Versatile Systems Inc. (TSX VENTURE:VV) announces its results for the fourth
quarter and the 2012 fiscal year.
Revenue for the three months ended June 30, 2012 was $8,832,150 generating a
gross profit of $1,942,201 or 22.0% of sales compared to $10,180,289 generating
a gross profit of $2,381,728 or 23.4% of sales for the same quarter last year.
The Loss from Operations for the quarter amounted to $390,775 compared to
$302,775 for the same quarter last year. As a result of the performance of the
U.S. Eastern operations, management determined that the goodwill related to the
original acquisition of Perfect Order was impaired. Further a provision should
also be recorded against the Deferred income tax assets for the U.S. operations.
Consequently, Versatile Systems Inc. ("Versatile" or "the Company") recorded
non-cash expenses of $7,195,380 for the Goodwill impairment and a write-down of
Deferred income taxes in the amount of $6,319,821. The Company also recorded
$105,875 for the equity loss relating to the Investment in Equus. As a result
the Net Loss for the quarter amounted to $14,075,239 ($0.09 per share) compared
to the Net Loss of $438,131 ($0.00 per share) for the same period last year.
Highlights for the quarter included:
-- Revenue for the three months ended June 30, 2012 was $8,832,150 compared
to $10,180,289 for the same quarter last year;
-- The cash used in operations before other items amounted to $381,420 for
the three months ended June 30, 2012 compared to cash used in operations
before other items of $162,977 for the same period last year;
-- The research and development expense for the quarter amounted to
$208,356 compared to $210,996 for the same quarter last year; and
-- Deferred revenue at June 30, 2012 was $6,712,216 (of which $5,292,359 is
expected to be recognized in the next four quarters) compared to
$6,320,199 at June 30, 2011, an increase of $392,017.
The research and development expense for the quarter amounted to $208,356
compared to $210,996 for the same quarter last year. During the current quarter,
the Company incurred $111,102 for research and development activities related to
an iPad application for Mobiquity Sell, Mobiquity Route(TM) and $54,546
primarily related to Smart Sign(TM).
Revenue for the year ended June 30, 2012 was $39,501,388 generating a gross
profit of $8,020,245 or 20.3% of sales compared to $45,903,472 generating a
gross profit of $10,129,378 or 22.1% of sales for the same period last year. The
Loss from Operations for the year amounted to $1,092,841 compared to $68,550 for
the previous year. As a result of the performance of the U.S. Eastern
operations, management determined that the goodwill related to the original
acquisition of Perfect Order was impaired. Further a provision should also be
recorded against the Deferred income tax assets for the U.S. operations.
Consequently, the Company recorded non-cash items of $7,195,380 for the Goodwill
impairment and a write-down of Deferred income tax assets in the amount of
$6,120,189. The Company also recorded $220,412 for the equity loss relating to
the Investment in Equus. As a result the Net Loss for the period amounted to
$14,717,158 ($0.09 per share) compared to Net Loss of $255,770 ($0.00 per share)
for the same period last year.
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. Further details of
the conversion to IFRS are provided in Management's Discussion and Analysis and
in the Notes to the Company's audited Consolidated Financial Statements for the
year ended June 30, 2012.
The Company has a 9.2% interest in Equus Total Return, Inc. (Equus), which is a
public company trading on the NYSE under the symbol EQS. The Company is deemed
to exert significant influence by virtue of having four Board members in common
as well as a senior executive in common. Significant influence was reached when
the four directors were elected to the Equus Board in May 2010 and the senior
executive was appointed in June 2010.
Equus applies generally accepted accounting principles in the United States ("US
GAAP") and is not required to consolidate portfolio company investments,
including those in which Equus has a controlling interest. However, under IFRS
Equus is required to consolidate investments in which it has a controlling
interest and equity account for those investments Equus significantly
influenced. The Company prepared consolidated financial statements for Equus as
at June 30, 2012 in accordance with IFRS. The Company is unable to obtain
information for dates prior to June 30, 2012 that would allow the preparation of
financial information for Equus that fully reflect the impact of these
differences between US GAAP and IFRS. As a result, Versatile Systems Inc. was
unable to determine whether any adjustments were necessary to the carrying value
of its investment in Equus as at June 30, 2011 and July 1, 2010 or the equity
method income (loss) for the years ended June 30, 2012 and 2011.
As a result of the foregoing the Company's auditors could not issue an
unqualified Auditors Report to accompany the Company's June 30, 2012
consolidated financial statements. As applicable legislation does not permit
such a qualification, the Company had to seek exemptive relief under National
Instrument 52-107 from the British Columbia Securities Commission and the
Ontario Securities Commission (collectively "the Regulators"). The Regulators
granted this relief with a Decision dated November 20, 2012, which permits the
Company's auditors to issue their Auditors Report with a qualified opinion. The
Decision also permits the Company's auditors to qualify their Auditors Report to
accompany the Company's June 30, 2013 consolidated financial statements is so
far as those statements relate to comparative information for the year ended
June 30, 2012.
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.
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Versatile Systems Inc.
Consolidated Statements of Financial Position
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Expressed in U.S. dollars June 30, 2012 June 30, 2011 July 1, 2010
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ASSETS
Current Assets
Cash and cash equivalents $ 434,725 $ 978,656 $ 1,738,036
Accounts receivable 5,994,377 7,134,328 10,580,706
Prepaid expenses 4,152,994 4,555,890 5,879,584
Inventory 2,347,110 1,849,635 1,719,477
-----------------------------------------------
12,929,206 14,518,509 19,917,803
Long-term accounts receivable 181,366 401,742 265,612
Long-term prepaid expenses 1,278,432 561,404 575,186
Investment in Equus 2,105,473 2,311,109 2,203,043
Capital assets 251,591 270,437 519,391
Intangible assets 167,206 159,544 174,228
Deferred income tax assets 880,407 7,001,156 6,965,850
Goodwill 2,718,970 9,914,350 9,914,350
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$ 20,512,651 $ 35,138,251 $ 40,535,463
-----------------------------------------------
-----------------------------------------------
LIABILITIES
Current Liabilities
Line of credit $ 1,988,675 $ 1,007,767 $ 1,353,312
Accounts payable and
accrued liabilities 5,544,888 6,823,643 9,955,342
Current portion of deferred
revenue 5,292,359 5,670,932 7,432,210
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12,825,922 13,502,342 18,740,864
Deferred Revenue 1,419,857 649,267 710,269
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14,245,779 14,151,609 19,451,133
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SHAREHOLDERS' EQUITY
Share Capital 54,433,709 54,433,709 54,433,709
Warrants reserve - 42,000 186,367
Equity Reserve 4,629,219 4,578,470 4,231,539
Deficit (52,458,434) (37,741,276) (37,485,506)
Accumulated other
comprehensive loss (337,622) (326,261) (281,779)
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6,266,872 20,986,642 21,084,330
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$ 20,512,651 $ 35,138,251 $ 40,535,463
-----------------------------------------------
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Versatile Systems Inc.
Consolidated Statements of Operations and Comprehensive Loss
(Unaudited - Prepared by Management)
----------------------------------------------------------------------------
Expressed in U.S.
dollars Three months ended June 30 Twelve months ended June 30
2012 2011 2012 2011
----------------------------------------------------------
(unaudited) (unaudited)
SALES $ 8,832,150 $ 10,180,289 $ 39,501,388 $ 45,903,472
COST OF SALES 6,889,949 7,798,561 31,481,143 35,774,094
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1,942,201 2,381,728 8,020,245 10,129,378
----------------------------------------------------------
EXPENSES
Selling and
marketing 1,269,214 1,186,724 4,571,281 4,659,897
General and
administrative 819,595 929,913 3,420,726 3,702,160
Research and
development 208,356 210,996 927,881 960,399
Amortization of
capital assets 43,164 51,473 168,388 225,227
Legal fees - 199,293 - 492,950
Share-based
compensation - 141,658 8,749 202,564
Foreign exchange
loss (gain) (7,353) (35,554) 16,061 (45,269)
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2,332,976 2,684,503 9,113,086 10,197,928
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LOSS FROM
OPERATIONS (390,775) (302,775) (1,092,841) (68,550)
Interest expense (62,203) (2,616) (82,282) (16,426)
Goodwill
impairment (7,195,380) - (7,195,380) -
Equity income
(loss) from
Investment in
Equus (105,875) 43,181 (220,412) 103,053
Write-down of
Investment in
Equus to fair
value - (304,543) - (304,543)
Loss on sale of
capital assets
and investment (190) (1,410) (1,724) (4,610)
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LOSS BEFORE INCOME
TAXES (7,754,423) (568,163) (8,592,639) (291,076)
Current income tax
expense (995) (995) (4,330) -
Deferred income
tax (expense)
recovery (6,319,821) 131,027 (6,120,189) 35,306
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NET LOSS $(14,075,239) $ (438,131) $(14,717,158) $ (255,770)
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Other
comprehensive
loss
Foreign exchange
translation 2,317 (11,189) (11,361) (44,482)
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Total
comprehensive
loss $(14,072,922) $ (449,320) $(14,728,519) $ (300,252)
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LOSS PER SHARE
(basic and
diluted) ($0.09) ($0.00) ($0.09) ($0.00)
----------------------------------------------------------
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Versatile Systems Inc.
Consolidated Statements of Changes in Shareholders' Equity
(Unaudited - Prepared by Management)
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Expressed in U.S. dollars
Share Warrant Equity
Capital Reserve Reserve
---------------------------------------------
Balance, July 1, 2010 $ 54,433,709 $ 186,367 $ 4,231,539
Net loss - - -
Foreign exchange on the
translation of VMS-UK - - -
Expiration of warrants - (144,367) 144,367
Share-based compensation
expense - - 202,564
---------------------------------------------
Balance, June 30, 2011 54,433,709 42,000 4,578,470
---------------------------------------------
Balance, June 30, 2011 54,433,709 42,000 4,578,470
Net loss - - -
Foreign exchange on the
translation of VMS-UK - - -
Expiration of warrants - (42,000) 42,000
Share-based compensation
expense - - 8,749
---------------------------------------------
Balance, June 30, 2012 $ 54,433,709 $ - $ 4,629,219
---------------------------------------------
Expressed in U.S. dollars
Accumulated
other
comprehensive
Deficit loss Total
---------------------------------------------
Balance, July 1, 2010 $ (37,485,506) $ (281,779) $ 21,084,330
Net loss (255,770) - (255,770)
Foreign exchange on the
translation of VMS-UK - (44,482) (44,482)
Expiration of warrants - - -
Share-based compensation
expense - - 202,564
---------------------------------------------
Balance, June 30, 2011 (37,741,276) (326,261) 20,986,642
---------------------------------------------
Balance, June 30, 2011 (37,741,276) (326,261) 20,986,642
Net loss (14,717,158) - (14,717,158)
Foreign exchange on the
translation of VMS-UK - (11,361) (11,361)
Expiration of warrants - - -
Share-based compensation
expense - - 8,749
---------------------------------------------
Balance, June 30, 2012 $ (52,458,434) $ (337,622) $ 6,266,872
---------------------------------------------
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Versatile Systems Inc.
Consolidated Statements of Cash Flows
(Unaudited - Prepared by Management)
----------------------------------------------------------------------------
Expressed in U.S.
dollars Three months ended June 30 Twelve months ended June 30
2012 2011 2012 2011
-------------------------------------------------------
(unaudited) (unaudited)
OPERATING ACTIVITIES
Net loss $(14,075,239) $ (438,131) $(14,717,158) $ (255,770)
Items not involving
cash
Amortization of
capital assets 43,164 56,998 177,159 256,075
Share-based
compensation - 141,658 8,749 202,564
Goodwill impairment 7,195,380 - 7,195,380 -
Equity loss
(income) from
Equus Investment 105,875 (43,181) 220,412 (103,053)
Write-down of
Investment in
Equus - 304,543 - 304,543
Loss on sale of
capital assets and
investments 190 1,410 1,724 4,610
Unrealized foreign
exchange gain
(loss) 29,389 (55,247) 11,498 (54,014)
Deferred income
taxes 6,319,821 (131,027) 6,120,189 (35,306)
-------------------------------------------------------
Cash flow used in
operations before
other items (381,420) (162,977) (982,047) 319,649
Net change in non-
cash operating
balance sheet
items 326,310 502,259 (344,877) (432,742)
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(55,110) 339,282 (1,326,924) (113,093)
INVESTING ACTIVITIES
Purchase of shares
in Equus - - (14,776) (309,556)
Proceeds from
disposition of
capital assets (17,387) (30,387) 17,640 76,968
Intangible assets -
contract cost
additions (80,321) (81,223) (321,283) (324,891)
Intangible assets -
contract cost
recognized 107,293 102,056 313,621 339,116
Purchase of capital
assets (29,957) 26,465 (193,117) (82,379)
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(20,372) 16,911 (197,915) (300,742)
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FINANCING ACTIVITIES
Proceeds from
(Repayment of)
line of credit 220,903 (131,060) 980,908 (345,545)
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220,903 (131,060) 980,908 (345,545)
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Increase (Decrease)
in cash and cash
equivalents 145,421 225,133 (543,931) (759,380)
Cash and cash
equivalents,
beginning of period 289,304 753,523 978,656 1,738,036
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Cash and cash
equivalents, end of
period $ 434,725 $ 978,656 $ 434,725 $ 978,656
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FOR FURTHER INFORMATION PLEASE CONTACT:
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
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