Versatile Systems Inc.
TSX VENTURE : VV
AIM : VVS

Versatile Systems Inc.

January 25, 2010 03:15 ET

Versatile Reports Second Quarter Results

VANCOUVER, CANADA--(Marketwire - Jan. 25, 2010) -

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

Versatile Systems Inc. (TSX VENTURE:VV)(AIM:VVS), announces its results for the second quarter of the 2010 fiscal year.

Revenue for the three months ended December 31, 2009 was $11,259,292 generating a gross profit of $2,660,080 or 23.6% of sales compared to $12,327,064 generating a gross profit of $3,039,395 or 24.7% of sales for the same quarter last year. The Net Loss for the quarter amounted to $80,661 ($0.00 per share) compared to a Net Loss of $533,171 ($0.00 per share) for the same period last year, an improvement of $452,510.

"The overall economic environment continues to be difficult. In addition, Oracle's potential acquisition of Sun Microsystems has created uncertainty and had a negative effect on both our pipeline and top line revenue," said John Hardy, Chairman and CEO of Versatile. "Nevertheless, we managed to significantly reduce our Net Loss by $452,510 over the same quarter last year. We continue to monitor our cost structures to ensure they are in line with anticipated revenues and Gross Profit. Our goal is to move back to sustained profitability by year end."

Highlights for the quarter included:

- Cash and cash equivalents and short term investments at December 31, 2009 was $6,096,258 compared to $2,002,530 at June 30, 2009, an increase of $4,093,728;

- Revenue for the three months ended December 31, 2009 was $11,259,292 compared to $12,327,064 for the same quarter last year, a decrease of $1,067,772;

- Deferred revenue at December 31, 2009 was $7,512,605 (of which $6,641,170 is expected to be recognized in the next four quarters);

- Net Loss for the quarter amounted to $80,661 ($0.00 per share) compared to a Net Loss of $533,171 ($0.00 per share) for the same period last year, an improvement of $452,510;

- Research and development expense for the quarter amounted to $247,084 compared to $391,088 for the same quarter last year;

- Non-brokered private placement with the issuance of 39,000,000 shares for proceeds of $3,876,257; and

- The Company increased its position to 696,869 shares of Equus Total Return, Inc. which is a public company trading on the NYSE under the symbol EQS.

The working capital as of December 31, 2009 was $6,148,754, an increase of $3,578,333 compared to the working capital of $2,570,421 at June 30, 2009.

Revenue for the six months ended December 31, 2009 was $22,875,517 generating a gross profit of $5,315,384 or 23.2% of revenue compared to $26,630,915 generating a gross profit of $6,792,495 or 25.5% of revenue for the same period last year. The Net Loss for the period amounted to $127,436 ($0.00 per share) compared to $476,556 ($0.00 per share) for the same period last year, an improvement of $349,120.

"With working capital exceeding $6 million at December 31, 2009 the Company has the strongest financial position in its history," said Fraser Atkinson, CFO of Versatile.

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) 2010 Versatile Systems Inc. All rights reserved.



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

Expressed in U.S. dollars
December 31, 2009 June 30, 2009
----------------- -------------
(unaudited)
ASSETS
Current Assets
Cash and cash equivalents $ 3,795,423 $ 2,002,530
Short term investments 2,300,835 -
Accounts receivable 7,499,668 8,408,093
Current portion of deferred contract costs 5,029,092 5,745,493
Work-in-progress 42,822 92,145
Prepaid expenses 387,000 286,709
Inventory 1,446,357 1,376,746
Future income tax benefits 944,843 944,843
---------------------------
21,446,040 18,856,559

Long-term accounts receivable 238,868 112,781
Deferred contract costs 678,291 803,246
Capital Assets 644,145 794,008
Intangible assets 242,138 332,953
Future income tax benefits 5,631,462 5,283,896
Goodwill 9,977,659 9,977,659
---------------------------
$ 38,858,603 $ 36,161,102
---------------------------
---------------------------
LIABILITIES
Current Liabilities
Line of credit and bank overdraft $ 2,558,445 $ -
Accounts payable and accrued liabilities 6,097,671 8,530,987
Current portion of deferred revenue 6,641,170 7,755,151
---------------------------
15,297,286 16,286,138

Deferred Revenue 871,435 977,411
---------------------------
16,168,721 17,263,549
---------------------------
SHAREHOLDERS' EQUITY
Share Capital 54,433,709 50,583,743
Warrants 186,367 186,367
Contributed surplus 4,208,236 4,138,437
Deficit (35,856,651) (35,729,215)
Accumulated other comprehensive loss (281,779) (281,779)
---------------------------
22,689,882 18,897,553
---------------------------

$ 38,858,603 $ 36,161,102
---------------------------
---------------------------


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


Expressed in Three Months ended Six Months ended
U.S. dollars December 31 December 31
2009 2008 2009 2008
---------------------------------------------------

SALES $ 11,259,292 $ 12,327,064 $ 22,875,517 $ 26,630,915

COST OF SALES 8,599,212 9,287,669 17,560,133 19,838,420
---------------------------------------------------
2,660,080 3,039,395 5,315,384 6,792,495
---------------------------------------------------
EXPENSES
General and
administrative 1,100,145 1,278,420 1,974,493 2,601,480
Selling and
marketing 1,619,075 1,717,311 2,980,776 3,487,136
Research and
development 247,084 391,088 493,754 815,840
Non recurring expenses 28,219 372,177 48,079 372,177
Foreign exchange (gain)
loss (89,154) (76,407) (74,612) (96,759)
Stock-based
compensation 23,242 2,753 45,630 5,996
---------------------------------------------------
2,928,611 3,685,342 5,468,120 7,185,870
---------------------------------------------------
Earnings before
interest, taxes and
amortization (268,531) (645,947) (152,736) (393,375)

Amortization of
capital assets 62,287 87,406 128,911 157,306
Amortization of
intangible assets 90,675 90,675 181,349 181,349
Interest expense 10,441 354 14,210 29,442
Gain on sale of
investments (4,952) - (4,952) -
---------------------------------------------------
EARNINGS (LOSS)
BEFORE INCOME TAXES (426,982) (824,382) (472,254) (761,472)

Current income tax
expense (1,245) (16,044) (2,748) (20,544)
Future income tax
expense 347,566 307,255 347,566 305,460
---------------------------------------------------
NET EARNINGS (LOSS) (80,661) (533,171) (127,436) (476,556)
---------------------------------------------------

DEFICIT, BEGINNING
OF PERIOD (35,775,990) (35,006,481) (35,729,215) (35,063,096)
---------------------------------------------------

DEFICIT, END OF PERIOD (35,856,651) (35,539,652) (35,856,651) (35,539,652)
---------------------------------------------------
---------------------------------------------------

EARNINGS (LOSS) PER
SHARE (basic and
diluted) ($0.00) ($0.00) ($0.00) ($0.00)
---------------------------------------------------
---------------------------------------------------


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


Expressed in Three Months ended Six Months ended
U.S. dollars December 31 December 31
2009 2008 2009 2008
---------------------------------------------------

Net earnings (loss) (80,661) (533,171) (127,436) (476,556)

Other comprehensive
(loss) income
Foreign currency
translation
adjustments 0 (367,732) 0 (400,981)
---------------------------------------------------

Comprehensive (loss)
income (80,661) (900,903) (127,436) (877,537)
---------------------------------------------------
---------------------------------------------------


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

Expressed in Three Months ended Six Months ended
U.S. dollars December 31 December 31
2009 2008 2009 2008
------------------------------------------------

CASH FLOWS FROM (USED
IN) OPERATING
ACTIVITIES
Net earnings (loss) $ (80,661) $ (533,171) $ (127,436) $ (476,556)
Items not affecting
cash
Amortization of
capital and
intangible assets 170,862 178,081 348,987 344,983
Stock-based
compensation 23,242 2,753 45,630 5,996
Gain on sale of
investments (4,952) - (4,952) -
Unrealized foreign
exchange loss (gain) (38,209) 27,913 (42,539) 36,032
Future income tax
expense (benefit) (347,566) (307,255) (347,566) (305,460)
-------------------------------------------------
Cash flow from (used in)
operations before other
items (277,284) (631,679) (127,876) (395,005)
Net change in non-cash
working capital items 41,236 2,213,837 (2,157,242) 1,828,665
-------------------------------------------------
(236,048) 1,582,158 (2,285,118) 1,433,660

CASH FLOWS FROM (USED IN)
INVESTING ACTIVITIES
Short term investments (567,558) - (2,300,835) -
Proceeds from
disposition of capital
assets 7,701 - 7,701 -
Additions to capital
assets (21,414) (106,511) (37,266) (209,989)
-------------------------------------------------
(581,271) (106,511) (2,330,400) (209,989)
-------------------------------------------------

CASH FLOWS FROM (USED IN)
FINANCING ACTIVITIES
Proceeds from issuance
of shares 3,876,257 - 3,876,257 -
Share issue costs (26,291) - (26,291) -
Purchase of company
shares - (25,088) - (25,088)
Proceeds from (Repayment
of) line of credit (503,051) - 2,558,445 (74,942)
Repayment of bank
overdraft - - - (127,214)
Repayment of Promissory
Notes - (20,000) - (40,000)
-------------------------------------------------
3,346,915 (45,088) 6,408,411 (267,244)
-------------------------------------------------

Effect of foreign
exchange rate on cash - (195,478) - (84,919)

Increase in cash and
cash equivalents 2,529,596 1,235,081 1,792,893 871,508

CASH and cash
equivalents, beginning
of period 1,265,827 1,136,432 2,002,530 1,500,005
-------------------------------------------------

CASH and cash
equivalents, end
of period $3,795,423 $2,371,513 $ 3,795,423 $2,371,513
-------------------------------------------------
-------------------------------------------------


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
    International: 001-206-979-6760
    or
    Versatile Systems Inc.
    Fraser Atkinson
    CFO
    1-800-262-1633
    www.versatile.com