VersaPay Corporation
TSX VENTURE : VPY

August 29, 2011 16:01 ET

VersaPay Announces 2011 Second Quarter and Year to Date Results

TORONTO, ONTARIO--(Marketwire - Aug. 29, 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 month and six month periods ended June 30, 2011. All amounts are in Canadian dollars unless otherwise noted.

Q2 2011 Highlights
  • Grew recurring revenues 25% year over year

  • Improvement in Adjusted EBITDA1 to $(0.2) million from $(0.5) million in Q2 2010, as a result of Company's sales growth and cost-cutting initiatives

  • Continued to invest in the VersaPay EMT product
Q2 and Year to Date 2011 Financial Summary2
three months
ending June 30
six months
ending June 30
Q2 2011 Q2 2010 Q2 YTD 2011 Q2 YTD 2010
Recurring Revenues 3 $3.7M $3.0M $6.9M $5.5M
Non-recurring revenue 4 $.05M $.1M $.1M $.3M
TOTAL Revenue $3.8M $3.1M $7.1M $5.7M
Cash Operating Expenses 5 $0.9M $1.3M $1.7M $2.4M
Adjusted EBITDA $(0.2)M $(0.5)M $(0.3)M $(1.0)M
Loss from continuing operations $(0.3)M $(0.6)M $(0.6)M $(1.8)M
Cash $0.6M

"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, despite the increase in professional fees due to the Company's conversion to IFRS and expenses related to our first Annual General Meeting in the second quarter, our Adjusted EBITDA benefited from the cost controls we began implementing 2010. During the quarter, we also continued to lay the foundations for future growth with our VersaPay by continuing to invest in sales and marketing and product development. Looking ahead, we believe that we are positioned to build upon these results in the coming periods."

Q2 and Year to Date 2011 Financial Review

Total revenue for Q2 2011 increased 23% to $3.8 million from $3.1 million in Q2 2010. Of this amount, recurring revenue for Q2 2011 increased 25% to $3.7 million from $3.0 million in Q2 2010. The year-over-year improvement was driven primarily by growth in the Company's transaction processing fees.

Cash operating expense (excluding amortization, listing expense and share-based payments) decreased 26% to $0.9 million from $1.3 million in Q2 2011 from the same period 2010.

Adjusted EBITDA for Q2 2011 was $(0.2) million, compared to $(0.5) million in Q2 2010, reflecting the Company's revenue growth and the implementation of cost control measures.

Loss from continuing operations for Q2 2011 was $(0.3) million. This compares to a loss from continuing operations of $(0.6) million for Q2 2010.

1 Adjusted EBITDA is defined as Earnings Before Interest, Taxes, Depreciation, Amortization, Listing expense and Share-based payments. See table A.
2 A complete set of financial statements and notes and MD&A for the period ended June 30, 2011 will be available on the Company's website at http://www.versapay.com/ and 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, interest, listing expense and share-based payments
Table A
3 months ended June 30, 6 months ended June 30,
2011 2010 2011 2010
Adjusted EBITDA (153,066 ) (516,502 ) (316,025 ) (1,042,365 )
Stock-based compensation (51,983 ) (57,478 ) (103,149 ) (354,741 )
Listing expense - - - (396,000 )
Interest expense (38,576 ) (2,246 ) (73,747 ) 12,192
Amortization (35,151 ) (25,833 ) (81,551 ) (51,571 )
Loss from continuing operations (278,776 ) (602,059 ) (574,472 ) (1,832,485 )

Executive Officers

The Company also announced that following the re-election of the Board of Directors at the Company's Annual General Meeting on June 20th, 2011, the Board has reappointed the following officers:

Bill McGill - Chief Executive Officer
Patrick MacDonald - President
Kevin Short - Chief Information Officer

In addition, VersaPay's Board of Directors has appointed David Chan as Chief Financial Officer of the Company. David has been a Charted Accountant for 16 years and has 13 years corporate finance advisory experience. In connection with David's appointment, he was granted stock options to purchase 100,000 common shares in the capital of the Company under its share option plan. The options are exercisable at a price of $0.95 per share on or before August 29, 2016, subject to the approval of the TSX Venture Exchange.

Jeff Sheremeta, one of VersaPay's founding partners, stepped down as Chief Investment Officer, but will continue to work with the Company in a consulting role. The Board thanked Mr. Sheremeta for continuing to serve the Company.

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 at
As at December 31
June 30 (restated)
2011 2010
$ $
(note 19)
ASSETS
Current
Cash 640,237 1,121,816
Funds held for merchants 1,390,570 474,177
Receivables 567,373 465,341
Prepaid expenses 20,557 18,686
2,618,737 2,080,020
Equipment (note 7) 403,325 360,837
Intangible assets (note 8) 112,843 140,763
3,134,905 2,581,620
LIABILITIES
Current
Accounts payable and accrued liabilities 510,858 440,784
Funds due to merchants 1,390,570 474,177
Current portion of obligation under capital lease (note 9) 65,589 46,257
1,967,017 961,218
Obligation under capital lease, net of current portion (note 9) 72,820 90,628
Promissory Note (note 16) 554,358 534,741
2,594,195 1,586,587
SHAREHOLDERS' EQUITY (DEFICIENCY)
Share capital (note 11) 7,891,062 7,819,002
Contributed surplus (note 12) 919,383 865,645
Warrants (note 11) 690,970 696,619
Deficit (8,960,705 ) (8,386,233 )
540,710 995,033
3,134,905 2,581,620
Unaudited Consolidated Statement of Loss and Comprehensive Loss
3 months ended June 30 6 months ended June 30
2011 2010 2011 2010
$ $ $ $
(note 19) (note 19)
Revenue
Transaction processing fees 3,640,979 2,908,948 6,814,058 5,356,210
Product sales and other 53,629 108,856 132,348 253,024
VersaCard/EFT and EMT Fees 72,587 52,319 129,771 97,172
3,767,195 3,070,123 7,076,177 5,706,406
Expenses
Cost of services 2,581,814 1,974,416 4,815,284 3,584,112
Cost of products sold and other 376,580 343,313 773,318 713,820
VersaCard/EFT costs 36,259 15,453 62,807 27,014
Amortization 35,151 25,833 81,551 51,571
Bank charges and interest 38,576 2,246 73,747 (12,192 )
Consulting fees 61,980 55,045 86,470 147,129
General and administrative 79,842 89,612 175,654 187,818
Listing expense (note 17) - - - 396,000
Marketing and promotion 45,941 48,948 84,244 110,246
Professional fees 126,057 251,296 196,156 339,619
Rent and occupancy 72,109 72,159 143,680 139,653
Salaries and benefits 442,090 643,074 865,000 1,243,283
Share based payments (note 11) 51,983 57,478 103,149 354,741
Telecom and wireless connection fees 66,424 71,990 135,575 194,167
Travel 31,165 21,319 54,014 61,910
4,045,971 3,672,182 7,650,649 7,538,891
Operating Loss from Continuing Operations (278,776 ) (602,059 ) (574,472 ) (1,832,485 )
Income from discontinued operations (note 18) - (32,221 ) - (23,504 )
Non-controlling interest - 5,905 - 1,667
Net loss and comprehensive loss for the period (278,776 ) (628,375 ) (574,472 ) (1,854,322 )
Unaudited Consolidated Statement of Shareholders' Equity

Issued Capital
Share subscriptions received
Contributed Surplus


Warrants


Deficit

Total Equity
(note 19)
As at December 31, 2010 7,819,002 - 865,645 696,619 (8,386,233 ) 995,033
Net Loss for the period - - - - (574,472 ) (574,472 )
Exercise of Options 72,060 - (55,060 ) - - 17,000
Share Based Payments - - 103,149 - - 103,149
Warrants expired - - 5,649 (5,649 ) - -
At June 30, 2011 7,891,062 - 919,383 690,970 (8,960,705 ) 540,710

Issued Capital
Share subscriptions received
Contributed Surplus


Warrants


Deficit

Total Equity
(note 19
)
As at January 1, 2010 4,872,073 288,958 687,955 - (5,984,453 ) (135,467 )
Net Loss for the period - - - - (1,854,322 ) (1,854,322 )
Listing expense 396,000 - - - - 396,000
Revaluation of warrants on amalgamation - - - 42,064 (42,064 ) -
Value of warrants issued on amalgamation (15,040 ) - - 15,040 - -
Value of warrants issued in private placement (357,260 ) - - 357,260 - -
Warrants exercised - - - (23,418 ) - (23,418 )
Warrants forfeited - - - (2,786 ) - (2,786 )
Issued (net) 2,564,876 (288,958 ) 49,563 - - 2,325,481
Share Based Payments - - 354,741 - - 354,741
At June 30, 2010 7,460,649 - 1,092,259 388,160 (7,880,839 ) 1,060,229
Unaudited Consolidated Statement of Cash Flow
6 Months ended June 30,
2011 2010
$ $
(note 19)
Cash Provided By (Used In) Operating Activities
Net loss for the period (574,472 ) (1,854,322 )
Items not affecting cash:
- amortization of equipment 53,631 51,571
- amortization of intangible assets 27,920 -
- interest accreted on promissory note 19,617 -
- cancellation of JG Capital loan interest - 14,271
- share based payments 103,149 354,741
- non-controlling interest - (7,569 )
- discontinued operations - (10,212 )
- listing expenses - 396,000
Change in non-cash working capital items
receivables (102,032 ) (138,120 )
prepaid expenses (1,871 ) (3,882 )
accounts payable and accrued liabilities 70,074 (540,241 )
(403,984 ) (1,737,763 )
Cash Provided by (Used In) Financing Activities
issuance of common shares, net of issuance costs 17,000 2,592,263
capital lease payments (26,298 ) (17,658 )
(9,298 ) 2,574,605
Cash (Used in) in Investing Activities
acquisition of equipment (68,297 ) (94,132 )
developed technology - (65,928 )
(68,297 ) (160,060 )
(Decrease) increase in cash and cash equivalents (481,579 ) 676,782
Cash and cash equivalents, beginning of period 1,121,816 206,763
Cash and cash equivalents, end of period 640,237 883,545

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

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