Versatile Systems Inc.
TSX VENTURE : VV
AIM : VVS

Versatile Systems Inc.

September 10, 2010 03:15 ET

Versatile Reports Fourth Quarter and Fiscal 2010 Results

VANCOUVER, CANADA--(Marketwire - Sept. 10, 2010) - Versatile Systems Inc. (TSX VENTURE:VV)(AIM:VVS) announces its results for the fourth quarter of the 2010 fiscal year.

Revenue for the three months ended June 30, 2010 was $11,517,023 generating a gross profit of $2,419,338 or 21.0% of revenue compared to $11,609,822 generating a gross profit of $2,995,037 or 25.8% of revenue for the same quarter last year. The Net Loss for the quarter amounted to $292,335 ($0.00 per share) compared to Net Earnings of $383,392 ($0.00 per share) for the same period last year.

"Economic conditions remained challenging throughout fiscal 2010," said John Hardy, Chairman and CEO of Versatile. "Nevertheless, we continued to make investments in our product set and partner relationships. We continued to review our cost structures and reduced overhead by approximately $1.1 million. In addition, we made a strategic investment in Equus, becoming their single largest shareholder and subsequently were successful in placing four of our directors on the Equus Board following a lengthy proxy battle."

Highlights for the quarter included:

  • Cash and cash equivalents at June 30, 2010 was $1,738,036 compared to $2,002,530 at June 30, 2009;
  • Working capital as of June 30, 2010 was $4,252,546, compared to the working capital of $2,570,421 at June 30, 2009, an increase of $1,682,125;
  • Revenue for the three months ended June 30, 2010 was $11,517,023 compared to $11,609,822 for the same quarter last year, a decrease of $92,799;
  • Gross profit of $2,419,338 or 21.0% of sales as compared to a gross profit of $2,995,037 or 25.8% of sales for the same quarter last year;
  • Cash flow used in operations (before non-cash operating balance sheet items) was $194,052 compared to $14,461 for the same quarter last year;
  • Deferred revenue at June 30, 2010 was $8,142,479 (of which $7,432,210 is expected to be recognized in the next four quarters) compared to $8,732,562 at June 30, 2009;
  • Net Loss for the quarter amounted to $292,335 ($0.00 per share) compared to Net Earnings of $383,392 ($0.00 per share) for the same period last year;
  • Research and development expense for the quarter amounted to $177,744 compared to $186,568 for the same quarter last year;
  • Investment of 822,031 shares of Equus Total Return, Inc. which is a public company trading on the NYSE under the symbol EQS. Versatile is the single largest shareholder of Equus, holding 9.3%;
  • On May 20th Alessandro Benedetti, Bertrand des Pallieres, John Hardy and Fraser Atkinson, were elected to the Board of Directors of Equus; and
  • On June 9th John Hardy was appointed Executive Chairman and Fraser Atkinson was appointed Chairman of the Audit Committee of Equus.

Revenue for the year ended June 30, 2010 was $44,188,021 generating a gross profit of $10,036,501 or 22.7% of revenue compared to $49,118,091 generating a gross profit of $12,111,519 or 24.7% of revenue for the same period last year. The Net Loss for the year amounted to $1,236,621 ($0.01 per share) compared to a Net Loss of $666,119 ($0.01 per share) for the prior year.

During the current fiscal year, the Company incurred $409,105 (2009 - $515,548) for research and development activities related to Mobiquity Route™, DEX and related mobile software products and $355,384 (2009- $693,587) related to Mobiquity Transaction Engine 3.0™, Mobiquity Kiosk™ and research on Virtualization.

"Despite the decline in revenue Versatile has maintained a strong financial position with $1.7 million of cash and approximately $4.5 million that is available on its line of credit," said Fraser Atkinson, CFO of Versatile.

About Versatile

Versatile provides business solutions that enable companies to improve sales, marketing and distribution of their products. Versatile also provides information technology services for the implementation, maintenance and security of mission-critical computer environments. Versatile has the ability to architect solutions involving both proprietary and third party components. For more information: www.versatile.com.

Forward-Looking Statements

This document may contain forward-looking statements relating to Versatile's operations or to the environment in which it operates, which are based on Versatile's 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's 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 disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

All amounts are expressed in U.S. dollars unless otherwise stated. © 2010 Versatile Systems Inc. All rights reserved.

Versatile Systems Inc.

Consolidated Balance Sheets

Expressed in U.S. dollars   June 30, 2010 June 30, 2009
 
 
ASSETS          
Current Assets          
  Cash and cash equivalents $   1,738,036 $ 2,002,530
  Investment in Equus     2,203,043   -
  Accounts receivable     10,580,706   8,408,093
  Current portion of deferred contract costs     5,793,180   5,745,493
  Prepaid expenses     236,993   286,709
  Inventory     1,719,477   1,468,891
  Future income tax benefits     721,975   944,843
      22,993,410   18,856,559
Long-term accounts receivable     265,612   112,781
Deferred contract costs     598,366   803,246
Capital Assets     519,391   794,008
Intangible assets     459   332,953
Future income tax benefits     6,243,875   5,283,896
Goodwill     9,914,350   9,977,659
  $   40,535,463 $ 36,161,102
LIABILITIES          
Current Liabilities          
  Line of credit and bank overdraft $ 1,353,312 $ -
  Accounts payable and accrued liabilities     9,955,342   8,530,987
  Current portion of deferred revenue     7,432,210   7,755,151
      18,740,864   16,286,138
Deferred Revenue     710,269   977,411
      19,451,133   17,263,549
SHAREHOLDERS' EQUITY          
  Share Capital     54,433,709   50,583,743
  Warrants     186,367   186,367
  Contributed surplus     4,231,539   4,138,437
  Deficit     (36,965,836)   (35,729,215)
  Accumulated other comprehensive loss     (801,449)   (281,779)
      21,084,330   18,897,553
  $   40,535,463 $ 36,161,102

Versatile Systems Inc.

Consolidated Statements of Operations and Deficit

Expressed in U.S. dollars   Three Months ended June 30   Year ended June 30
    2010   2009   2010   2009
    (unaudited)   (unaudited)        
 
SALES $ 11,517,023 $ 11,609,822 $ 44,188,021 $ 49,118,091
COST OF SALES   9,097,685   8,614,785   34,151,520   37,006,572
    2,419,338   2,995,037   10,036,501   12,111,519
EXPENSES                
  Selling and marketing   1,497,988   1,685,829   5,969,542   6,688,676
  General and administrative   1,140,105   1,148,758   4,058,864   4,649,659
  Research and development   177,744   186,568   856,787   1,281,109
  Non recurring expenses   (214,924)   (110,823)   358,811   421,512
  Stock-based compensation   23,887   12,719   93,102   21,411
  Foreign exchange (gain) loss   1,733   (161,062)   (9,181)   (258,306)
    2,626,533   2,761,989   11,327,925   12,804,061
Earnings (loss) before interest, taxes, amortization and other   (207,195)   233,048   (1,291,424)   (692,542)
  Amortization of capital assets   67,874   33,392   258,742   282,296
  Amortization of intangible assets   60,191   90,674   332,214   362,698
  Interest expense   10,248   5,520   32,239   33,314
  Goodwill impairment   63,309   -   63,309   -
  Gain on sale of investments   -   -   (4,952)   -
EARNINGS (LOSS) BEFORE INCOME TAXES   (408,817)   103,462   (1,972,976)   (1,370,850)
Current income tax expense   2,985   (80,563)   (756)   (144,855)
Future income tax benefit   113,497   360,493   737,111   849,586
NET EARNINGS (LOSS)   (292,335)   383,392   (1,236,621)   (666,119)
 
DEFICIT, BEGINNING OF PERIOD   (36,673,501)   (36,112,607)   (35,729,215)   (35,063,096)
 
DEFICIT, END OF PERIOD   (36,965,836)   (35,729,215)   (36,965,836)   (35,729,215)
 
EARNINGS (LOSS) PER SHARE (basic and diluted)   ($0.00)   ($0.00)   ($0.01)   ($0.01)

Versatile Systems Inc.

Consolidated Statements of Comprehensive (Loss) Income

Expressed in U.S. dollars Three Months ended June 30 Year ended June 30
  2010 2009 2010 2009
  (unaudited) (unaudited)    
 
Net earnings (loss) (292,335) 383,392 (1,236,621) (666,119)
 
Other comprehensive (loss) income        
  Net change in fair value of available-for-sale investments (519,670) - (519,670) -
  Foreign currency translation adjustments - 118,721 - (224,565)
 
Comprehensive (loss) income (812,005) 502,113 (1,756,291) (890,684)

Versatile Systems Inc.

Consolidated Statements of Cash Flows

Expressed in U.S. dollars   Three Months ended June 30   Year ended June 30
    2010   2009   2010   2009
    (unaudited)   (unaudited)        
 
OPERATING ACTIVITIES                
    Net earnings (loss) $ (292,335) $ 383,392 $ (1,236,621) $ (666,119)
    Items not affecting cash                
      Amortization of capital and intangible assets   144,719   177,577   665,091   704,833
      Stock-based compensation   23,887   12,719   93,102   21,411
      Goodwill impairment   63,309   -   63,309   -
      (Gain) Loss on sale of investments and capital assets   -   234   ( 4,952)   234
      Unrealized foreign exchange gain   ( 20,135)   ( 227,890)   ( 6,978)   ( 194,359)
      Future income tax benefit   ( 113,497)   ( 360,493)   ( 737,111)   ( 849,586)
Cash flow used in operations before other items   ( 194,052)   ( 14,461)   ( 1,164,160)   ( 983,586)
      Net change in non-cash operating balance sheet items   ( 593,002)   ( 87,211)   ( 1,538,546)   2,051,380
    ( 787,054)   ( 101,672)   ( 2,702,706)   1,067,794
 
INVESTING ACTIVITIES                
  Short term investments   3,447   -   (2,722,713)   -
  Proceeds from disposition of capital assets   33,519   -   57,253   1,820
  Additions to capital assets   ( 26,390)   ( 32,932)   ( 99,606)   ( 267,393)
    10,576   ( 32,932)   ( 2,765,066)   ( 265,573)
 
FINANCING ACTIVITIES                
  Proceeds from issuance of shares   -   -   3,876,257   -
  Share issue costs   -   -   (26,291)   -
  Purchase of company shares   -   -   -   (24,379)
  Proceeds from (repayment of) line of credit   584,976   -   1,353,312   (74,942)
  Repayment of bank overdraft   -   -   -   (127,214)
  Repayment of promissory notes   -   -   -   (40,000)
    584,976   -   5,203,278   ( 266,535)
 
Effect of foreign exchange rate on cash   -   36,489   -   ( 33,161)
 
Increase (decrease) in cash and cash equivalents   ( 191,502)   ( 98,115)   ( 264,494)   502,525
 
CASH and cash equivalents, beginning of period   1,929,538   2,100,645   2,002,530   1,500,005
 
CASH and cash equivalents, end of period $ 1,738,036 $ 2,002,530 $ 1,738,036 $ 2,002,530

The TSX Venture Exchange and the AIM market of the London Stock Exchange have not reviewed and do not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • Versatile Systems Inc.
    John Hardy
    Chairman and CEO
    1-800-262-1633 or International: 001-206-979-6760
    or
    Versatile Systems Inc.
    Fraser Atkinson
    CFO
    1-800-262-1633
    www.versatile.com