VersaPay Corporation
TSX VENTURE : VPY

VersaPay Corporation

August 29, 2014 07:00 ET

VersaPay Reports Q2 2014 Results, Achieves Record Transaction Volumes

TORONTO, ONTARIO--(Marketwired - Aug. 29, 2014) - VersaPay Corporation (TSX VENTURE:VPY) ("VersaPay" or the "Company"), a leading provider of cloud-based invoicing, accounts receivable management and payment solutions, is pleased to report financial results for the second quarter of 2014. Revenue for Q2 2014 grew to $4.8 million from $4.4 million in the previous year. Revenue growth occurred across both of the Company's operating units, the VersaPay Solutions business and the POS Merchant Services business, as synergies accrued.

Q2 2014 Highlights:

  • Heartland Payment Systems, the fifth largest payment processor in the United States completes integration with Arc™ and rolls out reseller program to its world class sales distribution network
  • The Company's strategic investment in the Solutions business advanced significantly, with the build-out of the product and support teams, the launch of new Solutions product branding, the opening of a new leading edge development center in Toronto and the expansion of the Company's cloud infrastructure
  • Grew total credit card processing volume to $246 million for Q2 2014 versus $221 million in Q2 2013, representing a record quarter

Subsequent to Q2 2014 Highlights:

  • Art Mesher appointed chairman of VersaPay's board of directors, effective August 20, 2014

Q2 2014 Financial Summary(1)

Three months ended,
June 30
Six months ended,
June 30
2014 2013 2014 2013
Total Revenue $ 4.8M $ 4.4M $ 9.2M $ 8.5M
Cash Operating Expenses(2) $ 1.5M $ 1.0M $ 2.8M $ 2.1M
Adjusted EBITDA(3) $ (0.6)M $ (0.1)M $ (1.1)M $ (0.4)M
Net Loss $ (0.7)M $ (0.3)M $ (1.5)M $ (0.6)M
June 30, 2014
Cash $ 5.0 M
Notes:
(1) The unaudited condensed interim consolidated financial statements for the three and six months ended June 30, 2014 and the related Management's Discussion and Analysis for the period will be available on the Company's website at www.versapay.com and on SEDAR at www.sedar.com.
(2) Cash operating expense is defined as operating expense excluding depreciation, amortization and share-based payments.
(3) Adjusted EBITDA is defined as earnings before interest, taxes, depreciation, amortization, share-based payments, and other income. See table A below.

"We are pleased with our results in Q2, especially with respect to the record results achieved by our POS Merchant Services business and our progress launching the Arc™ product into the market," said Craig O'Neill, VersaPay's CEO. "The strong results from our POS business continue to support the strategic investment we are making in Arc™" as we build the foundation for future growth. After a good start in Q1 we have remained on course meeting our business objectives for Q2: enhancing the Arc™ team with top software talent, winning additional customers, going live with two major partners, rolling sales training out across Heartland's US-wide sales force and improving our direct sales capabilities. The sales pipeline has continued to build in both businesses as we see a growing level of interest in both Arc™ and our existing payment processing products and services. Furthermore, the expected synergies between the businesses are yielding improved results, with our Arc™ products opening up new opportunities for our POS salesforce and our credit card processing enhancing the revenue potential of some of our new Arc™ customers."

Q2 2014 Financial Review

Total revenues for Q2 2014 increased 11% to $4.8 million from $4.4 million in Q2 2013. Total revenues for the six months ended June 30, 2014 increased 8% from $9.2 million from $8.5 million in the six months ended June 30, 2013. 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 49% to $1.5 million from $1.0 million in Q2 2014 from the same period in 2013. Cash operating expense for the six months ended June 30, 2013 were $2.8 million compared to $2.1 million for the six months ended June 30, 2013, an increase of 35%.

Adjusted EBITDA for Q2 2014 was $(0.6) million, compared to $(0.1) million in Q2 2013. Adjusted EBITDA for the six months ended June 30, 2014 was $(1.1) million, compared to $(0.4) million for the six months ended June 30, 2013. Loss from continuing operations for Q2 2014 was $(0.7) million compared to a loss from continuing operations of $(0.3) million for Q2 2013. Loss from continuing operations for the six months ended June 30, 2013 was $(1.5) million compared to $(0.6) million for the same period in 2013.

Table A

Three months ended,
June 30
Six months ended,
June 30
2014 2013 2014 2013
$ $ $ $
Adjusted EBITDA(1) (570,211 ) (141,451 ) (1,074,457 ) (393,073 )
Share based payments (69,901 ) (64,550 ) (329,917 ) (125,722 )
Interest expense (44,530 ) (41,006 ) (87,675 ) (80,816 )
Amortization (21,408 ) (34,975 ) (38,051 ) (71,590 )
Other income - 23,028 - 85,774
Net Loss (706,050 ) (258,954 ) (1,530,100 ) (585,427 )
Notes:
(1) Adjusted EBITDA is defined as earnings before interest, taxes, depreciation, amortization, share-based payments, and other income.

Grant of Options

The Company also announces the grant of incentive stock options to certain directors of the Company to purchase up to 125,000 common shares in the capital stock of the Company under its share option plan. The options are exercisable at a price of $1.25 per share on or before August 28, 2019, subject to the approval of the TSX Venture Exchange and applicable hold and Company vesting periods.

About VersaPay

VersaPay is a leading cloud-based invoice presentment and payment provider for businesses of all sizes. VersaPay's Arc and ArcPay software-as-a-service offerings allow businesses to easily deliver customized electronic invoices to their customers, to accept credit card and EFT payments and automatically reconcile payments to their ERP and accounting software. VersaPay is headquartered in Toronto, Canada and has operations in Montreal and New York.

More information about VersaPay can be found at 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.

Unaudited Condensed Interim Consolidated Statements of Financial Position

June 30,
2014
December 31,
2013
$ $
ASSETS
Current
Cash and cash equivalents 4,825,957 1,276,410
Restricted cash 185,790 -
Funds held for merchants 5,809,990 4,063,599
Receivables 591,471 407,949
Prepaid expenses 149,852 33,441
11,563,060 5,781,399
Non-current
Equipment 299,149 194,999
Intangible assets 5,859 7,215
Total Assets 11,868,068 5,983,613
LIABILITIES
Current
Accounts payable and accrued liabilities 511,941 289,465
Funds due to merchants 5,809,990 4,063,599
Current portion of obligations under finance lease 12,913 24,367
6,334,844 4,377,431
Non-current
Obligations under finance lease, net of current portion - 2,953
Promissory note 740,253 698,927
Total Liabilities 7,075,097 5,079,311
EQUITY
Share capital 16,227,272 11,133,048
Reserve 1,559,330 1,608,613
Warrants 425,977 52,149
Deficit (13,419,608 ) (11,889,508 )
Total Equity 4,792,971 904,302
Total Liabilities and Equity 11,868,068 5,983,613

Unaudited Condensed Interim Consolidated Statements of Loss and Comprehensive Loss

Three months ended,
June 30
Six months ended,
June 30
2014 2013 2014 2013
$ $ $ $
Revenue
VersaPay Solutions 128,056 92,565 225,922 163,614
POS Merchant Services 4,719,863 4,291,596 8,956,807 8,358,520
4,847,919 4,384,161 9,182,729 8,522,134
Cost of Sales
VersaPay Solutions 82,739 62,450 152,723 119,809
POS Merchant Services 3,888,812 3,504,607 7,387,819 6,796,664
3,971,551 3,567,057 7,540,542 6,916,473
Gross Profit 876,368 817,104 1,642,187 1,605,661
Expenses
Depreciation and amortization 21,408 34,975 38,051 71,590
General and office expenses 205,088 146,690 403,851 291,949
Interest expense (note 15 and 20) 44,530 41,006 87,675 80,816
Marketing and promotion 96,799 79,381 193,061 124,517
Professional and consulting fees 280,202 150,219 517,064 361,692
Rent and occupancy 46,221 52,249 120,822 127,361
Research and development 192,568 95,860 330,111 199,117
Salaries and benefits 625,701 434,156 1,151,735 894,098
Share based payments 69,901 64,550 329,917 125,722
Total Expenses 1,582,418 1,099,086 3,172,287 2,276,862
Other Income (note 19) - 23,028 - 85,774
Net Loss and Comprehensive Loss for the Period (706,050 ) (258,954 ) (1,530,100 ) (585,427 )
Loss per share, basic $ (0.03 ) $ (0.02 ) $ (0.08 ) $ (0.04 )
Weighted average number of common shares outstanding, basic 20,932,875 15,485,044 19,943,541 15,426,700

Unaudited Condensed Interim Consolidated Statements of Changes in Equity

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
At June 30, 2013 10,266,637 1,474,255 372,260 (11,364,287 ) 748,865
Issued
Capital
Reserve Warrants Deficit Total
Equity
$ $ $ $ $
At December 31, 2013 11,133,048 1,608,613 52,149 (11,889,508 ) 904,302
Net loss for the period - - - (1,530,100 ) (1,530,100 )
Shares Issued 3,996,813 - 425,977 - 4,422,790
Exercise of options 638,736 (205,400 ) - - 433,336
Exercise of warrants 284,875 - (52,149 ) - 232,726
Share based payments 173,800 156,117 - - 329,917
At June 30, 2014 16,227,272 1,559,330 425,977 (13,419,608 ) 4,792,971

Unaudited Condensed Interim Consolidated Statements of Cash Flows

Six months ended June 30,
2014 2013
$ $
Cash Provided By (Used In) Operating Activities
Net loss for the period (1,530,100 ) (585,427 )
Items not affecting cash:
Depreciation of equipment 36,695 42,314
Amortization of intangible assets 1,356 29,277
Interest accreted on promissory note 41,326 32,237
Loss on disposal of equipment - 15,795
Share based payments 329,917 125,722
Change in non-cash working capital items
Receivables (183,522 ) (17,296 )
Prepaid expenses (116,411 ) (10,781 )
Accounts payable and accrued liabilities 222,476 (161,768 )
(1,198,263 ) (529,927 )
Cash Provided By (Used in) in Investing Activities
Acquisition of equipment (140,845 ) (2,954 )
Proceeds on disposal of equipment - 11,900
(140,845 ) 8,946
Cash Provided by (Used In) Financing Activities
Issuance of common shares, net of issuance costs 5,088,852 135,933
Finance lease payments (14,407 ) (22,707 )
5,074,445 113,226
Increase (decrease) in cash and cash equivalents 3,735,337 (407,755 )
Cash and cash equivalents, beginning of period 1,276,410 1,461,388
Cash and cash equivalents, end of period 5,011,747 1,053,633

Cash and cash equivalents consist of the following:

2014 2013
$ $
Cash at bank and in hand 1,008,091 195,922
Demand deposits 3,817,866 857,711
Restricted cash 185,790 -
5,011,747 1,053,633

Neither the 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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