Versatile Systems Inc.
TSX VENTURE : VV
AIM : VVS

Versatile Systems Inc.

February 23, 2012 09:00 ET

Versatile Reports Second Quarter Results

VANCOUVER, CANADA--(Marketwire - Feb. 23, 2012) - Versatile Systems Inc. (TSX VENTURE:VV)(AIM:VVS), announces its results for the second quarter of the 2012 fiscal year.

Revenue for the three months ended December 31, 2011 was $9,147,552 generating a gross profit of $1,951,833 or 21.3% of sales compared to $15,460,033 generating a gross profit of $2,968,137 or 19.2% of sales for the same quarter last year. The Net Loss for the quarter amounted to $244,831 ($0.00 per share) compared to Net Earnings of $178,965 ($0.01 per share) for the same period last year. The total comprehensive income for the quarter amounted to $103,019 compared to $320,380 for the same quarter last year.

"We are continuing to add new sales resources and obtain additional partnership opportunities with tier 1 technology companies such as Citrix, Hitachi Data Systems, NetApp, Red Hat, Splunk, and Symantec," said John Hardy, Chairman and CEO of Versatile. "We have cautiously increased R&D and marketing activities to respond to strengthening interest from partners and customers. We are focused on increasing sales of our proprietary technology and look forward to demonstrating Versatile's SmartSign™ at the Digital Signage Expo to be held in Las Vegas from March 6th to 9th, 2012."

Deferred revenue at December 31, 2011 was $5,671,777 (of which $5,202,720 is expected to be recognized in the next four quarters) compared to $6,320,199 at June 30, 2011.

The research and development expense for the quarter amounted to $275,847 compared to $278,909 for the same quarter last year. During the current quarter, the Company incurred $133,744 for research and development activities related to Mobiquity Route™, DEX and related mobile software products and $99,978 related to Self-service, Mobiquity Transaction Engine 3.0™ and Mobiquity Kiosk™.

The Company adopted IFRS in the first quarter of the current fiscal year. The Company has applied the transitional exceptions and exemptions to full retroactive application of IFRS in its preparation of an opening IFRS consolidated statement of financial position at July 1, 2010. The most significant changes include the reclassification of deferred contract costs to intangible assets and the reclassification of current deferred income taxes to long term. Further details of the conversion to IFRS are provided in Management's Discussion and Analysis and in the Notes to the Company's unaudited Consolidated Financial Statements, as at and for the six months ended December 31, 2011.

The following table provides a reconciliation of the Company's working capital under IFRS and under the previous Canadian generally accepted accounting principles:

31-Dec-11 30-Jun-11 01-Jul-10
Current Assets - IFRS 9,838,049 12,501,790 16,478,255
Add back deferred contract costs 4,544,253 4,469,066 5,793,180
Add back deferred income taxes 539,701 546,252 721,975
Current Assets - Canadian GAAP 14,922,003 17,517,108 22,993,410
Current Liabilities - IFRS and Canadian GAAP - 11,355,176 - 13,502,342 - 18,740,864
Working Capital - Canadian GAAP 3,566,827 4,014,766 4,252,546

"The gross profit improved from 19.8% last quarter to 21.3% in the current quarter," said Fraser

Atkinson, CFO of Versatile. "The Company has taken a number of measures to reduce costs. These steps, combined with continuing improvement of the gross profit to the historical average of 22.5%, will have a positive impact on cash flow."

Revenue for the six months ended December 31, 2011 was $18,186,764 generating a gross profit of $3,742,211 or 20.6% of sales compared to $24,679,083 generating a gross profit of $5,071,964 or 20.6% of sales for the same period last year. The Net Loss for the period amounted to $604,742 ($0.00 per share) compared to Net Earnings of $89,651 ($0.00 per share) for the same period last year.

On January 3, 2012 the Company delisted its shares from trading on the AIM market of the London Stock Exchange, which was approved by the shareholders at the annual general meeting held on November 17, 2011.

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. © 2012 Versatile Systems Inc. All rights reserved.

Versatile Systems Inc.
Consolidated Statements of Financial Position
(Unaudited - Prepared by Management)
Expressed in U.S. dollars December 31, 2011 June 30, 2011 July 1, 2010
ASSETS
Current Assets
Cash and cash equivalents $ 132,128 $ 978,656 1,738,036
Investment in Equus 2,172,995 2,311,109 2,203,043
Accounts receivable 5,106,060 7,134,328 10,580,706
Prepaid expenses 279,232 228,062 236,993
Inventory 2,147,634 1,849,635 1,719,477
9,838,049 12,501,790 16,478,255
Long-term accounts receivable 278,736 401,742 265,612
Capital Assets 264,608 270,437 519,391
Intangible assets 4,544,253 5,048,776 6,392,005
Deferred income tax assets 7,221,988 7,001,156 6,965,850
Goodwill 9,914,350 9,914,350 9,914,350
$ 32,061,984 $ 35,138,251 40,535,463
LIABILITIES
Current Liabilities
Line of credit $ 885,125 1,007,767 1,353,312
Accounts payable and accrued liabilities 5,267,331 6,823,643 9,955,342
Current portion of deferred revenue 5,202,720 5,670,932 7,432,210
11,355,176 13,502,342 18,740,864
Deferred Revenue 469,057 649,267 710,269
11,824,233 14,151,609 19,451,133
SHAREHOLDERS' EQUITY
Share Capital 54,433,709 54,433,709 54,433,709
Warrants 42,000 42,000 186,367
Equity Reserve 4,587,219 4,578,470 4,231,539
Deficit (37,669,340 ) (37,064,598 ) (36,965,836 )
Accumulated other comprehensive loss (1,155,837 ) (1,002,939 ) (801,449 )
20,237,751 20,986,642 21,084,330
$ 32,061,984 $ 35,138,251 40,535,463
Versatile Systems Inc.
Consolidated Statements of Operations and Comprehensive Income (Loss)
(Unaudited - Prepared by Management)
Expressed in U.S. dollars Three months ended December 31 Six months ended December 31
2011 2010 2011 2010
SALES $ 9,147,552 $ 15,460,033 $ 18,186,764 $ 24,679,083
COST OF SALES 7,195,719 12,491,896 14,444,553 19,607,119
1,951,833 2,968,137 3,742,211 5,071,964
EXPENSES
Selling and marketing 1,098,187 1,327,878 2,118,118 2,336,445
General and administrative 827,851 1,051,897 1,788,978 1,942,347
Research and development 275,847 278,909 519,957 471,177
Non recurrring expenses - 37,503 - 58,171
Stock-based compensation 4,279 - 8,749 -
Foreign exchange loss 27,957 (33,751 ) 28,781 (31,418 )
2,234,121 2,662,436 4,464,583 4,776,722
OPERATING PROFIT (LOSS) (282,288 ) 305,701 (722,372 ) 295,242
Amortization of capital assets 38,092 48,108 86,511 119,269
Interest expense 7,594 666 12,817 15,636
Loss on sale of capital assets and investments 1,534 2,575 1,534 2,575
EARNINGS (LOSS) BEFORE INCOME TAXES (329,508 ) 254,352 (823,234 ) 157,762
Current income tax expense (995 ) (995 ) (2,340 ) (1,990 )
Deferred income tax benefit 85,672 (74,392 ) 220,832 (66,121 )
NET EARNINGS (LOSS) (244,831 ) 178,965 (604,742 ) 89,651
EARNINGS (LOSS) PER SHARE (basic and diluted) ($0.00 ) $0.00 ($0.00 ) $0.00
Net earnings (loss) (244,831 ) 178,965 (604,742 ) 89,651
Other comprehensive income (loss)
Net change in fair value of available-for-sale investments 347,850 141,415 (152,898 ) (105,194 )
Total comprehensive income (loss) 103,019 320,380 (757,640 ) (15,543 )
Versatile Systems Inc.
Consolidated Statements of Changes in Shareholders' Equity
(Unaudited - Prepared by Management)
Expressed in U.S. dollars
Accumulated
other
Share Equity comprehensive
Capital Warrants Reserve Deficit loss Total
Balance, July 1, 2010 54,433,709 186,367 4,231,539 (36,965,836 ) (801,449 ) 21,084,330
Net earnings 89,651 89,651
Net change in fair value of
available-for-sale investments (105,194 ) (105,194 )
Balance, December 31, 2010 54,433,709 186,367 4,231,539 (36,876,185 ) (906,643 ) 21,068,787
Balance, June 30, 2011 54,433,709 42,000 4,578,470 (37,064,598 ) (1,002,939 ) 20,986,642
Net loss (604,742 ) (604,742 )
Net change in fair value of
available-for-sale investments (152,898 ) (152,898 )
Share-based compensation
expense - - 8,749 - - 8,749
Balance, December 31, 2011 54,433,709 42,000 4,587,219 (37,669,340 ) (1,155,837 ) 20,237,751
Versatile Systems Inc.
Consolidated Statements of Cash Flows
(Unaudited - Prepared by Management)
Expressed in U.S. dollars Three months ended December 31 Six months ended December 31
2011 2010 2011 2010
OPERATING ACTIVITIES
Net earnings (loss) $ (244,831 ) $ 178,965 $ (604,742 ) $ 89,651
Items not affecting cash
Amortization of capital assets 42,491 63,597 95,000 137,849
Stock-based compensation 4,279 - 8,749 -
Loss on sale of capital assets and investments 1,534 2,575 1,534 2,575
Unrealized foreign exchange gain (10,042 ) (20,886 ) (10,042 ) (20,391 )
Deferred income taxes (85,672 ) 74,392 (220,832 ) 66,121
Cash flow used in operations before other items (292,241 ) 298,643 (730,333 ) 275,805
Net change in non-cash working capital (781,384 ) (564,840 ) (394,426 ) (391,733 )
(1,073,625 ) (266,197 ) (1,124,759 ) (115,928 )
INVESTING ACTIVITIES
Short term Investments (14,776 ) (309,556 ) (14,776 ) (309,556 )
Proceeds from disposition of capital assets 19,089 30,174 20,430 103,268
Intangible assets - contract cost additions (1,277,653 ) (1,125,332 ) (2,633,433 ) (2,754,526 )
Amortization of intangible assets 1,857,045 1,274,464 3,137,956 2,878,612
Purchase of capital assets (102,095 ) (38,799 ) (109,304 ) (78,624 )
481,610 (169,049 ) 400,873 (160,826 )
FINANCING ACTIVITIES
Proceeds from (Repayment of) line of credit 160,144 (104,426 ) (122,642 ) (537,457 )
160,144 (104,426 ) (122,642 ) (537,457 )
Decrease in cash and cash equivalents (431,871 ) (539,672 ) (846,528 ) (814,211 )
Cash and cash equivalents, beginning of period 563,999 1,463,497 978,656 1,738,036
Cash and cash equivalents, end of period $ 132,128 $ 923,825 $ 132,128 $ 923,825

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
    International: 001-206-979-6760

    Versatile Systems Inc.
    Fraser Atkinson
    CFO
    1-800-262-1633
    www.versatile.com