	$	(1,673,593	)
LOSS PER SHARE (basic and diluted)		$	(0.00	)	$	(0.00	)	$	(0.02	)	$	(0.01	)
Weighted average number of common shares oustanding, basic and diluted			161,654,689			157,285,643			158,362,942			157,285,643

Versatile Systems Inc.

Condensed Consolidated Statements of Changes in Shareholders' Equity

(Unaudited - Prepared by Management)

Expressed in U.S. dollars
	Share Capital			Equity Reserve			Deficit			Accumulated other comprehensive loss			Total
Balance, June 30, 2012	$	54,433,709		$	4,629,219		$	(52,458,434	)	$	(337,622	)	$	6,266,872
Net loss		-			-			(1,679,571	)		-			(1,679,571	)
Foreign exchange on the translation of VMS-UK		-			-			-			5,978			5,978
Share-based compensation expense		-			6,561			-			-			6,561
Balance, March 31, 2013		54,433,709			4,635,780			(54,138,005	)		(331,644	)		4,599,840
Balance, June 30, 2013		54,433,709			4,637,968			(56,313,036	)		(334,894	)		2,423,747
Shares issued during the period		742,237			-			-			-			742,237
Warrants issued during the period		-			33,714			-			-			33,714
Conversion option with the convertible loan		-			126,954			-			-			126,954
Net loss		-			-			(2,762,167	)		-			(2,762,167	)
Foreign exchange on the translation of VMS-UK		-			-			-			16,922			16,922
Balance, March 31, 2014	$	55,175,946		$	4,798,636		$	(59,075,203	)	$	(317,972	)	$	581,408

Versatile Systems Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited - Prepared by Management)

Expressed in U.S. dollars			Three months ended March 31						Nine months ended March 31
			2014			2013			2014			2013
OPERATING ACTIVITIES
	Net loss		$	(560,852	)	$	(780,888	)	$	(2,762,167	)	$	(1,679,571	)
	Items not involving cash
		Amortization of capital assets		20,118			24,408			61,065			101,409
		Amortization of Financing costs		51,520			-			51,520			-
		Share-based compensation		-			2,188			-			6,561
		Loss on sale of capital assets		-			-			461			-
		Equity loss from Investment in Equus		-			23,881			-			102,780
		Unrealized foreign exchange loss (gain)		-			(409	)		991			683
Cash flow used in operations before other items				(489,213	)		(730,820	)		(2,648,129	)		(1,468,138	)
		Net change in non-cash working capital		(30,740	)		675,027			837,121			90,061
				(519,953	)		(55,793	)		(1,811,008	)		(1,378,077	)
INVESTING ACTIVITIES
	Proceeds from disposition of capital assets			-			-			1,418			-
	Intangible assets - contract cost additions			(30,195	)		(52,185	)		(140,090	)		(190,164	)
	Intangible assets - contract cost recognized			57,937			58,491			176,690			203,864
	Purchase of capital assets			(3,355	)		(15,815	)		(10,117	)		(43,319	)
				24,387			(9,509	)		27,901			(29,619	)
FINANCING ACTIVITIES
	Proceeds from the bridge loan			-			-			742,237			-
	Repayment of the bridge loan			(742,237	)		-			(742,237	)		-
		Issuance of common shares		742,237			-			742,237			-
		Proceeds from the convertible loan		586,902			-			586,902			-
		Proceeds from line of credit		(43,543	)		36,167			481,148			1,014,616
				543,359			36,167			1,810,287			1,014,616
Increase (decrease) in cash and cash equivalents				47,793			(29,135	)		27,180			(393,080	)
Cash and cash equivalents, beginning of period				63,111			70,780			83,724			434,725
Cash and cash equivalents, end of period			$	110,904		$	41,645		$	110,904		$	41,645

Versatile Systems Inc.Kenny [e-mail] Contact: Daum Weigle Inc.Jon [e-mail]