Versatile Mobile Systems (Canada) Inc.

Versatile Mobile Systems (Canada) Inc.

February 28, 2005 21:50 ET

Versatile Announces Q2 2005 Results Provides Business Update on Acquisition


NEWS RELEASE TRANSMITTED BY CCNMatthews

FOR: VERSATILE MOBILE SYSTEMS (CANADA) INC.

TSX VENTURE SYMBOL: VMS

FEBRUARY 28, 2005 - 21:50 ET

Versatile Announces Q2 2005 Results Provides Business
Update on Acquisition

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Feb. 28, 2005) - Versatile
Mobile Systems (Canada) Inc. (TSX VENTURE:VMS), a leading mobile
commerce solutions provider, today announced its second quarter results
for the period ended December 31, 2004 and provides a business update on
the acquisition of Perfect Order, Inc. and Perfect Order Manufacturing,
Inc. (collectively "Perfect Order").

Revenue for the six months ended December 31, 2004 was $6,677,220
compared to $10,265,242 for the same period last year. Revenue for the
quarter ended December 31, 2004 was $2,865,311 compared to $5,039,522
for the same quarter last year. The Net Loss for the six-month period
was $1,137,281 ($0.01 per share) compared to Net Earnings of $148,744
($0.00 per share) in the same period last year. The Net Loss for the
quarter was $495,184 ($0.01 per share) compared to Net Earnings of
$4,780 ($0.00 per share) in the same quarter last year.

"A significant amount of management time has been diverted from the core
business of the Company to deal with the negotiation, financial analysis
and due diligence surrounding the Company's recent acquisition
activity," said John Hardy, Chairman and CEO of Versatile. "This
activity has negatively impacted the last two quarters, however, it is
anticipated that the benefits will be realized by the end of this
quarter. With the recently announced acquisition of Perfect Order, the
company is uniquely positioned to automate the supply chain from the
back office, to its furthest point, the mobile worker. We anticipate
moving towards sustained profitability by the end of this fiscal year."

Cost of sales for the six month period ended December 31, 2004 was
$4,938,802 yielding a gross margin of 26.0% as compared to $6,919,350 or
a gross margin of 32.6% in the same period last year. Cost of sales for
the quarter was $2,002,512 yielding a gross margin of 30.1% as compared
to $3,515,070 or a gross margin of 30.2% in the same quarter last year.
The decrease in the cost of sales percentage compared to last year can
be attributed to the fact that the sales were primarily related to lower
margin hardware and systems integration services.

Research and development costs were $342,288 for the six-month period
ended December 31, 2004 as compared to $547,785 for the same period last
year. Research and development costs were $175,128 for the quarter as
compared to $303,995 for the same quarter last year. The level of in
house activity in research and development has decreased as the Company
has completed several research and development initiatives. Staffing
levels were reduced over the course of the prior year and the Company
will continue to monitor these costs for the remainder of the fiscal
year.

Working capital at December 31, 2004 was $2,297,160 compared to
$3,620,261 at June 30, 2004. Cash and cash equivalents at December 31,
2004 amounted to $828,194. The ability of the Company to continue
operations on an ongoing basis will be dependent on its ability to
continue to generate sales, maintain profitable operations, margins and
control operating expenses. The company has cash on hand and accounts
receivable sufficient for the company to meet all of its current
obligations as they become due.

Business Update

On February 24, 2005 the Company announced the signing of a letter of
intent to acquire all of the shares of Perfect Order, Inc. and Perfect
Order Manufacturing, Inc. (collectively "Perfect Order"). In that press
release the Company provided selected financial information that had
been reported on by Perfect Order (all subject to the completion of an
audit). Versatile is now in a position to provide historical financial
information on the combination of Versatile and Perfect Order for the
year ending December 31, 2004.



Year ended December 31, 2004
Versatile
Perfect Order Mobile
CDN$ @ 1.22 Systems Combined
----------------------------- ----------
(unaudited) (unaudited) (unaudited)

Sales 66,121,223 15,857,083 81,978,306
Cost of Goods sold 52,132,928 11,858,555 63,991,483
----------------------------- ----------
Gross Profit 13,988,296 3,998,528 17,986,824

Research & development 1,697,375 836,668 2,534,043
Selling, marketing,
general &
administrative 10,089,871 4,772,254 14,862,125
----------------------------- ----------
Earnings before
interest, taxes &
amortization 2,201,050 (1,610,394) 590,656
Amortization &
depreciation 409,310 289,632 698,942
Stock based
compensation - 37,680 37,680
Interest 15,714 0 15,714
Income taxes - 1,011 1,011
----------------------------- ----------
Net Earnings 1,776,026 (1,938,717) (162,691)
----------------------------- ----------
----------------------------- ----------


The Perfect Order financial information has been compiled from the
unaudited financial information prepared by the management of Perfect
Order for the year ending December 31, 2004 with the result being
translated into Canadian dollars from U.S. dollars using a foreign
exchange rate of 1.22.

The combined financial information does not reflect any adjustments
arising from the purchase, such as the amortization of intangible assets
from the allocation of the purchase price, any adjustments that may
arise from differences in accounting policies or any costs from the
funding to complete the acquisition. The Company has not quantified the
extent of savings or any integration costs that may arise from this
transaction, but believes that there will be a net saving.

Upon completion of the transaction the Company will be in a position to
provide forward looking guidance. In addition, the Company has
identified a number of areas involving the cross selling of its software
and services to new industry verticals but has not quantified these at
this time.

About Versatile Mobile Systems

Versatile Mobile Systems provides mobile business solutions that enable
companies to improve sales, marketing and distribution of their
products. By using Versatile Mobile's technology, over 300 companies in
the consumer packaged goods, and transportation industries have gained
the benefits of supply chain visibility, shortened fulfillment cycles
and improved customer satisfaction. Versatile's international customer
list includes Cadbury Schweppes, Ocado, Albertsons, Michaels, Nordstrom,
Publix Supermarkets, K&L Distributors, Rug Doctor and Kellogg.
Additional information is available at www.versatilemobile.com.

Forward-Looking Statements

This document may contain forward-looking statements relating to
Versatile Mobile Systems' operations, the environment in which it
operates and the acquisition of Perfect Order, which are based on
Versatile Mobile Systems' operations, estimates, forecasts and
projections. This document also contains forward looking statements
regarding Perfect Order's operations and the environment in which it
operates and its operations, estimates, forecasts and projections. These
statements are not guarantees of future performance and involve risks
and uncertainties that are difficult to predict or are beyond Versatile
Mobile Systems' control. A number of important factors including those
set forth in other public filings could cause actual outcomes and
results to differ materially from those expressed in these forward
looking statements. Consequently readers should not place any undue
reliance on such forward-looking statements. In addition, these forward
looking statements relate to the date on which they are made. Versatile
Mobile Systems disclaims any intention or obligation to update or revise
any forward-looking statements whether as a result of new information,
future events or otherwise.

(C) 2005 Versatile Mobile Systems (Canada) Inc. All rights reserved.

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Contact Information

  • FOR FURTHER INFORMATION PLEASE CONTACT:
    Versatile Mobile Systems (Canada) Inc.
    John Hardy
    Chairman and CEO
    1-800-262-1633 or from Europe 011-425-778-8577
    or
    Versatile Mobile Systems (Canada) Inc.
    Fraser Atkinson
    CFO
    (604) 683-2915, ext. 214
    www.versatilemobile.com
    The TSX Venture Exchange has not reviewed and does not accept
    responsibility for the adequacy or accuracy of this release.