Versatile Systems Inc.
TSX VENTURE : VV
AIM : VVS

Versatile Systems Inc.

October 26, 2009 03:15 ET

Versatile Reports First Quarter Results

Cash flow from operations of $149,408 for the quarter

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Oct. 26, 2009) - Versatile Systems Inc. (TSX VENTURE:VV)(AIM:VVS) announces its results for the first quarter of the 2010 fiscal year.

Revenue for the three months ended September 30, 2009 was $11,616,225 generating a gross profit of $2,655,304 or 22.9% of sales compared to $14,303,851 generating a gross profit of $3,753,100 or 26.2% of sales for the same quarter last year. The Net Loss for the quarter amounted to $46,775 ($0.00 per share) compared to a Net Earnings of $56,615 ($0.00 per share) for the same period last year.

"Economic conditions remained challenging throughout the first quarter," said John Hardy, Chairman and CEO of Versatile. "Nevertheless, we made enhancements to our product set, spending $246,670 on research and development which will help drive future growth. In addition, we secured major orders from customers in the telecommunications, cable, manufacturing and education verticals, which enabled the Company to generate positive cash flow from operations."

Highlights for the quarter included:

- Cash and cash equivalents and short term investments at September 30, 2009 was $2,999,104 compared to $2,002,530 at June 30, 2009, an increase of $996,574;

- Revenue for the three months ended September 30, 2009 was $11,616,225 compared to $10,877,354 for the last quarter, an increase of $738,871;

- Earnings before interest, taxes and amortization (EBITDA) of $115,795 for the three months ended September 30, 2009 compared to $252,572 for the same period last year;

- The Net Loss for the quarter amounted to $46,775 ($0.00 per share) compared to Net Earnings of $56,615 ($0.00 per share) for the same period last year, a decrease of $103,390;

- The cash flow generated from operations, before non-cash working capital items amounted to $149,408 for the three months ended September 30, 2009 compared to cash flow generated from operations of $236,674 for the same period last year;

- The research and development expense for the quarter amounted to $246,670 compared to $424,752 for the same quarter last year;

- Deferred revenue at September 30, 2009 was $8,260,060 (of which $7,375,423 is expected to be recognized in the next four quarters) compared to $7,773,787 at September 30, 2008, an increase of $486,273;

- The Company acquired 531,680 shares of Equus Total Return, Inc., which is a public company trading on the NYSE under the symbol EQS;

- Completing development and certification of an Electronic Credit Application of Mobiquity Kiosk™ for a major Canadian bank to be deployed in a leading Canadian retailer and Canadian sports arena; and

- Completing development and certification testing for a new Electronic Credit Application of Mobiquity Kiosk™ for a major United States healthcare financing lender.

The working capital as of September 30, 2009 was $2,593,260, an increase of $22,839 compared to the working capital of $2,570,421 at June 30, 2009. The cash flow generated from operations, before non-cash working capital items amounted to $149,408 for the three months ended September 30, 2009 compared to cash flow generated from operations of $236,674 for the same period last year.

During the current quarter, the Company incurred $134,655 for research and development activities related to Mobiquity Route™, DEX and related mobile software products and $106,139 related to Mobiquity Transaction Engine 3.0™, Mobiquity Kiosk™ and research on Virtualization.

"The Company's cost structure in the current quarter is at its lowest level in four years," said Fraser Atkinson, CFO of Versatile. "Consequently, the Company was able to generate positive EBITDA and cash flow from operations."

About Versatile

Versatile provides business solutions that enable companies to improve sales, marketing and distribution of their products. Versatile also provides information technology services for the implementation, maintenance and security of mission-critical computer environments. Versatile has the ability to architect solutions involving both proprietary and third party components. For more information: 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.

All amounts are expressed in U.S. dollars unless otherwise stated.

(C) 2009 Versatile Systems Inc. All rights reserved.



---------------------------------------------------------------------------
Versatile Systems Inc.
Consolidated Balance Sheets
(unaudited - prepared by management)
---------------------------------------------------------------------------

Expressed in U.S. dollars September 30, 2009 June 30, 2009
------------------ -------------
(unaudited)
ASSETS
Current Assets
Cash and cash equivalents $ 1,265,827 $ 2,002,530
Short term investments 1,733,277 -
Accounts receivable 8,622,176 8,408,093
Current portion of deferred contract costs 5,883,066 5,745,493
Work-in-progress 16,560 92,145
Prepaid expenses 382,061 286,709
Inventory 1,522,585 1,376,746
Future income tax benefits 944,843 944,843
--------------------------------
20,370,395 18,856,559

Long-term accounts receivable 206,670 112,781
Deferred contract costs 728,448 803,246
Capital Assets 726,638 794,008
Intangible assets 242,209 332,953
Future income tax benefits 5,283,896 5,283,896
Goodwill 9,977,659 9,977,659
--------------------------------
$ 37,535,915 $ 36,161,102
--------------------------------
--------------------------------

LIABILITIES
Current Liabilities
Line of credit and bank overdraft $ 3,061,496 $ -
Accounts payable and accrued liabilities 7,340,216 8,530,987
Current portion of deferred revenue 7,375,423 7,755,151
--------------------------------
17,777,135 16,286,138
Deferred Revenue 884,637 977,411
--------------------------------
18,661,772 17,263,549
--------------------------------

SHAREHOLDERS' EQUITY
Share Capital 50,583,743 50,583,743
Warrants 186,367 186,367
Contributed surplus 4,161,802 4,138,437
Deficit (35,775,990) (35,729,215)
Accumulated other comprehensive loss (281,779) (281,779)
--------------------------------
18,874,143 18,897,553
$ 37,535,915 $ 36,161,102
--------------------------------
--------------------------------


---------------------------------------------------------------------------
Versatile Systems Inc. Consolidated Statements of Earnings (Loss) and
Deficit
(unaudited - prepared by management)
---------------------------------------------------------------------------

Three Months ended September 30
Expressed in U.S. dollars 2009 2008
-------------------------------
SALES $ 11,616,225 $ 14,303,851
COST OF SALES 8,960,921 10,550,751
-------------------------------
2,655,304 3,753,100
-------------------------------

EXPENSES
General and administrative 874,348 1,323,060
Selling and marketing 1,361,701 1,769,825
Research and development 246,670 424,752
Non recurrring expenses 19,860 -
Foreign exchange (gain) loss 14,542 (20,352)
Stock-based compensation 22,388 3,243
-------------------------------
2,539,509 3,500,528
-------------------------------
Earnings before interest, taxes and
amortization 115,795 252,572

Amortization of capital assets 66,624 69,900
Amortization of intangible assets 90,674 90,674
Interest expense 3,769 29,088
-------------------------------

EARNINGS (LOSS) BEFORE INCOME TAXES (45,272) 62,910
Current income tax expense (1,503) (4,500)
Future income tax expense - (1,795)
-------------------------------
NET EARNINGS (LOSS) (46,775) 56,615
-------------------------------
DEFICIT, BEGINNING OF PERIOD (35,729,215) (35,063,096)
-------------------------------
DEFICIT, END OF PERIOD (35,775,990) (35,006,481)
-------------------------------
-------------------------------
EARNINGS (LOSS) PER SHARE (basic and
diluted) ($0.00) $0.00
-------------------------------
-------------------------------


---------------------------------------------------------------------------
Versatile Systems Inc.
Consolidated Statements of Comprehensive (Loss) Income
(unaudited - prepared by management)
---------------------------------------------------------------------------

Three Months ended September 30
Expressed in U.S. dollars 2009 2008
-------------------------------
Net earnings (loss) (46,775) 56,615

Other comprehensive (loss) income
Foreign currency translation adjustments 0 (33,429)
-------------------------------
Comprehensive (loss) income (46,775) 23,186
-------------------------------
-------------------------------


---------------------------------------------------------------------------
Versatile Systems Inc.
Consolidated Statements of Cash Flows
(unaudited - prepared by management)
---------------------------------------------------------------------------

Three Months ended September 30
Expressed in U.S. dollars 2009 2008
-------------------------------

CASH FLOWS FROM (USED IN) OPERATING
ACTIVITIES
Net earnings (loss) $ (46,775) $ 56,615
Items not affecting cash
Amortization of capital and intangible
assets 178,125 166,902
Stock-based compensation 22,388 3,243
Unrealized foreign exchange loss (gain) (4,330) 8,119
Future income tax expense (benefit) - 1,795
-------------------------------
Cash flow from (used in) operations before
other items 149,408 236,674
Net change in non-cash working capital
items (2,198,478) (385,172)
-------------------------------
(2,049,070) (148,498)

CASH FLOWS FROM (USED IN) INVESTING
ACTIVITIES
Short term investments (1,733,277) -
Additions to capital assets (15,852) (103,478)
-------------------------------
( 1,749,129) ( 103,478)
-------------------------------

CASH FLOWS FROM (USED IN) FINANCING
ACTIVITIES
Proceeds from (Repayment of) line of credit 3,061,496 (74,942)
Repayment of bank overdraft - (127,214)
Repayment of Promissory Notes - (20,000)
-------------------------------
3,061,496 (222,156)
-------------------------------

Effect of foreign exchange rate on cash - 110,559

Increase (decrease) in cash and cash
equivalents (736,703) (363,573)

CASH and cash equivalents, beginning of
period 2,002,530 1,500,005

-------------------------------
CASH and cash equivalents, end of period $ 1,265,827 $ 1,136,432
-------------------------------
-------------------------------


The TSX Venture Exchange and the AIM market of the London Stock Exchange have not reviewed and do not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • Versatile Systems Inc.
    John Hardy
    Chairman and CEO
    1-800-262-1633 or International: 001-206-979-6760
    or
    Versatile Systems Inc.
    Fraser Atkinson
    CFO
    1-800-262-1633
    www.versatile.com