VersaPay Corporation
TSX VENTURE : VPY

April 28, 2011 08:21 ET

VersaPay Announces Year End Results

TORONTO, ONTARIO--(Marketwire - April 28, 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 year ended December 31, 2010. All amounts are in Canadian dollars unless otherwise noted.

Q4 2010 Highlights
  • Raised $900,000 by way of five year debt facility
  • Improvement in Adjusted EBITDA2 to $(0.2) million from $(0.5) million in Q4 2009, as a result of Company's sales growth and cost-cutting initiatives
  • Signed a five-year contract renewal to provide Brewers Distributor Ltd. (BDL) with VersaPay EMT
  • Signed an agreement with Corus Radio to provide EMT and credit card processing solutions
Q4 2010 Financial Summary3
Q4 2010Q4 200920102009
Recurring revenue 4$3.3M$1.9M$12.2M$7.3M
Non-recurring revenue5$0.1M$0.4M$0.5M$0.7M
TOTAL REVENUE$3.4M$2.3M$12.7M$8.0M
Cash Operating Expenses6$0.9M$1.0M$4.2M$2.9M
Adjusted EBITDA$(0.2)M$(0.5)M$(1.4)M$(0.8)M
Income (loss) from continuing operations$(0.2)M$(0.6)M$(2.0)M$(1.3)M
31-Dec-1031-Dec-09
Cash$1.1M$0.2M

"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, our strengthened Adjusted EBITDA benefited from the cost controls we began implementing in Q2. During the quarter, we also gained further traction with our VersaPay EMT offering, signing a contract renewal with BDL, our longest standing EMT client, and Corus Radio. Looking ahead, we will continue to work to grow our merchant customer base, and believe we are positioned to build upon these results in the coming periods."

Q4 2010 Financial Review

Total revenue for Q4 2010 increased 44% to $3.4 million from $2.3 million in Q4 2009. Of this amount, recurring revenue for Q4 2010 increased 69% to $3.3 million from $1.9 million in Q4 2009. The year-over- year improvement was driven primarily by growth in the Company's transaction processing fees.

Cash operating expense (excluding amortization and stock-based compensation) decreased 6% to $.9 million from $1.0 million in Q4 2010 from the same period 2009.

Adjusted EBITDA for Q4 2010 was $(0.2) million, compared to $(0.5) million in Q4 2009, reflecting the Company's revenue growth and the implementation of cost control measures.

Loss from continuing operations for Q4 2010 was $(0.2) million. This compares to a loss from continuing operations of $(0.6) million for Q4 2009.

Annual Results

Total revenue for 2010 increased 58% to $12.7 million from $8.0 million in 2009. Of this amount, recurring revenue for 2010 increased 67% to $12.2 million from $7.3 million in 2009. The year-over-year improvement was driven primarily by growth in the Company's transaction processing fees.

Cash operating expense (excluding amortization and stock-based compensation) increased 45% to $4.2 million from $2.9 million for 2010 versus 2009. This is due to opening a new office in Toronto and the additional costs of becoming a publicly traded company.

Adjusted EBITDA for 2010 was $(1.4) million, compared to $(0.8) million in 2009.

Loss from continuing operations for 2010 was $(2.0) million, versus a loss of $(1.3) million from the prior year.

As at December 31, 2010 VersaPay had cash $1.1 million, compared to $0.2 million as at December 31, 2009.

1Total quarterly gross transaction value processed represents the total volume of credit and debit card transactions processed by VersaPay's merchant customers
2Adjusted EBITDA is defined as Earnings Before Interest, Taxes, Depreciation, Amortization and Stock- based compensation. See table A.
3A complete set of financial statements and notes and MD&A for the year ended December 31, 2010 will be available on the Company's website at http://www.versapay.com/and on SEDAR.
4Defined as Transaction processing fees + VersaCard/EMT fees
5Defined as Product sales (point-of-sale devices) and other
6Defined as operating expense excluding amortization and stock-based compensation
Table A
Q4 2010Q4 200920102009
Adjusted EBITDA(160,891)(487,605)(1,396,300)(827,751)
Stock-based compensation(12,787)(52,937)(430,711)(333,357)
Interest expense(4,964)(11,421)4,588(50,063)
Amortization(29,384)(29,194)(115,241)(71,517)
Amortization of EFT(12,797)-(26,757)-
Loss from continuing operations(220,823)(581,157)(1,964,421)(1,282,688)

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.

Consolidated Balance Sheets
As at December 31
20102009
$$
ASSETS
Current
Cash1,121,816206,763
Funds held for merchants (note 17)474,177365,518
Receivables465,341307,675
Prepaid expenses18,68617,133
Current assets of discontinued operations (note 13)-29,133
2,080,020926,222
Share issue costs (note 20)-425,536
Equipment (note 7)360,837318,735
Intangible assets (note 8)140,763101,592
Non-current assets of discontinued operations (note 13)-161,012
2,581,6201,933,097
LIABILITIES
Current
Accounts payable and accrued liabilities440,7841,259,384
Funds due to merchants (note 17)474,177365,518
Deferred revenue-9,688
JG Capital Loan (note 20)-225,000
Current portion of obligation under capital lease (note 9)46,25736,819
Current liabilities of discontinued operations (note 13)-76,728
961,2181,973,137
Obligation under capital lease, net of current portion (note 9)90,62897,546
Secured Subordinate Promissory Notes (note 16)534,741-
1,586,5872,070,683
Non-controlling interest in Positive Inc. (note 13)-7,569
SHAREHOLDERS' EQUITY (DEFICIENCY)
Share capital (note 11)7,423,0024,872,073
Shares subscriptions received (note 11)-288,958
Contributed surplus (note 12)778,875618,955
Warrants (note 11)696,619-
Deficit(7,903,463)(5,925,141)
995,033(145,155)
2,581,6201,933,097
Consolidated Statement of Loss, Comprehensive Loss and Deficit
Year ended December 31
20102009
$$
Revenue (note 6)
Transaction processing fees11,977,3667,049,864
Product sales and other499,689729,498
VersaCard/EFT fees201,225244,427
12,678,2808,023,789
Expenses
Cost of services8,282,9574,882,921
Cost of products sold and other1,485,193975,133
VersaCard/EFT costs75,547123,413
Amortization141,99871,517
Bad debts11,6933,044
Bank charges and interest(4,588)50,063
Consulting fees (note 14)201,523667,995
General and administrative341,306302,379
Marketing and promotion184,368102,190
Professional fees (note 14)637,130269,053
Rent and occupancy281,928197,028
Salaries and benefits2,080,800893,513
Stockbased compensation (note 11)430,711333,357
Telecom and wireless connection fees380,469345,223
Travel111,66689,648
14,642,7019,306,477
Operating Loss from Continuing Operations(1,964,421)(1,282,688)
Discontinued Operations (note 13)26,496(70,146)
Non-controlling interest1,66711,585
Net loss and comprehensive loss for the year(1,936,258)(1,341,249)
Deficit, beginning of year(5,925,141)(4,583,892)
Exchange of warrants on IPO (note 11)(42,064)-
Deficit, end of year(7,903,463)(5,925,141)
Loss per Share - basic and fully diluted$(0.15)$(0.15)
Weighted average number of common shares outstanding12,740,1089,011,570
Consolidated Statement of Cash Flows
Year ended December 31,
20102009
$$
Cash Used In Operating Activities
Net loss for the year(1,936,258)(1,341,249)
-Items not affecting cash:
-amortization of equipment115,241105,925
-amortization of intangible26,757-
-cancellation of JG Capital loan interest14,271-
-stock- based compensation430,711333,357
-non- controlling interest1,667(11,585)
-discontinued operations(29,837)70,146
Change in non- cash working capital items
receivables(157,666)(120,168)
prepaid expenses(1,553)(4,078)
accounts payable and accrued liabilities(832,872)748,595
deferred revenue(9,688)(312)
(2,379,227)(219,369)
Cash Provided by Financing Activities
issuance of convertible debt-(120,000)
issuance of common shares, net of issuance costs2,671,831207,568
share subscriptions received-288,958
capital lease payments(49,133)(23,259)
promissory notes843,200-
3,465,898353,267
Cash Used in Investing Activities
acquisition of equipment(105,690)(140,584)
developed technology(65,928)(101,592)
discontinued operations-(10,134)
(171,618)(252,310)
Increase (decrease) in cash and cash equivalents915,053(118,412)
Cash and cash equivalents, beginning of year206,763325,175
Cash and cash equivalents, end of period1,121,816206,763
Supplementary Cash Flow Information:
Interest paid6,78131,527

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