Versatile Reports Fourth Quarter and Fiscal 2014 Results

MECHANICSBURG, Pa.--()--Versatile Systems Inc. (Trading symbol on the TSX Venture Exchange: VV), announces its results for the fourth quarter and the 2014 fiscal year.

Revenue for the three months ended June 30, 2014 was $8,485,599, generating a gross profit of $1,027,270 or 12.1% of sales compared to $8,584,095, generating a gross profit of $1,050,994 or 12.2% of sales for the same quarter last year. The Net Loss for the quarter amounted to $3,675,953 ($0.02 per share) compared to a Net Loss of $2,172,843 ($0.01 per share) for the same period last year.

Highlights for the Fourth quarter:

  • Revenue for the three months ended June 30, 2014 was $8,485,599 compared to $8,584,095 for the same quarter last year;
  • The gross profit for the three months ended June 30 2014 was $1,027,270 or 12.1% of sales compared to $1,050,994 or 12.2% of sales for the same quarter last year;
  • Net Loss for the quarter amounted to $3,675,953 ($0.02 per share) compared to Net Loss of $2,172,843 ($0.01 per share) for the same quarter last year; Excluding the non-cash items of $2,718,970 for goodwill impairment, write down of deferred income tax assets in the amount of $336,275 the loss was $620,708.
  • The research and development expense for the quarter amounted to $266,049 compared to $339,273 for the same quarter last year;
  • Deferred revenue at June 30, 2014 was $6,542,049 (of which $5,986,803 is expected to be recognized in the next four quarters) compared to $6,835,938 at June 30, 2013;
  • The Company sold 960,087 shares of their investment in Equus, which consisted of 970,087 shares of Equus Total Return, Inc., a public company trading on the NYSE under the symbol EQS, for proceeds of $2,340,422 which resulted in a gain on disposal of $567,019. The carrying value of the remaining Equus investment at June 30, 2014 was $24,800 (2013: $1,798,203).

Revenue for the year ended June 30, 2014 was $36,369,343 generating a gross profit of $5,969,151 or 16.4% of sales compared to $36,272,893 generating a gross profit of $6,424,199 or 17.7% of sales for the same period last year. The Net Loss for the year amounted to $6,438,120 ($0.04 per share) compared to $3,854,602 ($0.02 per share) for the same period last year. The total comprehensive loss for the year amounted to $6,434,487 compared to a comprehensive loss of $3,851,874 for last year. The significant components of the loss in the prior year, relates to the $2,718,970 for the Goodwill impairment for the U.S. Western operations and a write-down of the Deferred income tax assets in the amount of $336,275.

During this current quarter the Company continued to actively pursue its goal of improved financial and operational performance. "I am optimistic about the improving performance of the company as a result of our focusing on operating cost reduction and an emphasis on our higher growth business segments,” said Bertrand des Pallieres the Company’s Executive Chairman.

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.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.

Versatile Systems Inc.
Consolidated Statements of Financial Position
         
   
Expressed in U.S. dollars June 30, 2014   June 30, 2013
 
ASSETS
Current Assets
Cash and cash equivalents $ 2,439,635 $ 83,724
Investment in Equus 24,800 1,798,203
Accounts receivable 4,593,075 6,379,629
Prepaid expenses 5,100,642 4,588,012
Inventory   1,153,376       2,406,355  
13,311,528 15,255,923
 
Long-term Accounts Receivable 187 14,368
Long-term Prepaid Expenses 502,488 1,140,311
Capital Assets 184,260 189,274
Intangible Assets 112,867 169,959
Deferred Income Tax Assets - 336,275
Goodwill   -       2,718,970  
$ 14,111,330     $ 19,825,080  
 
LIABILITIES
Current Liabilities
Line of credit and bank overdraft $ 4,492,062 $ 3,602,269
Accounts payable and accrued liabilities 5,957,226 6,963,126
Current portion of deferred revenue 5,986,802 5,586,738
Derivative liability   57,814       -  
16,493,904 16,152,133
 
Deferred Revenue 555,246 1,249,200
Convertible Loan   386,353       -  
  17,435,503       17,401,333  
SHAREHOLDERS’ EQUITY (DEFICIENCY)
Share capital 55,120,276 54,433,709
Equity reserve 4,637,968 4,637,968
Accumulated deficit (62,751,156 ) (56,313,036 )
Accumulated other comprehensive loss   (331,261 )     (334,894 )
(3,324,173 ) 2,423,747
     
$ 14,111,330     $ 19,825,080  
 
Versatile Systems Inc.
Consolidated Statements of Comprehensive Loss
         
   
 
Expressed in U.S. dollars Year ended June 30
  2014       2013  
 
 
 
SALES $ 36,369,343 $ 36,272,893
 
COST OF SALES   30,400,192       29,848,694  
 
  5,969,151       6,424,199  
 
EXPENSES
Selling and marketing 3,419,190 4,445,260
General and administrative 5,330,648 3,485,107
Research and development 1,105,781 1,265,258
Amortization of capital assets 77,237 119,709
Share-based compensation - 8,749
Foreign exchange (gain)/loss (41,997 ) 4,402
     
  9,890,859       9,328,485  
 
LOSS FROM OPERATIONS (3,921,708 ) (2,904,286 )
 
Interest expense (268,098 ) (93,784 )
Goodwill impairment (2,718,970 ) -
Gain on sale of investment 567,019
Equity gain (loss) from Investment in Equus - (307,270 )
Loss on sale of capital assets (110 ) -
Gain on derivatives 244,549 -
     
LOSS BEFORE INCOME TAXES (6,097,318 ) (3,305,340 )
 
Current income tax expense (4,527 ) (5,130 )
Deferred income taxes   (336,275 )     (544,132 )
 
NET LOSS $ (6,438,120 )   $ (3,854,602 )
 
Other comprehensive income (loss)
Foreign exchange translation   3,633       2,728  
Total comprehensive loss $ (6,434,487 )   $ (3,851,874 )
 
LOSS PER SHARE (basic and diluted)   ($0.04 )     ($0.02 )
 

Weighted average number of common shares outstanding, basic and diluted

  168,198,052       157,285,643  
 
Versatile Systems Inc.
Consolidated Statements of Changes in Shareholders' Equity (Deficit)
                     
         
Expressed in U.S. dollars
 
 
Share Equity Accumulated other
Capital   Reserve   Deficit   comprehensive loss   Total
 
 
Balance, June 30, 2012 $ 54,433,709 $ 4,629,219 $ (52,458,434 ) $ (337,622 ) $ 6,266,872
 
Net loss - - (3,854,602 ) - (3,854,602 )
Foreign exchange translation of subsidiary - - - 2,728 2,728
Share-based compensation expense - 8,749 - - 8,749
                 
Balance, June 30, 2013   54,433,709     4,637,968     (56,313,036 )     (334,894 )     2,423,747  
 
 
Balance, June 30, 2013 54,433,709 4,637,968 (56,313,036 ) (334,894 ) 2,423,747
 
Net loss - - (6,438,120 ) - (6,438,120 )

Shares Issued, net of share issuance costs

686,567 - - - 686,567
Foreign exchange translation of subsidiary - - - 3,633 3,633
                 
Balance, June 30, 2014   55,120,276     4,637,968     (62,751,156 )     (331,261 )     (3,324,173 )
 
Versatile Systems Inc.
Consolidated Statements of Cash Flows
         
   
 
Expressed in U.S. dollars

Year ended June 30

  2014       2013  
 
 
OPERATING ACTIVITIES
Net loss $ (6,438,120 ) $ (3,854,602 )
Items not involving cash
Amortization of capital assets 77,237 119,709
Amortization of financing fees 68,100 -
Inventory Write-down 738,892 -
Fair value gain on investment in Equus

(567,019

)

-
Share-based compensation - 8,749
Equity (gain) loss from Investment in Equus - 307,270
Fair value gain on derivative liabilities

(210,835

)

-
Unrealized foreign exchange loss (gain) -

(2,045

)

Goodwill impairment 2,718,970

-

Deferred income taxes   336,275       544,132  
Cash flow generated from (used in) operations before other items

(3,276,500

)

(2,876,787

)

Net change in non-cash working capital   1,140,225       972,692  
 

(2,136,275

)

   

(1,904,095

)

 
INVESTING ACTIVITIES
Proceeds from disposition of capital assets - -
Intangible assets - contract cost additions (170,812 ) (261,361 )
Intangible assets - contract cost recognized 227,904 258,608
Purchase of capital assets

(68,590

)

(57,747

)

Sale of investment in Equus   2,340,422       -  
  2,328,924      

(60,500

)

 
FINANCING ACTIVITIES
Proceeds from line of credit and bank overdraft 889,793 1,613,594
Proceeds from bridge loan 742,237 -
Repayment of bridge loan (244,952 ) -
Issuance of common shares 189,282 -
Proceeds - convertible loan   586,902       -  
  2,163,262       1,613,594  
 
Effect of Foreign exchange rate on cash

 

-
Increase (decrease) in cash and cash equivalents 2,355,911

(351,001

)

 
Cash and cash equivalents, beginning of year 83,724 434,725
     
Cash and cash equivalents, end of year $ 2,439,635     $ 83,724  

Contacts

Versatile Systems Inc.
Bertrand des Pallieres
Executive Chairman
800-851-1281
or
Vicki Turjan
CFO
800-851-1281

Contacts

Versatile Systems Inc.
Bertrand des Pallieres
Executive Chairman
800-851-1281
or
Vicki Turjan
CFO
800-851-1281