Versatile Systems Inc.
TSX VENTURE : VV
AIM : VVS

Versatile Systems Inc.

September 06, 2007 03:32 ET

Versatile Reports Record Revenues for Its Year-End and Fourth Quarter

The fourth quarter Net earnings were U.S. $992,566 and cash flow from operations was U.S. $1,144,881

VANCOUVER, CANADA--(Marketwire - Sept. 6, 2007) - Versatile Systems Inc. (TSX VENTURE:VV)(AIM:VVS), today announces its results for the fourth quarter and the year ended June 30, 2007.

Revenue, gross profit, EBITDA and cash flow from operations, before non-cash working capital items, for the three months ended June 30, 2007 were all at record levels.



Q4 2007 Q4 2006 Increase
---------------------------------------
(restated)
Revenue $ 18,193,167 $ 15,288,876 19.0%
Cash flow from operations 1,144,881 605,459 89.1%
Earnings before interest, taxes,
amortization and stock based
compensation 1,242,273 780,654 59.1%


"The financial metrics of our business have shown marked improvement over the previous fiscal year," said John Hardy, Chairman and CEO of Versatile. "The quality and capabilities of our products have been proven and, as a result, we are seeing further opportunities in key sectors of our business. Our sales funnel has never been so promising and should provide a solid foundation to grow the business."

Highlights of the fourth quarter included:

- Revenue for the three months ended June 30, 2007 was $18,193,167 compared to $15,288,876 for the same quarter last year, an increase of 19.0%,

- Deferred revenue at June 30, 2007 was $6,787,279 compared to $5,331,408 at March 31, 2007, an increase of $1,455,871 during the quarter,

- Strong repeat business from customers including Comcast, Motorola, Tyco Electronics, Thermo Fisher Scientific, Ohio State University and Cadbury Schweppes,

- Earnings before interest, taxes, amortization and stock based compensation for the quarter was $1,242,273 compared to $780,654 for the same quarter last year, an increase of 59.1%,

- Cash flow from operations, before the non-cash working capital items, was $1,144,881 compared to $605,459 for the same quarter last year, an increase of 89.1%,

- The Company was admitted for trading on the Alternative Investment Market (AIM) of the London Stock Exchange and completed a brokered private placement for gross proceeds of CDN $4,805,640,

- Customization and deployment of the final phase of an order for 6,000 handheld devices that were delivered during the year,

- Sale of Versatile's proprietary software Mobiquity™ Sales Supervisor solution to Cadbury Schweppes' field reps and regional managers based across England, Scotland, Wales and Northern Ireland,

- Tyco Electronics Corporation, in conjunction with the Company, launched the website www.syncseer.com,

- Mobiquity Kiosk™ implementation of BillMeLater kiosk application for I4 Commerce and a direct communication connection to Wells Fargo's credit decision systems to eliminate the requirement for third party middleware solutions,

- Designed, developed, and implemented automated time and attendance module for the Mobiquity Transaction Engine 3.0™ using long-range passive RFID, and

- The TSX Venture Exchange ranked the Company as the top technology company in its TSX Venture 50 annual ranking.

Technology Development

During the fourth quarter Versatile had many feature improvements to current product lines.

For the Mobiquity Transaction Engine 3.0™ these included the following:

- Designed, developed, and implemented automated time and attendance module for SyncSeer. This solution uses long-range passive RFID to help automate the time and attendance tracking of clients, and

- Added improved remote configuration support for ThingMagic RFID Readers.

For the Mobiquity Kiosk™, these included the following:

- Implementation of BillMeLater kiosk application for I4 Commerce,

- Implementation of a direct communication connection to Wells Fargo's credit decision systems to eliminate the requirement for third party middleware solutions,

- Implementation of extended credit offering on kiosks that are connected with HSBC,

- Streamlined Kiosk configuration so that it is easier to use and requires less time,

- Finalized kiosk support for the IBM Anywhere hardware platform,

- Research into the Verifone mx870 payment platform as a small-form-factor kiosk alternative, and

- Implementation of a large-touch-screen entertainment mall kiosk.

Revenue for the year ended June 30, 2007 was $62,230,275 compared to $59,921,368 for the same period last year, an increase of $2,308,907. Cost of sales for the year ended June 30, 2007 amounted to $47,514,478 resulting in a gross profit of $14,715,797 or 23.6% of sales as compared to $46,675,639 resulting in a gross profit of $13,245,729 or 22.1% of sales for the same period last year.

The EBITDA for the year was $1,992,905 compared to an EBITDA of $1,437,734 for the same period last year, an increase of 38.6%. EBITDA is defined as net earnings before interest expense, income taxes, depreciation and amortization. The Company has included information concerning EBITDA because it believes that it may be used by certain investors as one measure of the Company's financial performance. Earnings before interest, taxes, amortization and stock-based compensation, which is a non-cash item, amounted to $2,548,349 compared to $1,560,801 for the same period last year.

Earnings before income taxes amounted to $529,146 compared to a Loss before income taxes of $322,392 last year. Net Earnings for the period amounted to $1,379,445 ($0.01 per share) compared to $4,058,555 ($0.04 per share) for the same period last year. Cash flow from operations, before non-cash working capital items was $2,159,289 compared to $1,099,233 for the previous year, an increase of 96.4%.

"In the 2007 fiscal year we generated significant cash flow from operations while continuing to invest in our proprietary products, sales resources and professional staff to support current and future growth opportunities," said Fraser Atkinson, CFO of Versatile.

Versatile has historically prepared its consolidated financial statements in Canadian dollars. The majority of Versatile's operations are in the United States and as a result it has a significant and growing U.S. customer base. Further, the majority of its global revenue and assets are denominated in U.S. dollars. Effective July 1, 2006, the Company adopted the U.S. dollar as its reporting currency. The financial information for all of the prior periods have been translated into the new reporting currency.

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.

(C) 2007 Versatile Systems Inc.

All rights reserved.



Versatile Systems Inc.
Consolidated Balance Sheets
--------------------------------------------------------------------------

Expressed in U.S. dollars June 30, 2007 June 30, 2006
---------------------------------
(Restated)
ASSETS
Current Assets
Cash and cash equivalents $ 3,369,087 $ 99,010
Accounts receivable 15,200,919 10,658,843
Current portion of deferred contract
costs 4,489,111 3,117,610
Work in progress 41,705 28,050
Prepaid expenses 347,023 845,556
Inventory 1,268,682 938,229
Future income tax benefits 1,094,579 900,546
---------------------------------
25,811,106 16,587,844

Long term accounts receivable 812,000 -
Deferred contract costs 396,423 461,793
Capital Assets 492,979 325,067
Intangible assets 1,335,877 2,207,665
Future income tax benefits 4,326,136 3,529,635
Goodwill 9,914,350 9,914,350
---------------------------------
$ 43,088,871 $ 33,026,354
---------------------------------
---------------------------------

LIABILITIES
Current Liabilities
Line of credit $ 3,383 $ 370,760
Bank overdraft 170,422 757,968
Accounts payable and accrued liabilities 13,720,928 10,428,436
Current portion of deferred revenue 6,299,863 4,937,709
Current portion of bank term loan 2,749,263 -
Term loan 175,000 -
Convertible debenture - 107,594
Current portion of capital lease
obligations 4,748 6,422
---------------------------------
23,123,607 16,608,889

Deferred Revenue 487,416 533,733
Capital Lease Obligations - 4,748
Bank Term Loan - 2,749,263
Term Loan - 175,000
---------------------------------
23,611,023 20,071,633

SHAREHOLDERS' EQUITY
Share Capital 51,643,963 44,473,680
Shares to be issued - 2,502,079
Warrants 382,650 538,144
Contributed surplus 2,998,798 2,392,030
Deficit (35,263,226) (36,642,671)
Foreign currency translation adjustment (284,337) (308,541)
---------------------------------
19,477,848 12,954,721

---------------------------------
$ 43,088,871 $ 33,026,354
---------------------------------
---------------------------------


Versatile Systems Inc.
Consolidated Statements of Operations and Deficit
--------------------------------------------------------------------------

Expressed in Three months ended June 30 Year ended June 30
U.S. dollars (unaudited)
2007 2006 2007 2006
-------------------------------------------------
(Restated) (Restated)

SALES 18,193,167 15,288,876 62,230,275 59,921,368

COST OF SALES 13,770,768 11,395,093 47,514,478 46,675,639

-------------------------------------------------
4,422,399 3,893,783 14,715,797 13,245,729

EXPENSES
General and
administrative 1,252,940 1,001,277 4,597,181 4,243,188
Selling and marketing 1,587,817 1,842,837 6,502,051 5,918,898
Research and
development 339,369 269,015 1,068,216 1,522,842
Stock-based
compensation 264,896 31,278 555,444 123,067
-------------------------------------------------
3,445,022 3,144,407 12,722,892 11,807,995

Earnings before interest,
taxes and amortization 977,377 749,376 1,992,905 1,437,734

Amortization of capital
assets 90,251 36,492 288,291 182,875
Amortization of
intangible assets 192,454 323,115 874,550 1,052,148
Interest 69,236 252,534 300,918 525,103
-------------------------------------------------

EARNINGS (LOSS) BEFORE
INCOME TAXES 625,436 137,235 529,146 (322,392)

Current income tax
(expense) recovery (40,937) (20,000) (101,323) (33,804)
Future income tax
benefit 408,067 2,407,551 951,622 4,414,751

-------------------------------------------------
NET EARNINGS FOR THE
PERIOD 992,566 2,524,786 1,379,445 4,058,555
-------------------------------------------------

DEFICIT, BEGINNING
OF PERIOD (36,255,792) (39,167,457) (36,642,671) (40,701,226)

-------------------------------------------------
DEFICIT, END OF
PERIOD (35,263,226) (36,642,671) (35,263,226) (36,642,671)
-------------------------------------------------
-------------------------------------------------

EARNINGS PER SHARE
(basic and fully
diluted): $ 0.01 $ 0.03 $ 0.01 $ 0.04
-------------------------------------------------
-------------------------------------------------


Versatile Systems Inc.
Consolidated Statements of Cash Flows
--------------------------------------------------------------------------

Expressed in Three months ended June 30 Year ended June 30
U.S. dollars (unaudited)
2007 2006 2007 2006
----------------------------------------------------
(Restated) (Restated)

CASH FLOWS FROM (USED IN)
OPERATING ACTIVITIES
Net earnings for
the period $ 992,566 $ 2,587,786 $ 1,379,445 $ 4,058,555
Items not affecting
cash
Amortization of capital
and intangible assets 282,705 296,607 1,162,841 1,235,023
Loss on sale of capital
assets 4,293 5,661 4,693 5,661
Stock-based compensation 264,896 31,278 555,444 123,067
Amortization of deferred
finance charges - 47,402 - 47,402
Foreign exchange loss 8,488 44,276 8,488 44,276
Future income tax benefit (408,067) (2,407,551) (951,622) (4,414,751)
-------------------------------------------------
Cash flow from operations
before other items 1,144,881 605,459 2,159,289 1,099,233
Net change in non-cash
working capital items 24,665 (1,872,302) (1,907,534) 106,835
-------------------------------------------------
1,169,546 (1,266,843) 251,755 1,206,068

CASH FLOWS FROM (USED IN)
INVESTING ACTIVITIES
Proceeds from disposition
of capital assets 700 31,499 2,640 31,499
Additions to capital and
intangible assets (63,921) (56,698) (455,234) (151,622)
-------------------------------------------------
(63,221) (25,199) (452,594) (120,123)
-------------------------------------------------

CASH FLOWS FROM (USED IN)
FINANCING ACTIVITIES
Proceeds from issuance of
shares, net of costs 4,050,642 56,919 4,564,059 394,909
Proceeds from issuance of
convertible debenture,
net of costs - 3,294,394 - 3,294,394
Repayment of convertible
debenture - (510,106) (107,594) (510,106)
Repayment of the line
of credit (1,680,236) 370,760 (367,377) 63,760
Repayment of the bank
overdraft (276,334) 757,968 (587,546) 640,175
Repayment of the
quarterly payments - - - (206,250)
Repayment of VAC Notes - - - (666,667)
Repayment of promissory
notes - (4,200,000) - (4,200,000)
Repayment of capital
lease obligations (1,196) (1,138) (6,422) (5,672)
-------------------------------------------------
2,092,876 (231,203) 3,495,120 (1,195,457)
-------------------------------------------------

Effect of foreign
exchange rate on cash (37,922) 50,403 (24,204) 58,719

Increase in cash and
cash equivalents 3,161,279 (1,472,842) 3,270,077 (50,793)

CASH and cash
equivalents,
beginning of
period 207,808 1,571,852 99,010 149,803

-------------------------------------------------
CASH and cash
equivalents,
end of period 3,369,087 99,010 3,369,087 99,010
-------------------------------------------------
-------------------------------------------------


The TSX Venture Exchange has not reviewed and does 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
    Website: www.versatile.com