VersaPay Corporation
TSX VENTURE : VPY

November 29, 2011 09:15 ET

VersaPay Announces 2011 Third Quarter and Year to Date Results

TORONTO, ONTARIO--(Marketwire - Nov. 29, 2011) - VersaPay Corporation (TSX VENTURE:VPY) ("VersaPay" or the "Company"), a provider of merchant credit, debit, gift and loyalty card payment processing and electronic bill presentation and payment solutions, today announced its financial and operational results for the three month and nine month periods ended September 30, 2011. All amounts are in Canadian dollars unless otherwise noted.

Q3 2011 Highlights

  • Delivered positive quarterly Adjusted EBITDA(1) and net income for the first time since VersaPay's inception
  • Recurring revenues grew 23% year over year reflecting our continued success in adding new customers and increasing transaction volumes from existing customers
  • Improvement in Adjusted EBITDA(1) to $0.1 million from $(0.2) million in Q3 2010, as a result of Company's sales growth and cost-cutting initiatives
  • Continued to invest in the VersaPay EMT product

Q3 and Year to Date 2011 Financial Summary(2)

three months ending Sept 30 nine months ending Sept 30
Q3 2011 Q3 2010 Q3 YTD
2011
Q3 YTD
2010
Recurring Revenues (3) $ 4.2M $ 3.4M $ 11.2M $ 8.9M
Non-recurring revenue (4) $ .08M $ .1M $ .2M $ .4M
TOTAL Revenue $ 4.3M $ 3.6M $ 11.4M $ 9.3M
Cash Operating Expenses (5) $ 0.8M $ 0.9M $ 2.5M $ 2.1M
Adjusted EBITDA (1) $ .1M $ (0.2)M $ (0.2)M $ (1.2)M
Income/loss from continuing operations $ .01M $ (0.3)M $ (0.6)M $ (2.1)M
Cash $ 0.7M

"Despite continuing to invest heavily in future growth, VersaPay delivered positive Adjusted EBITDA(1) and Net Income for the quarter" said Bill McGill, CEO of VersaPay. "This important accomplishment is a direct result of the hard work and dedication of our employees and our continued focus on cost management." Mr. McGill continued, "We believe that our strategy of using our proprietary technology and partnerships to create deep relationships with merchants will allow us to continue to build on these results."

Q3 and Year to Date 2011 Financial Review

Total revenue for Q3 2011 increased 20% to $4.3 million from $3.6 million in Q3 2010. Of this amount, recurring revenue for Q3 2011 increased 23% to $4.2 million from $3.4 million in Q3 2010. The year-over-year improvement was driven primarily by growth in the Company's transaction processing fees.

Cash operating expense (excluding amortization, interest, listing expense and share-based payments) decreased 18% to $0.8 million from $0.9 million in Q3 2011 from the same period 2010.

Adjusted EBITDA(1) for Q3 2011 was $0.1 million, compared to $(0.2) million in Q3 2010, reflecting the Company's revenue growth and the implementation of cost control measures.

Income from continuing operations for Q3 2011 was $0.01 million. This compares to a loss from continuing operations of $(0.3) million for Q3 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 September 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
Sept 30,
9 months ended
Sept 30,
2011 2010 2011 2010
Adjusted EBITDA (1) 146,979 (196,672 ) (169,046 ) (1,239,035 )
Stock-based compensation (48,271 ) (51,390 ) (151,420 ) (406,131 )
Listing expense - - - (396,000 )
Interest expense (38,272 ) (2,639 ) (112,019 ) 9,552
Amortization (46,378 ) (48,245 ) (127,929 ) (99,817 )
Loss from continuing operations 14,058 (298,946 ) (560,414 ) (2,131,431 )

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
September 30
As at
December 31
(restated)
2011 2010
$ $
ASSETS
Current
Cash 709,905 1,121,816
Funds held for merchants 859,332 474,177
Receivables 500,420 465,341
Prepaid expenses 19,621 18,686
2,089,278 2,080,020
Equipment 382,721 360,837
Intangible assets 103,633 140,763
2,575,632 2,581,620
LIABILITIES
Current
Accounts payable and accrued liabilities 425,873 440,784
Funds due to merchants 859,332 474,177
Current portion of obligation under capital lease 59,355 46,257
1,344,560 961,218
Obligation under capital lease, net of current portion 62,915 90,628
Promissory Note 565,119 534,741
1,972,594 1,586,587
SHAREHOLDERS' EQUITY (DEFICIENCY)
Share capital 7,891,062 7,819,002
Contributed surplus 968,332 865,645
Warrants 690,291 696,619
Deficit (8,946,647 ) (8,386,233 )
603,038 995,033
2,575,632 2,581,620

Unaudited Consolidated Statement of Loss and Comprehensive Loss

3 months ended
September 30
9 months ended
September 30
2011 2010 2011 2010
$ $ $ $
Revenue
Transaction processing fees 4,164,288 3,387,064 10,978,346 8,743,275
Product sales and other 80,315 148,700 212,663 401,723
VersaCard/EFT and EMT Fees 71,311 47,222 201,082 144,393
4,315,914 3,582,986 11,392,091 9,289,391
Expenses
Cost of services 2,963,053 2,355,313 7,778,337 5,939,424
Cost of products sold and other 397,813 459,442 1,171,130 1,173,262
VersaCard/EFT costs 39,363 22,299 102,171 49,313
Amortization 46,378 48,245 127,929 99,817
Bank charges and interest 38,272 2,639 112,019 (9,552 )
Consulting fees 72,632 27,511 159,102 174,640
General and administrative 76,544 88,506 252,199 276,323
Listing expense - - - 396,000
Marketing and promotion 42,475 29,296 126,719 139,542
Professional fees 35,480 138,921 231,636 478,540
Rent and occupancy 72,109 69,627 215,789 209,280
Salaries and benefits 362,602 457,133 1,227,602 1,700,416
Share based payments 48,271 51,390 151,420 406,131
Telecom and wireless connection fees 78,869 111,398 214,443 305,565
Travel 27,995 20,212 82,009 82,121
4,301,856 3,881,932 11,952,505 11,420,822
Operating Income (Loss) from Continuing Operations 14,058 (298,946 ) (560,414 ) (2,131,431 )
Income from discontinued operations - 50,000 - 26,496
Non-controlling interest - - - 1,667
Net Income (Loss) and Comprehensive Loss for the Period 14,058 (248,946 ) (560,414 ) (2,103,268 )

Unaudited Consolidated Statement of Shareholders' Equity

Issued
Capital
Share
subscriptions
received
Contributed
Surplus
Warrants Deficit Total
Equity
As at December 31, 2010 7,819,002 - 865,645 696,619 (8,386,233 ) 995,033
Net Loss for the period - - - - (560,414 ) (560,414 )
Exercise of Options 72,060 - (55,060 ) - - 17,000
Share Based Payments - - 151,420 - - 151,420
Warrants expired - - 6,328 (6,328 ) - -
At September 30, 2011 7,891,062 - 968,332 690,291 (8,946,647 ) 603,038
Issued
Capital
Share
subscriptions
received
Contributed
Surplus
Warrants Deficit Total
Equity
As at January 1, 2010 4,872,073 288,958 687,955 - (5,984,453 ) (135,467 )
Net Loss for the period - - - - (2,103,268 ) (2,103,268 )
Exercise of Options 25,500 25,500
Reallocation of contributed surplus upon exercise of stock options 86,394 86,394
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 (282,708 ) (36,831 ) - - 2,245,337
Share Based Payments - - 406,131 - - 406,131
At September 30, 2010 7,572,543 6,250 1,057,255 388,160 (8,129,785 ) 894,423

Unaudited Consolidated Statement of Cash Flow

9 Months ended
September 30,
2011 2010
$ $
Cash Provided By (Used In) Operating Activities
Net loss for the period (560,414 ) (2,103,268 )
Items not affecting cash:
- amortization of equipment 85,799 85,857
- amortization of intangible assets 42,130 13,960
- interest accreted on promissory note 30,378 -
- cancellation of JG Capital loan interest - 14,271
- share based payments 151,420 406,131
- non-controlling interest - (7,569 )
- discontinued operations - (10,212 )
- listing expenses - 396,000
Change in non-cash working capital items
receivables (35,079 ) (129,767 )
prepaid expenses (935 ) (2,493 )
accounts payable and accrued liabilities (14,911 ) (643,316 )
(301,612 ) (1,980,406 )
Cash Provided by (Used In) Financing Activities
issuance of common shares, net of issuance costs 17,000 2,624,013
capital lease payments (42,437 ) (31,671 )
(25,437 ) 2,592,342
Cash (Used in) in Investing Activities
acquisition of equipment (79,862 ) (96,509 )
intangible assets (5,000 ) (65,928 )
(84,862 ) (162,437 )
(Decrease) increase in cash and cash equivalents (411,911 ) 449,499
Cash and cash equivalents, beginning of period 1,121,816 206,763
Cash and cash equivalents, end of period 709,905 656,262

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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