Versatile Systems Inc. : December 19, 2011 Versatile Reports First Quarter Results Read More (PDF)

Press Release Versatile reports first quarter results

Vancouver, Canada December 19, 2011 - Versatile Systems Inc. (Trading symbols on the TSX Venture Exchange: VV and on AIM: VVS), announces its results for the first quarter of the 2012 fiscal year.

Revenue for the three months ended September 30, 2011 was $9,039,212 generating a gross profit of

$1,790,378 or 19.8% of sales compared to $9,219,050 generating a gross profit of $2,103,827 or 22.8% of sales for the same quarter last year. The Net Loss for the quarter amounted to $359,911 ($0.00 per share) compared to a Net Loss of $89,314 ($0.01 per share) for the same period last year.

"As a result of economic events occurring mid-quarter, several key customers reduced spending, which negatively impacted both revenue and gross profit," said John Hardy, Chairman and CEO of Versatile. "Nevertheless, we managed to be effectively cash flow neutral. In addition, we obtained a new credit facility of $4.5 million, and reduced operating expenses with a strategic relocation of our Mechanicsburg facility. We are in the process of adding new sales resources and remain committed to improving profitability, while carefully managing our expenses."

Highlights for the quarter included:

• Revenue for the three months ended September 30, 2011 was $9,039,212 compared to

$9,219,050 for the same quarter last year, a decrease of $179,838;

• The cash flow used in operations amounted to $51,134 for the three months ended September

30, 2011 compared to cash flow generated from operations of $150,269 for the same period last year;

• The research and development expense for the quarter amounted to $244,110 compared to

$192,268 for the same quarter last year;

• Deferred revenue at September 30, 2011 was $6,047,097 (of which $5,449,475 is expected to be recognized in the next four quarters) compared to $6,320,199 at June 30, 2011; and

• In order to save costs, the Company relocated to a smaller facility in Mechanicsburg, PA incurring a one-time cost of $65,040. This move will lead to a reduction in premise costs of approximately $200,000 per annum.

During the current quarter, the Company incurred $129,294 for research and development activities related to Mobiquity Route™, DEX and related mobile software products and $72,362 related to Mobiquity Transaction Engine 3.0™ and Mobiquity Kiosk™.

During the current quarter the Company changed its banking facilities for its U.S. based operations to a new financial institution, which is providing a credit facility for up to $4,500,000 on more favorable terms than the former bank.

"While the Company incurred a loss of $359,911 the cash used in operations amounted to $51,134," said Fraser Atkinson, CFO of Versatile. "Excluding the one-time moving costs the Company would have generated positive cash flow from operations. In addition, restoring the gross profit of 19.8% to the historical average of 21% to 22% will have a positive impact on cash flow."

The Company adopted IFRS during the current reporting period. 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, Condensed Consolidated Financial Statements, as at and for the three months ended September 30, 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.

FOR FURTHER INFORMATION, PLEASE CONTACT: John Hardy, Chairman and CEO Fraser Atkinson, CFO

1-800-262-1633 1-800-262-1633

International: 001-206-979-6760

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. All amounts are expressed in U.S. dollars unless otherwise stated. © 2011 Versatile Systems Inc. All rights reserved.

Versatile Systems Inc.

Consolidated Statements of Financial Position

(Unaudited - Prepared by Management)

Expressed in U.S. dollars

September 30, 2011

June 30, 2011 July 1, 2010
ASSETS Current Assets
Cash and cash equivalents
$ 563,999 $
978,656
1,738,036
Investment in Equus 1,810,369 2,311,109 2,203,043
Accounts receivable 5,535,268 7,134,328 10,580,706
Prepaid expenses 253,291 228,062 236,993
Inventory 1,910,121 1,849,635 1,719,477
10,073,048 12,501,790 16,478,255
Long-term accounts receivable 312,339 401,742 265,612
Capital Assets 221,587 270,437 519,391
Intangible assets 5,123,645 5,048,776 6,392,005
Deferred income tax assets 7,136,316 7,001,156 6,965,850
Goodwill 9,914,350 9,914,350 9,914,350
LIABILITIES Current Liabilities
$ 32,781,285
$ 35,138,251
40,535,463
Line of credit
$ 724,981
1,007,767 1,353,312
Accounts payable and accrued liabilities 5,878,754 6,823,643 9,955,342
Current portion of deferred revenue 5,449,475 5,670,932 7,432,210
12,053,210 13,502,342 18,740,864
Deferred Revenue 597,622 649,267 710,269
12,650,832 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 4,582,940 4,578,470 4,231,539
Deficit (37,424,509) (37,064,598) (36,965,836) Accumulated other comprehensive loss (1,503,687) (1,002,939) (801,449)
20,130,453 20,986,642 21,084,330
$ 32,781,285
$ 35,138,251
40,535,463

Versatile Systems Inc.

Consolidated Statements of Operations and Comprehensive Loss

(Unaudited - Prepared by Management)

Expressed in U.S. dollars Three months ended September 30

2011 2010
SALES
$ 9,039,212 $
9,219,050
COST OF SALES 7,248,834 7,115,223
1,790,378 2,103,827
EXPENSES
Selling and marketing 1,019,931 1,008,567
General and administrative 961,127 890,450
Research and development 244,110 192,268
Non recurrring expenses - 20,668
Stock-based compensation 4,470 - Foreign exchange loss 824 2,333
2,230,462 2,114,286
OPERATING LOSS (440,084) (10,459) Amortization of capital assets 48,419 71,161
Interest expense 5,223 14,970
LOSS BEFORE INCOME TAXES (493,726) (96,590) Current income tax expense (1,345) (995)
Deferred income tax benefit 135,160 8,271
NET LOSS (359,911) (89,314) LOSS PER SHARE (basic and diluted) ($0.00) ($0.00)
Net loss (359,911) (89,314) Other comprehensive loss
Net change in fair value of available-for-sale investments (500,748) (246,609) Total comprehensive loss (860,659) (335,923)

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 loss (89,314) (89,314) Net change in fair value of
available-for-sale investments (246,609) (246,609)
Balance, September 30, 2010 54,433,709 186,367 4,231,539 (37,055,150) (1,048,058) 20,748,407
Balance, June 30, 2011 54,433,709 42,000 4,578,470 (37,064,598) (1,002,939) 20,986,642
Net loss (359,911) (359,911) Net change in fair value of
available-for-sale investments (500,748) (500,748) Share-based compensation
expense - - 4,470 - - 4,470
Balance, September 30, 2011 54,433,709 42,000 4,582,940 (37,424,509) (1,503,687) 20,130,453

Versatile Systems Inc. Consolidated Statements of Cash Flows (Unaudited - Prepared by Management)

Expressed in U.S. dollars Three months ended September 30

2011 2010
OPERATING ACTIVITIES Net loss
Items not affecting cash
$ (359,911) $
(89,314)
Amortization of capital assets 52,509 74,252
Stock-based compensation 4,470 - Unrealized foreign exchange gain - 495
Deferred income taxes ( 135,160) ( 8,271) Cash flow used in operations before other items ( 438,092) ( 22,838)
Net change in non-cash working capital 386,958 173,107 ( 51,134) 150,269
INVESTING ACTIVITIES
Proceeds from disposition of capital assets 1,341 73,094
Intangible assets - contract cost additions (1,355,780) (1,629,194) Amortization of intangible assets 1,280,911 1,604,148
Purchase of capital assets ( 7,209) ( 39,825) ( 80,737) 8,223
FINANCING ACTIVITIES
Repayment of line of credit (282,786) (433,031) ( 282,786) ( 433,031)
Decrease in cash and cash equivalents ( 414,657) ( 274,539)
Cash and cash equivalents, beginning of period 978,656 1,738,036
Cash and cash equivalents, end of period
$ 563,999 $
1,463,497