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VendTek Systems Announces Fiscal Q1 2014 Financial Results


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2014-04-02 00:01:06 -

Vancouver, British Columbia CANADA, April 01, 2014 /FSC/ - VendTek Systems Inc. (VSI - TSX Venture), (the "Company a developer and licensor of software for the global prepaid telecom and financial services markets, today reported its financial results for its first quarter of fiscal 2014 ended January 31, 2014 ("Q1 FY2014

Selected Financial Information (2)

* Revenue for the quarter ended January 31, 2014 increased $776,000 to $1.3 million, or 142% from $547,000 in the prior fiscal quarter of FY2013;

* Gross profit for Q1 FY2014 increased to $892,000 million compared to $432,000 in the prior fiscal quarter, with gross margin decreasing to 67.4% from 84.1%, respectively;

* Operating expenses were $1.6 million compared to $1.5 million in the prior

fiscal quarter;

* Adjusted EBITDA1 loss was $653,000 for Q1 FY2014 compared to a loss of $958,000 for the prior fiscal quarter;

* Net income (loss) was $4.1 million compared to ($901,000) in the prior fiscal quarter;

* Cash used in operations was $927,000 for Q1 FY2014, compared to $187,000 in the prior fiscal quarter;

* Cash and cash equivalents was $1.7 million at January 31, 2014 compared to $2.7 million in at October 31, 2013, which excludes $3.9 million cash received by the Company on February 3, 2014 in connection with its Canadian operations divestiture, and $1.6 million in convertible debentures repaid on February 6, 2014;

* Resolution of $3.0 million of convertible debentures that matured on January 25, 2014.

(2) Reflects restated financial information of the Company's continuing operations following the divestiture of its Canadian assets, effective January 31, 2014.

“The first quarter of fiscal 2014 represents an important chapter in the life of the Company, commented Doug Buchanan, President and CEO of VendTek. It is the quarter marking the closing of our Canadian asset divestiture, the discontinuation of our US operations, and the beginning of our new emphasis on Brazil and other international operations. In particular, VendTek's Brazil operations will become a more material portion of our business and our reporting will necessary reflect this greater transparency added Mr. Buchanan.

Subsequent to quarter-end, the Company announced the closing of its Canadian operations divestiture to Payment Source Inc. PSI for $6.0 million (the “Purchase Price effective January 31, 2014 (the “Closing Date, which consists of $4.5 million of cash consideration and the assumption of up to $1.5 million of trade payables. The $4.5 million of cash consideration consists of a $200,000 deposit, which was paid on November 15, 2013, $3.9 million which was paid on February 3, 2014 and a $450,000 holdback Holdback which is due ninety days from the Closing Date, subject to working capital adjustments. The Company's preliminary analysis suggests it will not be receiving this Holdback payment based on its working capital position on the Closing Date.

In connection with the PSI transaction, the Company will also receive a minimum of two-years of license fee payments for its efreshTM software and transition service fees for a six-month period. The Company intends to use the proceeds from this sale to support and grow its ongoing operations in Brazil which the Company believes holds tremendous potential. This transaction will allow VendTek to refocus its resources on this exciting growth opportunity while simplifying its overall operating structure.

On October 31, 2013 the Company announced the cancellation of $750,000 in convertible debentures to one of its holders in connection with the 6.0% $3.05 million unsecured convertible debenture offering that was issued in 2011 and matured on January 25, 2014, leaving $2.3 million. This cancellation was in partial consideration for the renegotiation of the Company's territory agreement with a related party. On February 6, 2014, the Company repaid $1.6 million of the remaining $2.3 million in principal payments that matured on January 25, 2014 to its convertible debenture holders. The $672,000 balance in convertible debentures was cancelled and reissued as either new convertible debentures bearing interest of 7.5% per annum with attached warrants or 9.0% per annum without warrants.

Subsequent to quarter-end the Company announced an agreement between its Brazil subsidiary, Now Prepay Servicos de Informatica Ltda. ("NPS and GetNet, which specializes in the development and management of electronic payment solutions and services for businesses using electronic transactions. GetNet is present in over 400,000 retailers throughout Brazil and Chile. Under the agreement, NPS will have exclusive regional rights to distribute its full product portfolio to merchants who are using the GetNet debit/credit processing solution. By utilizing GetNet's hardware infrastructure to deliver the Company's products to the GetNet merchant network, NPS will also be able to significantly reduce the capital equipment cost required to build-out its network. Once fully implemented, the Company expects this agreement to have a significant impact on NPS's growth prospects in Brazil.

Also subsequent to quarter-end, the Company announced that its wholly owned Brazilian subsidiary, NPS, launched a new product in partnership with Vivo SA, called "Vivo Insurance". Vivo SA is an operator of mobile telephony, fixed telephony, broadband Internet and cable TV and is owned by Telefonica. Of the four major carriers, Vivo SA has the largest market share in Brazil. Vivo Insurance is a new product targeting Vivo's 77 million mobile customers. Users who buy mobile pre-paid credit will be able to add a health insurance feature to their purchases. The insurance feature is sold as a "package" bundled with mobile pre-paid credits and also enables participation in the Federal lottery. According to a 2011 report commissioned by the Brazilian Insurance Industry Association, there were in excess of 40 million people without any insurance in Brazil in 2009. The target market for micro-insurance was estimated to be 128 million people at that time.

With approximately 2,700 transacting point-of-sale locations as of January 31, 2014, the Company is targeting an additional 4,000 by December 31, 2014. VendTek's long-term strategy is to develop and maintain high margin licensing relationships of its e-Fresh(tm) transaction processing software with its international operating partners across the many markets where the demand for the Company's prepaid transaction processing services is significant.

VendTek's MD&A and complete financial statements and notes are available at www.sedar.com and the Company's website www.vendteksystems.com.

For more information or to receive the complete statements please contact Samantha White at 604-805-4653 or 1-800-806-4958 or investment@vendteksystems.com.

Conference Call
To access the conference call by telephone, dial 1-416-764-8688 or 1-888-390-0546 and reference the company name, VendTek Systems Inc. or this conference ID 05607738.

A live audio webcast of the conference call will be available at www.newswire.ca/en/webcast/detail/1328411/1467887. Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast.



VENDTEK SYSTEMS INC.
Unaudited Condensed Consolidated Statement of Financial Position
(All amounts expressed in Canadian dollars)
October 31, 2012 and 2011





January 31, October 31,


Note 2014 2013



Assets

Current assets:
Cash and cash equivalents $ 1,657,529 $ 2,653,198
Restricted cash 4 146,993 146,606
Accounts receivable 5 4,819,596 2,172,495
Inventories 96,735 1,423,827
Prepaid expenses and deposits 182,276 518,506


6,903,129 6,914,632
Non-current assets:
Property, plant and equipment, net 6 599,770 855,880
Intangible assets 7 79,439 86,638
Goodwill - 907,342



$ 7,582,338 $ 8,764,492



Liabilities and Shareholders' Deficiency

Current liabilities:
Bank indebtedness 8 $ 82,765 $ -
Accounts payable and accrued liabilities 4,384,840 9,686,126
Current portion finance lease obligations 253,479 263,083
Current portion of convertible debentures8 3,113,187 3,045,394
Deferred revenue 153,981 306,981


7,988,252 13,301,584
Non-current liabilities:
Long term portion of finance lease
obligations 203,235 196,200

Shareholders' deficiency:
Share capital 9 12,188,130 12,188,130
Contributed surplus 9 3,924,319 3,916,136
Deficit (16,478,935) (20,579,957)
Accumulated other comprehensive loss (242,661) (257,601)


(609,149) (4,733,292)



$ 7,582,338 $ 8,764,492





VENDTEK SYSTEMS INC.
Unaudited Condensed Consolidated Interim Statements of Operations and Comprehensive Loss
(All amounts expressed in Canadian dollars)



RESTATED - (NOTE 13) RESTATED - (NOTE 13)


Three months Three months
ended January 31, ended January 31,


Note 2014 2013


CONTINUING OPERATIONS:

Revenue
Products and service revenue 10 $ 1,323,531 $ 547,047
Cost of product and service
revenue 431,201 86,819



Gross profit 892,330 460,228

Operating expenses: 11
General and administrative 1,072,561 1,046,302
Selling and marketing 359,027 250,610
Research and development 212,567 216,544


Total operating expenses 1,644,155 1,513,456

Loss before finance costs, loss on
disposal of assets and foreign
exchange loss (gain) (751,825) (1,053,228)

Finance costs 12 136,550 174,241
Foreign exchange loss (gain) 37,095 (3,849)



Net loss from continuing operations (925,470) (1,223,620)

DISCONTINUED OPERATIONS:

Net income from discontinued
operations 13 5,026,490 322,469


Net income (loss) 4,101,020 (901,151)

Other comprehensive income (loss):
Foreign currency translation
difference 14,940 18,637



Comprehensive income (loss) $ 4,115,960 $ (882,514)




EARNINGS PER SHARE
Basic and diluted earnings
(loss) per share 15 0.07 (0.02)



EARNINGS PER SHARE -
CONTINUING OPERATIONS
Basic and diluted loss
per share 15 (0.02) (0.02)




Weighted average shares outstanding:
Basic and diluted 15 58,357,652 58,357,652





VENDTEK SYSTEMS INC.
Unaudited Condensed Consolidated Statements of Changes in Equity
(All amounts expressed in Canadian dollars)



Three months ended January 31, 2014 and 2013

--

Share capital Accumulated other
-
--
Contributed
Number Value surplus
--


Balance, November 1, 2012 58,357,652 $ 12,188,130 $ 3,813,238

Stock based compensation - - 31,454

Currency translation
adjustment - - -

Net loss for period - - -

--


Balance January 31, 2013 58,357,652 $ 12,188,130 $ 3,844,692
--


Balance, November 1, 2013 58,357,652 12,188,130 3,916,136

Stock based compensation - - 8,183

Currency translation
adjustment - - -

Net income (loss) for
period - - -

--


Balance January 31, 2014 58,357,652 $ 12,188,130 $ 3,924,319
--






Accumulated other Total Shareholders'


comprehensive equity
loss Deficit (deficiency)


Balance, November 1, 2012 $ (253,682) $(16,222.532) $ (474,846)

Stock based compensation - - 31,454

Currency translation
adjustment 18,637 - 18,637

Net loss for period - (901,151) (901,151)




Balance January 31, 2013 $ (235,045) $ (17,123,683) $ (1,325,906)



Balance, November 1, 2013 (257,601) (20,579,957) (4,733,292)

Stock based compensation - - 8,183

Currency translation
adjustment 14,940 - 14,940

Net income (loss) for
period - 4,101,020 4,101,020




Balance January 31, 2014 $ (242,661) $ (16,478,937) $ (609,149)





VENDTEK SYSTEMS INC.
Unaudited Condensed Consolidated Statements of Cash Flows
(All amounts expressed in Canadian dollars)



Three months ended January 31, 2014 and 2013



Note 2014 2013



Cash provided by (used in):

Operating activities:
Net loss for the period: $ 4,101,020 $ (901,151)
Items not involving cash:
Amortization 108,642 89,656
Accretion on convertible debentures 67,793 75,896
Mark to market loss on derivatives - 19,089
Foreign exchange loss (gain) 37,095 (3,849)
Gain on disposal of discontinued
operations 13 (4,792,384)
Loss on disposal of assets 8,199 6,427
Stock-based compensation expense 9 8,183 31,454
Change in non-cash operating working
capital 17 (534,435) 416,002
Interest expense on long-term debt 68,757 79,256


(927,130) (187,220)

Financing activities:
Interest paid on long-term debt (116,546) (123,135)
Repayment of capital lease obligations (64,890) (38,449)


(181,436) (161,584)

Investing activities:
Purchases of equipment (7,298) (87,638)
Decrease (increase) in restricted cash (2,790) 125,019
Net proceeds received from disposition
of discontinued operations 13110,260 -


100,172 37,381

Foreign exchange effect on cash and cash
equivalents 12,725 (12,918)

Decrease in cash and cash equivalents (995,669) (324,341)

Cash and cash equivalents, beginning of period 2,653,198 3,792,619



Cash and cash equivalents, end of period $ 1,657,529 $ 3,468,278





Adjusted EBITDA can be calculated from the Company's consolidated statements of operations, comprehensive loss and accumulated deficit, as follows:



-- ---

THREE MONTHS ENDED
--
JANUARY 31,
--

-- ---
2014 2013
-- --- ---

-- --- ---
Net loss from continuing operations $(925,470) ($1,223,620)

-- --- ---
Add:
-- --- ---
Interest 68,757 79,256

-- --- ---
Accretion on convertible debentures 67,793 75,896
-- --- ---
Mark to market loss on derivatives - 19,089
-- --- ---
Amortization 90,278 63,332

-- --- ---
Foreign-exchange difference 37,095 (3,849)
-- --- ---
Stock-based compensation 8,183 31,454
-- --- ---
ADJUSTED EBITDA ($653,364) ($958,442)
-- --- ---




To view the press release as a PDF, please click on the following link:
www.usetdas.com/pr/vendtek04012014.pdf



Source: VendTek Systems Inc. (TSX-V VSI) www.vendteksys.com
Maximum News Dissemination by FSCwire. www.fscwire.com


Author:
Fred Gautreau
e-mail
Web: www.fscwire.com
Phone: 14037173898

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