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 KahnCEO717-620-2531kkahn@versatile.comwww.versatile.comMedia Contact: Daum Weigle Inc.Jon Daum858-538-9755jdaum@daumweigle.com