Versatile Systems Inc.
TSX VENTURE : VV

Versatile Systems Inc.

January 19, 2006 03:30 ET

Versatile Reports Record Revenues of $17,765,850 in Q2

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Jan. 19, 2006) -

Record Net Earnings of $754,444 for the quarter

Versatile Systems Inc. (TSX VENTURE:VV), today announces its results for the period ended December 31, 2005.

Revenue for the three months ended December 31, 2005 was $17,765,850 compared to $2,865,311 for the same quarter last year, an increase of 620%. Net Earnings for the quarter were $754,444 or $0.01 per share compared to a Net Loss of $495,184 or ($0.01) per share in the same quarter last year. The Net Earnings include a future income tax benefit of $959,757, as well as non-cash expenses related to stock based compensation, and amortization of capital and intangible assets totaling $392,277. This compares to non-cash expenses of $61,934 for the same quarter last year.

"All aspects of our business have improved over the previous quarter," said John Hardy, Chairman and CEO of Versatile. "We are continuing to make a significant investment in research and development, which is expensed each quarter. This expense provides the foundation for our key initiatives, which will drive higher margin sales over the next year."

Highlights of the second quarter included:

- Revenue of $17,765,850 a record for the Company, an increase of 620% over the same period last year.

- Net earnings of $754,444, or $0.01 per share, compared to a Net loss of $495,184 over the same period last year.

- Cash generated from operations for the quarter amounted to $186,964 compared to a deficiency of $433,250 for the same quarter last year.

- Deferred revenue is at an all time high of $7,336,915. Of that, $6,706,221, together with the associated costs in deferred contract costs, are expected to be realized over the next four quarters.

- Partnering with Team Rahal Solutions to launch Versatile AutoStore™

- Becoming a certified partner of Computer Associates.

Technology Investment

The Research and development expense was $492,618 for the quarter as compared to $175,128 for the same quarter last year. This investment does not contribute directly to revenues during the period that the research and development expenses are incurred. During the quarter Versatile had many new product initiatives, along with feature improvements to current product lines including:

- Enhancements to the Mobiquity Reporting Engine™ to deliver audit and logging functionality to cover security requirements.

- Creation of additional Adapters for the Mobiquity Transaction Engine 3.0™ to integrate technologies such as device automation leveraging X10, IP based video to the H.323 standard and ISO 7811 Magnetic Stripe Card Readers.

- Continued development, testing and qualification of the Versatile Port™.

Results for the first six months

Revenue for the six months ended December 31, 2005 was $34,549,159 compared to $6,677,220 for the same period last year, an increase of 517%. Net earnings for the six months ended December 31, 2005 was $713,401, or $0.01 per share, compared to a Net Loss of $1,137,281, or ($0.01) per share for the comparable period last year. The Net Earnings include a future income tax benefit of $1,445,346, as well as non-cash expenses related to a stock based compensation charge, amortization of capital and intangible assets for the period totaling $818,252. This compares to non-cash expenses of $134,201 for the same period last year.

Financial Position

As at December 31, 2005 the Company had cash and cash equivalents of $122,372, a decrease of $61,226 over the balance at June 30, 2005, and the Company had an unused credit line of $3,536,645 (U.S. $2,982,844). The working capital deficiency at December 31, 2005 was $8,492,034 an improvement of $901,318 over the working capital deficiency of $9,393,352 at June 30, 2005. This working capital deficiency includes the Promissory Notes due to the Vendors, relating to the acquisition of the Perfect Order business, of $4,896,780 (U.S. $4,200,000), which are due on or before April 25, 2006 and the Bank Term Loan of $3,205,366 (U.S. $2,749,263).

During the quarter the Company repaid Promissory Notes amounting to $774,067 (U.S. $666,667), which were due on November 30, 2005. The ability of the Company to continue operations on an ongoing basis will be dependent on its ability to continue to generate sales at these levels, maintain profitable operations, maintain or increase margins, control operating expenses and pay its obligations as they become due.

"We are on track with the financial guidance that we provided with the first quarter results," said Fraser Atkinson, CFO of Versatile. "We will continue to monitor our expenditures in relation to our corporate initiatives and we expect to see an increase in our gross margins over the next year."

About Versatile

Versatile provides 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 also provides information technology services for the implementation, maintenance and security of mission-critical computing environments. Versatile has the ability to architect solutions involving both proprietary and third party components. For more information go to 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.

(C) 2006 Versatile Systems 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 Systems Inc.
    John Hardy
    Chairman and CEO
    1-800-262-1633
    or
    Versatile Systems Inc.
    Fraser Atkinson
    CFO
    (604) 683-2915 Ext. 214
    www.versatile.com