VersaPay Corporation
TSX VENTURE : VPY

August 28, 2012 09:30 ET

VersaPay Announces 2012 Second Quarter and Year Results

TORONTO, ONTARIO--(Marketwire - Aug. 28, 2012) - VersaPay Corporation (TSX VENTURE:VPY) ("VersaPay" or the "Company"), a provider of merchant credit and debit card payment processing and e-mail money transfer (EMT) solutions, today announced its financial and operational results for the three and six month ended June 30, 2012. All amounts are in Canadian dollars unless otherwise noted.

Q2 2012 Highlights

  • Grew year over year revenues by 12% and grew recurring revenues by 13%
  • Adjusted EBITDA1 was $(0.3) million, as the Company continued investment in its cloud based electronic invoice presentment and payment platform
  • Launched VersaPay Payment Technology Solutions Inc., the Company's wholly subsidary operating in the United States
  • Announced new partnership with Century Payments

Q2 2012 Financial Summary2

Three months ending
June 30
Six months ending
June 30
2012 2011 2012 2011
Recurring Revenues 3 $ 4.2M $ 3.7M $ 8.1M $ 6.9M
Non-recurring revenue 4 $ 0.01M $ 0.05M $ 0.03M $ 0.1M
TOTAL Revenue $ 4.2M $ 3.8M $ 8.1M $ 7.1M
Cash Operating Expenses 5 $ 1.2M $ 1.0M $ 2.2M $ 1.8M
Adjusted EBITDA 1 $ (0.3)M $ (0.2)M $ (0.5)M $ (0.3)M
Net loss $ (0.4)M $ (0.3)M $ (0.7)M $ (0.6)M
June 30, 2012
Cash $1.8 M

"We are very pleased with our financial and operational results for the second quarter of 2012. Our revenue growth in the quarter highlights the benefits of our recurring revenue business model," said Bill McGill, CEO of VersaPay. "We continue to invest in our proprietary platform to drive future growth. While this investment has negatively impacted on our near term earnings, we are very encouraged by the feedback that we have been receiving from potential partners and customers and are optimistic about our ability to earn an attractive return on this investment."

Q2 and Year to Date 2012 Financial Review

Total revenues for Q2 2012 increased 12% to $4.2 million from $3.8 million in Q2 2011. Of this amount, recurring revenues for Q2 2012 increased 13% to $4.2 million from $3.7 million in Q2 2011. Total revenue for the six months ended June 30, 2012 increased 15% to $8.1 million from $7.1 million for the same period in 2011. Of this amount, recurring revenues for the six months ended June 30, 2012 increased 17% to $8.1 million from $6.9 million in 2011. 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) increased to $1.2 million from $1.0 million in Q2 2012 from the same period 2011. Cash operating expense for the six months ended June 30, 2012 increased 23% to $2.2 million from $1.8 million in 2011.

Adjusted EBITDA for Q2 2012 was $(0.3) million, compared to $(0.2) million in Q2 2011. For the six months ended June 30, 2012, Adjusted EBITDA was $(0.5) million, compared to $(0.3) million in 2011.

Loss from continuing operations for Q2 2012 was $(0.4) million. This compares to a loss from continuing operations of $(0.3) million for Q2 2011. For the six months ended June 30, 2012, loss from continuing operations was $(0.7) million, compared to $(0.6) million in 2011.

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

2 Condensed interim financial statements and MD&A for the three and six months ended June 30, 2012 will be available on the Company's website at 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 and share-based payments

Table A

Three months ending
June 30
Six months ending
June 30
2012 2011 2012 2011
Adjusted EBITDA 1 (298,393 ) (153,066 ) (513,845 ) (316,025 )
Stock-based compensation (31,933 ) (51,983 ) (57,087 ) (103,149 )
Interest expense (39,614 ) (38,576 ) (78,762 ) (73,747 )
Amortization (43,999 ) (35,151 ) (87,814 ) (81,551 )
Loss from continuing operations (413,939 ) (278,776 ) (737,508 ) (574,472 )

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.

June 30, 2012 December 31, 2011
$ $
ASSETS
Current
Cash and cash equivalents 1,836,665 559,497
Funds held for merchants 1,024,434 443,005
Receivables 504,445 417,154
Prepaid expenses 20,644 28,685
3,386,188 1,448,341
Non-current
Equipment 382,080 397,530
Intangible assets 68,287 97,564
3,836,555 1,943,435
LIABILITIES
Current
Accounts payable and accrued liabilities 494,805 535,741
Funds due to merchants 1,024,434 443,005
Current portion of obligations under finance lease 44,958 53,026
1,564,197 1,031,772
Non-current
Obligations under finance lease, net of current portion 44,869 52,872
Promissory note 601,717 576,569
Total liabilities 2,210,783 1,661,213
EQUITY
Share capital 9,908,992 7,891,062
Reserve 1,391,684 1,010,525
Warrants 372,260 690,291
Deficit (10,047,164 ) (9,309,656 )
Total equity 1,625,772 282,222
Total liabilities and equity 3,836,555 1,943,435
Three months ended,
June 30
Six months ended,
June 30
2012 2011 2012 2011
$ $ $ $
Revenue
Transaction processing fees 4,150,881 3,640,979 7,985,760 6,814,058
Product sales and other 14,270 53,629 27,633 132,348
VersaCard/EFT and EMT Fees 56,494 72,587 113,159 129,771
4,221,645 3,767,195 8,126,552 7,076,177
Expenses
Cost of services 3,326,965 2,915,847 6,399,172 5,471,942
Cost of products sold and other 7,680 42,547 20,135 116,660
VersaCard/EFT and EMT costs 38,498 36,259 76,181 62,807
Depreciation and amortization 43,999 35,151 87,814 81,551
Bank charges and interest 39,614 38,576 78,762 73,747
Consulting fees 71,916 48,900 165,569 63,750
General and administrative 114,536 79,842 241,186 175,654
Marketing and promotion 11,774 45,941 34,373 84,244
Professional fees 115,632 126,057 204,172 196,156
Rent and occupancy 80,141 72,109 168,515 143,680
Research and development 108,135 13,080 183,106 22,720
Salaries and benefits 560,274 442,090 982,121 865,000
Share based payments 31,933 51,983 57,087 103,149
Telecom and wireless connection fees 59,518 66,424 121,937 135,575
Travel 24,969 31,165 43,930 54,014
4,635,584 4,045,971 8,864,060 7,650,649
Net loss and comprehensive loss for the period (413,939 ) (278,776 ) (737,508 ) (574,472 )
Loss per share
Basic $ (0.03 ) $ (0.02 ) $ (0.05 ) $ (0.04 )
Diluted $ (0.03 ) $ (0.02 ) $ (0.05 ) $ (0.04 )
Weighted average number of common shares outstanding, basic and diluted 15,287,438 13,009,044 14,208,879 12,960,151
Issued
Capital
Reserve Warrants Deficit Total
Equity
As at December 31, 2011 $ 7,891,062 $ 1,010,525 $ 690,291 $ (9,309,656 ) $ 282,222
Net loss for the period - - - (737,508 ) (737,508 )
Shares Issued 1,780,202 - 54,269 - 1,834,471
Exercise of options 237,728 (48,228 ) - - 189,500
Share based payments - 57,087 - - 57,087
Warrants expired - 372,300 (372,300 ) - -
At June 30, 2012 $ 9,908,992 $ 1,391,684 $ 372,260 $ (10,047,164 ) $ 1,625,772
Issued
Capital
Reserve 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 - - - (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
Six months ended, June 30
2012 2011
$ $
Cash Provided By (Used In) Operating Activities
Net loss for the period (737,508 ) (574,472 )
Items not affecting cash:
Depreciation of equipment 58,538 53,631
Amortization of intangible assets 29,276 27,920
Interest accreted on promissory note 25,148 19,617
Share based payments 57,087 103,149
Change in non-cash working capital items
Receivables (87,291 ) (102,032 )
Prepaid expenses 8,041 (1,871 )
Accounts payable and accrued liabilities (40,936 ) 70,074
(687,645 ) (403,984 )
Cash (Used in) in Investing Activities
Acquisition of equipment (24,214 ) (68,297 )
(24,214 ) (68,297 )
Cash Provided by (Used In) Financing Activities
Issuance of common shares, net of issuance costs 2,023,972 17,000
Finance lease payments (34,945 ) (26,298 )
1,989,027 (9,298 )
Increase (decrease) in cash and cash equivalents 1,277,168 (481,579 )
Cash and cash equivalents, beginning of period 559,497 1,121,816
Cash and cash equivalents, end of period 1,836,665 640,237

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