VersaPay Corporation
TSX VENTURE : VPY

June 22, 2011 09:22 ET

VersaPay Announces 2011 First Quarter Results

TORONTO, ONTARIO--(Marketwire - June 22, 2011) - VersaPay Corporation (TSX VENTURE:VPY) ("VersaPay" or the "Company"), a provider of merchant credit, debit, gift and loyalty card payment processing and e-mail money transfer (EMT) solutions, today announced its financial and operational results for the three months ended March 31, 2011. All amounts are in Canadian dollars unless otherwise noted.

Q1 2011 Highlights

  • Completed the Corus Radio integration
  • Grew recurring revenues 30% year over year
  • Improvement in Adjusted EBITDA1 to $(0.2) million from $(0.5) million in Q1 2010, as a result of Company's sales growth and cost-cutting initiatives
  • Held sequential Adjusted EBITDA flat despite Q1 being VersaPay's seasonally softest quarter
  • Began investing in sales and marketing of the VersaPay EMT product

Q1 2011 Financial Summary2

Q1 2011Q1 2010
Recurring Revenues 3$3.2M$2.5M
Non-recurring revenue 4$.08M$.1M
TOTAL Revenue$3.3M$2.6M
Cash Operating Expenses 5$0.9M$1.2M
Adjusted EBITDA$(0.2)M$(0.5)M
Loss from continuing operations$(0.3)M$(0.8)M
Cash$0.9M

"Our improved top line and Adjusted EBITDA results for the quarter reflect the continued expansion of our merchant relationships," said Bill McGill, CEO of VersaPay. "In addition, our Adjusted EBITDA benefited from the cost controls we began implementing 2010. During the quarter, we also laid the foundations for future growth with our VersaPay EMT product by investing in sales and market and product development. Looking ahead, we believe that we are positioned to build upon these results in the coming periods."

Q1 2011 Financial Review

Total revenue for Q1 2011 increased 26% to $3.3 million from $2.6 million in Q1 2010. Of this amount, recurring revenue for Q1 2011 increased 30% to $3.2 million from $2.5 million in Q1 2010. The year-over-year improvement was driven primarily by growth in the Company's transaction processing fees.

Cash operating expense (excluding amortization and share-based payments) decreased 26% to $0.9 million from $1.2 million in Q1 2011 from the same period 2010.

Adjusted EBITDA for Q1 2011 was $(0.2) million, compared to $(0.5) million in Q1 2010, reflecting the Company's revenue growth and the implementation of cost control measures.

Loss from continuing operations for Q1 2011 was $(0.3) million. This compares to a loss from continuing operations of $(0.8) million for Q1 2010.

  1. Adjusted EBITDA is defined as Earnings Before Interest, Taxes, Depreciation, Amortization and Share-based payments. See table A.

  2. A complete set of financial statements and notes and MD&A for the period ended March 31, 2011 will be available on the Company's website at www.versapay.comand on SEDAR.

  3. Defined as Transaction processing fees + VersaCard/EMT fees.

  4. Defined as Product sales (point-of-sale devices) and other.

  5. Defined as operating expense excluding amortization and share-based payments.

Table A

Q1 2011Q1 2010
Adjusted EBIDTA(162,958)(525,863)
Stock-based compensation(51,165)(297,263)
Interest expense(35,172)14,438
Amortization(46,400)(25,739)
Loss from continuing operations(295,696)(834,427)

About VersaPay

VersaPay's financial technology enables businesses and consumers across Canada to accept and process credit, debit and gift card transactions. As a payment services and financial technology company serving more than 2,500 Canadian businesses, VersaPay, in conjunction with its partners, provides the hardware, technology, infrastructure and support services that businesses of all types require to accept and process electronic payments from their consumers and clients.

While its core business is payment processing services, VersaPay also provides enhanced financial technology solutions such as VersaPay EMT - the Company's proprietary Electronic Bill Presentment and Payment solution - which enables merchants and consumers to easily transact with one another.

VersaPay is headquartered in Vancouver, Canada and has operations in Toronto and Montreal. To learn more about VersaPay, visit http://www.versapay.com.

Forward Looking and Other Cautionary Statements

This news release contains forward-looking statements and information that are based on the beliefs of management and reflect the Company's current expectations. When used in this news release, the words "estimate", "project", "belief", "anticipate", "intend", "expect", "plan", "predict", "may" or "should" and the negative of these words or such variations thereon or comparable terminology, are intended to identify forward-looking statements and information. Such statements and information reflect the current view of the Company with respect to risks and uncertainties that may cause actual results to differ materially from those contemplated in those forward-looking statements and information.

By their nature, forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements, or other future events, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, risks relating to the speculative nature of the Company's business, the Company's formative stage of development and the Company's financial position. Forward-looking statements are made based on management's beliefs, estimates and opinions on the date that statements are made and the Company undertakes no obligation to update forward looking statements if these beliefs, estimates and opinions or other circumstances should change.

Investors are cautioned against attributing undue certainty to forward-looking statements. There are a number of important factors that could cause the Company's actual results to differ materially from those indicated or implied by forward-looking statements and information. Such factors include, among others, risks related to following: the Company's financial position and the potential need for future financings, the ability of the Company to maintain its relationship with its strategic partner for payment processing, the efforts and abilities of the senior management team, the ability of the Company to attract and retain skilled management, competition in the payment processing industry, and the Company's ability to respond to technological change and protect its intellectual property rights.

The Company cautions that the foregoing list of material factors is not exhaustive. When relying on the Company's forward-looking statements and information to make decisions, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. The Company has assumed a certain progression, which may not be realized. It has also assumed that the material factors referred to in the previous paragraph will not cause such forward-looking statements and information to differ materially from actual results or events. There can be no assurance that such assumptions will reflect the actual outcome of such items or factors.

THE FORWARD-LOOKING INFORMATION CONTAINED IN THIS NEWS RELEASE REPRESENTS THE EXPECTATIONS OF THE COMPANY AS OF THE DATE OF THIS NEWS RELEASE AND, ACCORDINGLY, IS SUBJECT TO CHANGE AFTER SUCH DATE. READERS SHOULD NOT PLACE UNDUE IMPORTANCE ON FORWARD-LOOKING INFORMATION AND SHOULD NOT RELY UPON THIS INFORMATION AS OF ANY OTHER DATE. WHILE THE COMPANY MAY ELECT TO, IT DOES NOT UNDERTAKE TO UPDATE THIS INFORMATION AT ANY PARTICULAR TIME EXCEPT AS REQUIRED IN ACCORDANCE WITH APPLICABLE SECURITIES LEGISLATION.

Unaudited Consolidated Statement of Financial Position

As atAs atAs at
March 31December 31January 1
201120102010
$$$
(note 20)(note 20)
ASSETS
Current
Cash884,4691,121,816206,763
Funds held for merchants741,669474,177365,518
Receivables458,313465,341307,675
Prepaid expenses17,75018,68617,133
Current assets of discontinued operations (note 19)--29,133
2,102,2012,080,020926,222
Share issue costs (note 18)--425,536
Equipment (note 7)368,181360,837318,735
Intangible assets (note 8)126,803140,763101,592
Non-current assets of discontinued operations (note 19)--161,012
2,597,1852,581,6201,933,097
LIABILITIES
Current
Accounts payable and accrued liabilities391,243440,7841,259,384
Funds due to merchants741,669474,177365,518
Loan payable (note 14)--225,000
Current portion of obligation under capital lease (note 9)62,96346,25736,819
Current liabilities of discontinued operations (note 19)--76,728
1,195,875961,2181,963,449
Obligation under capital lease, net of current portion (note 9)89,90990,62897,546
Promissory Note (note 17)543,899534,741-
1,829,6831,586,5872,060,995
Non-controlling interest in Positive Inc.--7,569
SHAREHOLDERS' EQUITY (DEFICIENCY)
Share capital (note 11)7,495,0627,423,0024,872,073
Shares subscriptions received (note 11)--288,958
Contributed surplus (note 12)861,750865,645687,955
Warrants (note 11)696,619696,619-
Deficit(8,285,929)(7,990,233)(5,984,453)
767,502995,033(135,467)
2,597,1852,581,6201,933,097

Unaudited Consolidated Statement of Loss and Comprehensive Loss

3 months ended March 31
20112010
$$
(note 20)
Revenue
Transaction processing fees3,173,0792,447,262
Product sales and other78,720144,167
VersaCard/EFT fees57,18444,853
3,308,9832,636,282
Expenses
Cost of services2,233,4701,609,696
Cost of products sold and other396,738370,507
VersaCard/EFT costs26,54911,561
Amortization46,40025,739
Bank charges and interest35,172(14,438)
Consulting fees24,49092,084
General and administrative95,811128,064
Marketing and promotion38,30331,439
Professional fees70,09988,323
Rent and occupancy71,57167,494
Salaries and benefits422,911600,209
Share based payments (note 11)51,165297,263
Telecom and wireless connection fees69,150122,177
Travel22,85040,591
3,604,6793,470,709
Operating Loss from Continuing Operations(295,696)(834,427)
Income from discontinued operations (note 19)-8,717
Non-controlling interest-(4,237)
Net loss and comprehensive loss for the period(295,696)(829,947)

Unaudited Consolidated Statement of Shareholders' Equity

Share
IssuedsubscriptionsContributedTotal Equity
CapitalreceivedSurplusWarrantsDeficit(note 20)
As at December 31, 20107,423,002-865,645696,619(7,990,233)995,033
Net Loss for the period---(295,696)(295,696)
Exercise of Options72,060-(55,060)--17,000
Share Based Payments--51,165--51,165
At March 31, 20117,495,062-861,750696,619(8,285,929)767,502
Share
IssuedsubscriptionsContributedTotal Equity
CapitalreceivedSurplusWarrantsDeficit(note 20)
As at January 1, 20104,872,073288,958687,955-(5,984,453)(135,467)
Net Loss for the period----(829,947)(829,947)
Exchange of warrants on IPO----(42,064)(42,064)
Issued (net)2,146,732(288,958)550,583--2,408,357
Share Based Payments--297,263--297,263
At March 31, 20107,018,805-1,535,801-(6,856,464)1,698,142

Unaudited Consolidated Statement of Cash Flow

3 Months ended March 31,
20112010
$$
(note 20)
Cash Provided By (Used In) Operating Activities
Net loss for the period(295,696)(829,947)
Items not affecting cash:
- amortization of equipment32,44025,739
- amortization of intangible assets13,960-
- interest accreted on promissory note9,158-
- cancellation of JG Capital loan interest-14,271
- share based payments51,165297,263
- non-controlling interest-4,237
- discontinued operations-(8,717)
Change in non-cash working capital items
receivables7,028(104,732)
prepaid expenses936-
accounts payable and accrued liabilities(49,541)(626,755)
(230,550)(1,228,641)
Cash Provided by (Used In) Financing Activities
issuance of common shares,
net of issuance costs17,0002,537,131
capital lease payments(12,058)(11,730)
4,9422,525,401
Cash (Used in) in Investing Activities
acquisition of equipment(11,739)(63,255)
developed technology-(34,760)
(11,739)(98,015)
(Decrease) increase in cash and cash equivalents(237,347)1,198,745
Cash and cash equivalents, beginning of period1,121,816206,763
Cash and cash equivalents, end of period884,4691,405,508
Supplementary Cash Flow Information:

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