VersaPay Corporation
TSX VENTURE : VPY

VersaPay Corporation

August 27, 2013 09:30 ET

VersaPay Announces 2013 Second Quarter and Year Results

TORONTO, ONTARIO--(Marketwired - Aug. 27, 2013) - VersaPay Corporation (TSX VENTURE:VPY) ("VersaPay" or the "Company"), a provider of merchant credit and debit card payment processing services ("POS Merchant Services") and proprietary, cloud-based financial technology solutions ("VersaPay Solutions"), today announced its financial and operational results for the three and six months ended June 30, 2013. All amounts are in Canadian dollars unless otherwise noted.

Q2 2013 Highlights

  • Entered into a payment processing and referral agreement with TD Merchant Services
  • Adjusted EBITDA1 Was $(0.1) million, less than half of the Adjusted EBITDA loss of $(0.3) million in Q2 2012
  • Grew year over year Electronic Money Transfer ("EMT") per-transaction revenues by 213%
  • Grew year over year revenues by 4%
Q2 2013 Financial Summary2
Three months ended,
June 30
Six months ended,
June 30
2013 2012 2013 2012
Total Revenue $ 4.4M $ 4.2M $ 8.5M $ 8.1M
Cash Operating Expenses3 $ 1.0M $ 1.2M $ 2.1M $ 2.2M
Adjusted EBITDA1 $ (0.1)M $ (0.3)M $ (0.4)M $ (0.5)M
Net Loss $ (0.3)M $ (0.4)M $ (0.6)M $ (0.7)M
June 30, 2013
Cash $ 1.1 M

"Overall, we are pleased with the results for the second quarter," said Bill McGill, CEO of VersaPay. Mr. McGill continued, "While our financial results continue to be driven by our POS business, we are also encouraged by the progress made in our VersaPay Solutions business. In addition to experiencing strong growth in EMT transaction revenues, we signed a key agreement with TD Merchant Services in the quarter. Moreover, our pipeline of key partner and end customer relationships is expected to provide a foundation for future growth."

Q2 and Year to Date 2013 Financial Review

Total revenues for Q2 2013 increased 4% to $4.4 million from $4.2 million in Q2 2012. Total revenue for the six months ended June 30, 2013 increased 5% to $8.5 million from $8.1 million for the same period in 2012. 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 16% to $1.0 million from $1.2 million in Q2 2013 from the same period in 2012. Cash operating expense for the six months ended June 30, 2013 decreased 6% to $2.1 million from $2.2 million in 2012.

Adjusted EBITDA for Q2 2013 was $(0.1) million, compared to $(0.3) million in Q2 2012. For the six months ended June 30, 2013, Adjusted EBITDA was $(0.4) million, compared to $(0.5) million in 2012.

Loss from continuing operations for Q2 2013 was $(0.3) million. This compares to a loss from continuing operations of $(0.4) million for Q2 2012. For the six months ended June 30, 2013, loss from continuing operations was $(0.6) million, compared to $(0.7) million in 2012.

Table A
Three months ended,
June 30
Six months ended,
June 30
2013 2012 2013 2012
Adjusted EBITDA1 $ (135,891 ) $ (298,393 ) $ (383,624 ) $ (513,845 )
Share based payments (64,550 ) (31,933 ) (125,722 ) (57,087 )
Interest expense (46,566 ) (39,614 ) (90,265 ) (78,762 )
Amortization (34,975 ) (43,999 ) (71,590 ) (87,814 )
Other income 23,028 - 85,774 -
Net Loss $ (258,954 ) $ (413,939 ) $ (585,427 ) $ (737,508 )

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 and VersaPay EIPP - 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 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.

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.

June 30, 2013 December 31, 2012
$ $
ASSETS
Current
Cash and cash equivalents 1,053,633 1,461,388
Funds held for merchants 3,048,998 1,726,284
Receivables 427,776 410,480
Prepaid expenses 38,754 27,973
4,569,161 3,626,125
Non-current
Equipment 223,394 290,449
Intangible assets 9,734 39,011
Total Assets 4,802,289 3,955,585
LIABILITIES
Current
Accounts payable and accrued liabilities 297,853 459,621
Funds due to merchants 3,048,998 1,726,284
Current portion of obligations under finance lease 30,635 37,492
3,377,486 2,223,397
Non-current
Obligations under finance lease, net of current portion 13,511 29,361
Promissory note 662,427 630,190
Total Liabilities 4,053,424 2,882,948
EQUITY
Share capital 10,266,637 9,981,720
Reserve 1,474,255 1,497,517
Warrants 372,260 372,260
Deficit (11,364,287 ) (10,778,860 )
Total Equity 748,865 1,072,637
Total Liabilities and Equity 4,802,289 3,955,585
Three months ended,
June 30
Six months ended,
June 30
2013 2012 2013 2012
$ $ $ $
Revenue
POS Merchant Services 4,291,596 4,165,151 8,358,520 8,013,393
VersaPay Solutions 92,565 56,494 163,614 113,159
4,384,161 4,221,645 8,522,134 8,126,552
Cost of Sales
POS Merchant Services 3,504,607 3,319,652 6,796,664 6,393,598
VersaPay Solutions 62,450 53,491 119,809 101,890
3,567,057 3,373,143 6,916,473 6,495,488
Gross Profit 817,104 848,502 1,605,661 1,631,064
Expenses
Bank charges and interest 46,566 39,614 90,265 78,762
Consulting fees 68,353 71,916 129,765 165,569
Depreciation and amortization 34,975 43,999 71,590 87,814
General and administrative 92,894 114,536 184,013 241,186
Marketing and promotion 51,963 11,774 80,421 34,373
Professional fees 81,866 115,632 231,927 204,172
Rent and occupancy 52,249 80,141 127,361 168,515
Research and development 95,860 108,135 199,117 183,106
Salaries and benefits 434,156 560,274 894,098 982,121
Share based payments 64,550 31,933 125,722 57,087
Technology and infrastructure 48,236 59,518 98,487 121,937
Travel 27,418 24,969 44,096 43,930
Total Expenses 1,099,086 1,262,441 2,276,862 2,368,572
Other Income 23,028 - 85,774 -
Net Loss and Comprehensive Loss for the Period (258,954) (413,939) (585,427) (737,508)
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, 2012 $ 9,981,720 $ 1,497,517 $ 372,260 $ (10,778,860 ) $ 1,072,637
Net loss for the period - - - (585,427 ) (585,427 )
Shares Issued - - - - -
Exercise of options 284,917 (148,984 ) - - 135,933
Share based payments - 125,722 - - 125,722
Warrants expired - - - - -
At June 30, 2013 $ 10,266,637 $ 1,474,255 $ 372,260 $ (11,364,287 ) $ 748,865
Six months ended,
June 30
2013 2012
$ $
Cash Provided By (Used In) Operating Activities
Net loss for the period (585,427 ) (737,508 )
Items not affecting cash:
Depreciation of equipment 42,314 58,538
Amortization of intangible assets 29,277 29,276
Interest accreted on promissory note 32,237 25,148
Loss on disposal of equipment 15,795 -
Share based payments 125,722 57,087
Change in non-cash working capital items
Receivables (17,296 ) (87,291 )
Prepaid expenses (10,781 ) 8,041
Accounts payable and accrued liabilities (161,768 ) (40,936 )
(529,927 ) (687,645 )
Cash Provided By (Used in) in Investing Activities
Acquisition of equipment (2,954 ) -
Proceeds on disposal of equipment 11,900 (24,214 )
8,946 (24,214 )
Cash Provided by (Used In) Financing Activities
Issuance of common shares, net of issuance costs 135,933 2,023,972
Finance lease payments (22,707 ) (34,945 )
113,226 1,989,027
Increase (decrease) in cash and cash equivalents (407,755 ) 1,277,168
Cash and cash equivalents, beginning of period 1,461,388 559,497
Cash and cash equivalents, end of period 1,053,633 1,836,665

1 Adjusted EBITDA is defined as Earnings Before Interest, Taxes, Depreciation, Amortization, Share-Based Payments and Other Income. See table A.

2 Condensed interim financial statements and MD&A for the three and six months ended June 30, 2013 will be available on the Company's website at www.versapay.com and on SEDAR.

3 Defined as operating expense excluding depreciation, amortization and share-based payments.

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