Versatile Mobile Systems (Canada) Inc.
TSX VENTURE : VMS

Versatile Mobile Systems (Canada) Inc.

May 30, 2005 21:11 ET

Versatile Announces Third Quarter 2005 Results

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - May 30, 2005) - Versatile Mobile Systems (Canada) Inc. ("Versatile" or the "Company") (TSX VENTURE:VMS) today announced its third quarter results for the period ended March 31, 2005.

Revenue for the nine-months ended March 31, 2005 was $9,909,985 compared to $14,733,209 for the same period last year. Revenue for the quarter ended March 31, 2005 was $3,232,765 compared to $4,467,967 for the same quarter last year. The Net Loss for the nine-month period was $1,601,951 ($0.01 per share) compared to Net Earnings of $72,110 ($0.00 per share) in the same period last year. The Net Loss for the quarter was $464,670 ($0.01 per share) compared to a Net Loss of $76,634 ($0.00 per share) in the same quarter last year.

In addition to the acquisition activity, the highlights of the quarter included:

- the Company was short listed against one other party, IBM Solutions on a contract for U.S. $10 million in revenue over a one year period. This opportunity had been reflected in the Company's expectations for this quarter. While this contract was awarded to IBM Solutions, Versatile will now provide professional services and products for U.S. $1.4 million to the end-user over the next three quarters,

- the Company graduated to Tier 1 status on the TSX Venture Exchange, and

- Microsoft demonstrated Versatile's Sales Supervisor™ software on the Pen Tablet operating system at the National Retail Trade Show held in New York City

"Financial results for the quarter fell short of management's expectations due primarily to a significant contract being awarded to a competitor," said John Hardy, Chairman and CEO of Versatile. "However, we reached the first milestone in our acquisition strategy and have succeeded in transforming the business profile of Versatile by completing our acquisition of Perfect Order. We are now reaching the critical mass necessary to move our products to the market more efficiently as evidenced by new sales orders in excess of $9 million since the acquisition closed."

Cost of sales for the nine-month period ended March 31, 2005 was $7,341,602 yielding a gross margin of 25.9% as compared to $9,903,315 or a gross margin of 32.8% in the same period last year. Cost of sales for the quarter was $2,402,800 yielding a gross margin of 25.7% as compared to $2,983,965 or a gross margin of 33.2% 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 $471,691 for the nine-month period ended March 31, 2005 as compared to $822,294 for the same period last year. Research and development costs were $129,403 for the quarter as compared to $274,509 for the same quarter last year.

Working capital at March 31, 2005 was $2,027,329 compared to $3,620,261 at June 30, 2004. The ability of the Company to continue operations on an ongoing basis will be dependent on its ability to continue to generate sales, attain profitable operations, maintain margins and control operating expenses.

Acquisition Activity

In the Summer of 2004, Versatile hired Martin Wolfe Securities LLC of San Ramon, California to assist the Company with identifying and pursuing acquisition candidates. Versatile's acquisition strategy is focused on broadening its product offerings to complement its core mobility business, expanding into new industry vertical markets, leveraging acquired salesforce capabilities, and increasing the scope of operations through acquired revenue streams and operating earnings. These efforts resulted in advanced negotiations with two parties, InfoLogix and Perfect Order.

On November 17, 2004 the Company announced that it had entered into a Letter of Intent to purchase all of the outstanding shares of InfoLogix, Inc. and Optasia ACQ, LLC (collectively "InfoLogix"). The Company spent a considerable amount of time on due diligence activities including legal/financial review and multiple site visits, drafting agreements and related regulatory filings. This activity occurred over a 100 day time frame. The Company incurred significant costs in relation to these activities. The Company announced on February 24, 2005 that it was not proceeding with this transaction.

On February 24, 2005 the Company announced that it had entered into a Letter of Intent to purchase all of the outstanding shares of Perfect Order, Inc. and Perfect Order Manufacturing, Inc. (collectively "Perfect Order"). The Company continued its due diligence activities, including legal/financial review and multiple site visits, the result of which led to the completion of the Share Purchase Agreement to purchase all of the outstanding shares of Perfect Order, which was announced by the Company on March 28, 2005. Subsequent to the quarter, on April 27, 2005 the Company announced that it had completed the acquisition.

The Company also arranged banking facilities with a U.S. based financial institution for a secured term loan of U.S. $2,800,000 as well as a secured demand loan of up to U.S. $3,000,000 based on a percentage of eligible accounts receivable. The term loan was used to repay U.S. $2,739,332 for a term loan that Perfect Order had previously had with another financial institution. The demand loan provides additional access to capital for the combined organization.

The Company is conducting a strategic review of all divisions to explore the opportunities for improvement of operational efficiencies, and capture opportunities created by customer synergies. In particular, the company will focus on the immediate expansion of its European operations to help service its existing customers' and partners' global requirements. This review will be complete by the end of June 2005.

For the current fiscal year, the accounts of Perfect Order will be included in the Company's consolidated financial statements from the Closing Date of the acquisition to June 30, 2005.

About Versatile

Versatile provides mobile business solutions that enable companies to improve sales, marketing and distribution of their products. By using Versatile's technology, 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, Albertsons, Michaels, Nordstrom, K&L Distributors, and Kellogg. Versatile's Perfect Order division provides information technology services for the implementation, maintenance and security of mission-critical computing environments. Perfect Order has the ability to architect solutions involving both proprietary and third party components. Customers include Motorola, Tyco (AMP), Comcast, Adelphia Communications, Time Warner(AOL), Mellon Financial, HSBC, Astra Zeneca, and Bristol Meyers Squibb. Additional information is available at http://www.versatilemobile.com.

Forward-Looking Statements

This document may contain forward-looking statements relating to Versatile Mobile Systems' consolidated operations or to the environment in which it operates, which are based on Versatile Mobile Systems' consolidated 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.

The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • 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
    http://www.versatilemobile.com