VersaPay Corporation

TSX VENTURE : VPY


November 27, 2012 09:30 ET

VersaPay Announces 2012 Third Quarter and Year Results

TORONTO, ONTARIO--(Marketwire - Nov. 27, 2012) - VersaPay Corporation (TSX VENTURE:VPY) ("VersaPay" or the "Company"), a provider of merchant credit and debit card payment processing and electronic money transfer (EMT) and electronic invoice presentment and payment (EIPP) solutions, today announced its financial and operational results for the three and nine month ended September 30, 2012. All amounts are in Canadian dollars unless otherwise noted.

Q3 2012 Highlights

  • Grew year over year revenues by 7% and grew recurring revenues by 8%

  • Adjusted EBITDA1 was $(0.09) million, as the Company continued investment in its cloud based electronic invoice presentment and payment platform

  • Launched the electronic invoicing feature on its proprietary platform, creating a cloud based electronic invoice presentment and payment solution for businesses.

  • Announced, after the quarter, a strategic marketing partnership with MasterCard International Incorporated to increase MasterCard volumes in the B2B market.
Q3 2012 Financial Summary2
Three months ending September 30 Nine months ending September 30
2012 2011 2012 2011
Recurring Revenues 3 $4.6M $4.2M $12.7M $11.2M
Non-recurring revenue 4 $0.03M $0.08M $0.06M $0.2M
TOTAL Revenue $4.2M $3.8M $12.7M $11.4M
Cash Operating Expenses 5 $1.1M $1.0M $3.5M $2.9M
Adjusted EBITDA 1 $(0.09)M $0.1M $(0.6)M $(0.2)M
Income(loss) from continuing operations $(0.2)M $0.01M $(1.0)M $(0.6)M
September 30, 2012
Cash $1.7 M

"Our financial results in the third quarter of 2012 were driven primarily by our credit card processing business," said Bill McGill, CEO of VersaPay. "We continue to invest in our proprietary platform to drive future growth, and while this investment has negatively impacted on our near term earnings, we are very encouraged by the recent achievement of critical milestones. As a result, we are optimistic about our ability to earn an attractive return on this investment."

Q3 and Year to Date 2012 Financial Review

Total revenues for Q3 2012 increased 7% to $4.6 million from $4.3 million in Q3 2011. Of this amount, recurring revenues for Q3 2012 increased 8% to $4.6 million from $4.2 million in Q3 2011. Total revenue for the nine months ended September 30, 2012 increased 12% to $12.7 million from $11.4 million for the same period in 2011. Of this amount, recurring revenues for the nine months ended September 30, 2012 increased 13% to $12.7 million from $11.1 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 $1.1 million from $0.9 million in Q3 2012 from the same period 2011. Cash operating expense for the nine months ended September 30, 2012 increased 20% to $3.5 million from $2.9 million in 2011.

Adjusted EBITDA for Q3 2012 was $(0.09) million, compared to $0.1 million in Q3 2011. For the nine months ended September 30, 2012, Adjusted EBITDA was $(0.6) million, compared to $(0.2) million in 2011.

Loss from continuing operations for Q3 2012 was $(0.2) million. This compares to an income from continuing operations of $0.01 million for Q3 2011. For the nine months ended September 30, 2012, loss from continuing operations was $(1.0) 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 nine months ended September 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 September 30 Nine months ending September 30
2012 2011 2012 2011
Adjusted EBITDA 1 (85,720 ) 146,979 (599,563 ) (169,046 )
Stock-based compensation (76,581 ) (48,271 ) (133,669 ) (151,420 )
Interest expense (39,229 ) (38,272 ) (117,992 ) (112,019 )
Amortization (42,177 ) (46,378 ) (129,991 ) (127,929 )
Loss from continuing operations (243,707 ) 14,058 (981,215 ) (560,414 )

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 Toronto, Canada and has operations in Montreal, Vancouver and New York. 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.

September 30, 2012 December 31, 2011
$ $
ASSETS
Current
Cash and cash equivalents 1,666,258 559,497
Funds held for merchants 1,221,688 443,005
Receivables 443,583 417,154
Prepaid expenses 22,425 28,685
3,353,954 1,448,341
Non-current
Equipment 355,752 397,530
Intangible assets 53,649 97,564
3,763,355 1,943,435
LIABILITIES
Current
Accounts payable and accrued liabilities 335,592 535,741
Funds due to merchants 1,221,688 443,005
Current portion of obligations under finance lease 41,750 53,026
1,599,030 1,031,772
Non-current
Obligations under finance lease, net of current portion 36,666 52,872
Promissory note 615,512 576,569
Total liabilities 2,251,208 1,661,213
EQUITY
Share capital 9,981,720 7,891,062
Reserve 1,449,037 1,010,525
Warrants 372,261 690,291
Deficit (10,290,871 ) (9,309,656 )
Total equity 1,512,147 282,222
Total liabilities and equity 3,763,355 1,943,435
Three months ended, Sept 30 Nine months ended, Sept 30
2012 2011 2012 2011
$ $ $ $
Revenue
Transaction processing fees 4,505,703 4,164,288 12,491,462 10,978,346
Product sales and other 28,056 80,315 55,690 212,663
VersaCard/EFT and EMT Fees 69,214 71,311 182,373 201,082
4,602,973 4,315,914 12,729,525 11,392,091
Expenses
Cost of services 3,670,306 3,329,372 10,069,478 8,801,314
Cost of products sold and other 30,506 31,494 50,641 148,153
VersaCard/EFT and EMT costs 41,728 39,363 117,909 102,171
Depreciation and amortization 42,177 46,378 129,991 127,929
Bank charges and interest 39,229 38,272 117,992 112,019
Consulting fees 58,660 51,339 224,229 115,089
General and administrative 94,086 76,544 335,360 252,199
Marketing and promotion 10,182 42,475 44,515 126,719
Professional fees 96,681 35,480 300,853 231,636
Rent and occupancy 73,228 72,109 241,743 215,789
Research and development 91,069 21,293 274,174 44,013
Salaries and benefits 453,430 362,602 1,435,524 1,227,602
Share based payments 76,581 48,271 133,669 151,420
Telecom and wireless connection fees 61,019 78,869 182,895 214,443
Travel 7,798 27,995 51,767 82,009
4,846,680 4,301,856 13,710,740 11,952,505
Net Income (loss) and comprehensive income (loss) for the period (243,707 ) 14,058 (981,215 ) (560,414 )
Income (loss) per share
Basic $ (0.02 ) $ 0.00 $ (0.07 ) $ (0.04 )
Diluted $ (0.02 ) $ 0.00 $ (0.07 ) $ (0.04 )
Weighted average number of common shares outstanding, basic and diluted 15,337,498 13,009,044 14,587,852 12,977,291
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 - - - (981,215 ) (981,215 )
Shares Issued 1,780,202 - 54,270 - 1,834,472
Exercise of options 310,456 (67,456 ) - - 243,000
Share based payments - 133,668 - - 133,668
Warrants expired - 372,300 (372,300 ) - -
At September 30, 2012 $ 9,981,720 $ 1,449,037 $ 372,261 $ (10,290,871 ) $ 1,512,147
Issued Capital Reserve Warrants Deficit Total Equity
As at December 31, 2010 $ 7,819,002 $ 865,644 $ 696,619 $ (8,386,233 ) $ 995,032
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
Nine months ended, September 30
2012 2011
$ $
Cash Provided By (Used In) Operating Activities
Net loss for the period (981,215 ) (560,414 )
Items not affecting cash:
Depreciation of equipment 86,076 85,799
Amortization of intangible assets 43,915 42,130
Interest accreted on promissory note 38,942 30,378
Share based payments 133,669 151,420
Change in non-cash working capital items
Receivables (26,429 ) (35,079 )
Prepaid expenses 6,260 (935 )
Accounts payable and accrued liabilities (200,149 ) (14,911 )
(898,931 ) (301,612 )
Cash (Used in) in Investing Activities
Acquisition of equipment (25,424 ) (79,862 )
Intangible assets - (5,000 )
(25,424 ) (84,862 )
Cash Provided by (Used In) Financing Activities
Issuance of common shares, net of issuance costs 2,077,472 17,000
Finance lease payments (46,356 ) (42,437 )
2,031,116 (25,437 )
Increase (decrease) in cash and cash equivalents 1,106,761 (411,911 )
Cash and cash equivalents, beginning of period 559,497 1,121,816
Cash and cash equivalents, end of period 1,666,258 709,905

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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