VendTek Systems announces first quarter fiscal 2010 financial results
TSX Venture Exchange: VSI
VANCOUVER, March 10 /CNW/ - VendTek Systems Inc. (VSI - TSX Venture) (the "Company"), a developer and licensor of software for the global prepaid and financial services markets, today reported its financial results for the first quarter ended January 31, 2010.
Selected First Quarter Operational Highlights
- Licensed software to Dups Holdings Pty for Swaziland and the South
African Development Region comprising more than 130 million prepaid
telecommunications users;
- Signed a license and services agreement with Shreya Tech to provide
SaaS for India, which is ranked second in the world, behind only
China, with more than 500 million active mobile phones which
represents less than 50% market penetration;
- Partnered with Vancouver, BC-based Peoples Card Services, an
affiliate of Peoples Trust Company, and Visa Canada, to launch
Canada's first prepaid virtual Visa program, the 3V Visa(R); and
- Appointed two software industry executives with substantial
operational and financial expertise as independent directors of the
Company.
Selected First Quarter Financial Information
- Virtual prepaid revenues increased approximately 2.3% to $29 million
in the first quarter of fiscal 2010 from $28.9 million in the first
quarter of fiscal 2009;
- Gross margins were consistent at 4.9% in first quarter of fiscal 2010
and 2009;
- General and administrative expense decreased $195,000, or 10%, to
$998,000, for the three months ended January 31, 2010 compared with
$1.2 million for the three months ended January 31, 2009;
- Consolidated net loss was $106,000 for the quarter ended January 31,
2010, compared with a net loss of $156,000 for the same period in
2009.
- Excluding one-time restatement costs, the Company would have been
profitable for the quarter; and
- As at January 31, 2010 the Company's cash balance was $2.4 million
compared with $2.7 million on October 31, 2009.
"In the first quarter we continued to execute on our international expansion strategy, signing agreements in regions with large prepaid mobile user bases and relatively low overall penetration rates," said Doug Buchanan, President and Chief Executive Officer of VendTek. "Our focus in the near term will be on getting these partners launched and identifying additional international opportunities that will support growth over the next few years."
"VendTek grew virtual prepaid revenues in a period where the prepaid user base actually shrank in Canada, suggesting that we continue to build market share domestically," said Nurez Khimji, Chief Financial Officer of VendTek. "If we exclude the one-time restatement costs incurred in the quarter, we would have shown a small profit."
Financial Review for the Quarters Ended January 31, 2010 and 2009
Revenues for the quarter ended January 31, 2010, decreased $276,000 to $30.3 million, or 0.9%, from $30.6 million for the corresponding period in 2009.
Prepaid telecommunications revenue totalled $30.0 million for the quarter ended January 31, 2010, compared with $30.2 million for same quarter in 2009. The 1% decrease is due to a reduction in hard card sales. Hard card sales decreased $899,000 from $957,000 in the first quarter of 2009 to $58,000 in the same quarter of 2010. The decrease is a result of the decision by many telephone companies in Canada to eliminate their hard card products.
Despite this decrease, virtual prepaid revenues increased by $677,000 in the first quarter of 2010 compared with the first quarter of 2009. Virtual prepaid revenues in Canada for the quarter ended January 31, 2010 were $29.0 million compared with $28.9 million for the same period in 2009. In the U.S., virtual prepaid revenues were $915,000 and $322,000 in the first quarter of 2010 and 2009, respectively. The increase in virtual prepaid revenue is due to the Company's ongoing installation of POS terminals across Canada and the U.S. for distribution of virtual prepaid telecommunications vouchers (or PINs) through its distribution network.
Software and related service revenue decreased by $68,000, or 18%, to $318,000 for the first quarter of 2010 from $386,000 during the same period in 2009, while the number of transactions processed through the Company's system in the U.A.E. increased by 20%. The Company received software and service revenues from the U.A.E., China, Thailand and the U.S. Software and services revenue decreased primarily due to changes in the foreign exchange rate. Software and related service revenue are denominated in U.S. dollars. The Company was negatively impacted by the weakening U.S. dollar. The average U.S. exchange rate for the first quarter in 2010 was 1.05 compared to 1.23 for the same period in 2009.
Hardware revenue for the first quarter of 2010 was $33,000 compared with $19,000 in 2009. The $14,000 or 77% increase was due to an increase in parts orders from customers for the repair of vending machines.
Cost of revenues for the three months ended January 31, 2010, were $28.9 million, or 95.12% of revenues, compared with $29.1 million, or 95.06% of revenues for the same quarter in 2009. The consistent low margin is indicative of the virtual prepaid telecommunications industry.
General and administrative expense decreased $195,000, or 16%, to $998,000, for the three months ended January 31, 2010 compared with $1.2 million for the three months ended January 31, 2009. As a percentage of revenue, general and administrative expenses were 3.3% and 3.9% for the three months ended January 31, 2010 and 2009 respectively.
Included in general and administrative expense for the first quarter of 2010 and 2009 was $1,000 and $118,000, respectively, of non-cash stock-based compensation expense. As the majority of the Company's options had already vested, stock-based compensation expense decreased by $117,000 in the first quarter of 2010 compared to the same period in 2009. General and administrative expense decreased also due to reduced travel costs of $41,000. However, the decrease in general and administrative expense was partly offset by increased professional fees.
Sales and marketing expenses increased $39,000, or 24%, to $200,000 in the quarter ended January 31, 2010 compared with $161,000 for the same period in 2009. As a percentage of revenue, sales and marketing expense was 0.66% and 0.53% for the three months ended January 31, 2010 and 2009 respectively. The increase in sales and marketing expense was primarily due to marketing costs incurred for the 3V Virtual Visa. Sales and marketing expense increased also due to increased tradeshow participation.
Product development costs for the three months ended January 31, 2010 were $173,000, or approximately 0.57% of revenues. This compares to $204,000, or approximately 0.67% of revenues for the quarter ended January 31, 2009. The decrease from 2009 to 2010 was the result of decreased compensation expenses from a temporary reduction of engineering staff.
Restatement costs consist of accounting, legal and consulting costs incurred. The Company incurred $120,000 of costs related to the restatement of its 2006 and 2007 annual financial statements and the quarters ended January 31, April 30 and July 31, 2008. These costs are one-time expenses that management does not expect to continue after the process is completed.
Amortization expense decreased to $89,000, or 0.29% of revenue, in the quarter ended January 31, 2010 compared with $100,000, or 0.33% of revenue, for the same period in 2009. The decrease in amortization was due to some assets being fully amortized.
Interest expense reduced to $1,000 in the quarter ended January 31, 2010 down from $4,000 compared to the same period of 2009. The decrease was due to the re-payment of our lease obligations.
The consolidated net loss was $106,000 for the quarter ended January 31, 2010, compared with a net loss of $156,000 for the same period in 2009.
In the first quarter of 2010, net income increased by $50,000 compared to the corresponding period in 2009. The increase was mainly attributed to the decline in general and administrative expenses. This decrease was partially offset by increased expenditures relating to sales and marketing, research and development and restatement activities.
As of January 31, 2010, cash totalled approximately $2.4 million compared with approximately $2.7 million at October 31, 2009. VendTek's cash position can fluctuate significantly from period to period, largely as a result of differences in the timing, size and number of transactions, the timing of the receipt of proceeds from retailers, and the timing of the payment of net amounts due to suppliers. The Company generally collects proceeds from retailers within seven days of the transaction and makes payments to suppliers approximately 21 days following the purchase of inventory. If collections from retailers or suppliers occur near a period end, the Company's cash position will be affected accordingly.
Operating activities used cash of $266,000 during the quarter ended January 31, 2010, and provided cash of $56,000 during the quarter ended January 31, 2009. In the first quarter of 2010, cash was decreased by a $105,000 increase in accounts receivable, a $318,000 decrease in accounts payable, and a $20,000 increase in prepaid expenses. Accounts receivable balance was higher as the quarter end fell on Sunday and the Company had not collected the funds from its customers. Accounts payable balance was lower as the Company paid for restatement costs and GST outstanding at year end. Prepaid expenses were higher primarily due to deposits made for the purchase of equipment.
Cash was provided by a $192,000 decrease in inventory. Inventory balance was lower due to timing of purchases. The cash balance also increased because the Company incurred lower non-cash expenses for amortization of $89,000, in the quarter ended January 31, 2010, compared with $100,000 in the same quarter of 2009, and stock-based compensation expenses in the first quarter of 2010 ($1,000) compared with 2009 ($119,000).
Investing activities used cash of $33,000 and $12,000 during the three months ended January 31, 2010 and 2009, respectively. The funds were used to purchase equipment.
Financing activities provided cash of $57,000, and used cash of $11,000 during the quarters ended January 31, 2010 and 2009, respectively. Cash was provided through the exercise of stock options for $65,000 in 2010. Cash was used in the repayment of the Company's lease obligations for $7,000 and $11,000 during the three months ended January 31, 2010 and 2009 respectively.
Management believes that the Company has sufficient cash and working capital to meet its obligations as they become due in 2010. Management plans capital expenditure for fiscal 2010 in line with prior years.
VendTek's MD&A and complete statements are available at www.sedar.com and the Company's website www.vendteksystems.com.
Conference Call
VendTek management intends to host a conference call on Wednesday, March 10, 2010 at 4:15 p.m. EST (1:15 p.m. PST) to discuss its financial results and operational highlights for the first quarter of fiscal 2010.
To access the conference call by telephone, dial 1-647-427-7450 or 1-888-231-8191 and reference the company name, VendTek Systems Inc., or the conference code 61921450. The conference call will be archived for replay until Wednesday March 17, 2010, at midnight. To access the archived conference call, dial 1-800-642-1687 and enter the conference code 61921450.
A live audio webcast of the conference call will be available at http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2995520 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. The webcast will be archived at www.vendteksys.com.
About VendTek
VendTek develops and licenses automated transaction system software and supporting technologies that improve the efficiency of product delivery, reduce costs to clients and offer superior safety measures. VendTek's customers, subsidiaries and its Now Prepay division use e-Fresh(TM) software to build electronic, prepaid services networks that enable consumers to purchase prepaid products and services via POS and self-serve terminals connected to a central e-Fresh(TM) server. This system creates significant value through improved efficiencies compared to a traditional distribution model. e-Fresh(TM) reduces shrinkage and inventory requirements for vendors while improving consumer access to prepaid products and services by completely eliminating physical cards and vouchers. VendTek has deployed its software around the world including Canada, United States, Asia, the Middle East and Africa. For further information please visit the Company's websites www.vendteksystems.com and www.nowprepay.com.
Forward-Looking Information
This news release contains statements which are not current statements or historical facts and are "forward-looking information" within the meaning of applicable Canadian securities laws. All statements, other than statements of historical fact, contained in this news release constitute forward-looking information. Wherever possible, words such as "plans", "expects" or "does not expect", "budget", "forecasts", "projections", "anticipate" or "does not anticipate", "believe", "intent", "potential", "strategy", "schedule", "estimates" and similar expressions or statements that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved and other similar expressions have been used to identify forward-looking information. These forward-looking statements relate to, among other things the Company's expectations regarding future growth, results of operations (including, without limitation, future production and sales, and operating and capital expenditures), performance (both operational and financial), business and political environment and business prospects (including the timing and development of new deposits and the success of exploration activities) and opportunities.
Although the forward-looking information in this news release reflects the Company's current beliefs on the date of this news release based upon information currently available to management and based upon what management believes to be reasonable assumptions, the Company cannot be certain that actual results, performance, achievements, prospects and opportunities, either expressed or implied, will be consistent with such forward-looking information. By its very nature, forward-looking information necessarily involves significant known and unknown risks, assumptions, uncertainties and contingencies that may cause the Company's actual results, assumptions, performance, achievements, prospects and opportunities in future periods to differ materially from those expressed or implied by such forward-looking information. These risks and uncertainties include, among other things, revenue growth, operating results, the market demand for our products, product development, and litigation as well other factors described in the Risks Related to Our Business Section in our 2009 annual Management Discussion and Analysis. There may be other factors that cause results, assumptions, performance, achievements, prospects or opportunities in future periods not to be as anticipated, estimated or intended.
There can be no assurances that forward-looking information and statements will prove to be accurate, as many factors and future events, both known and unknown could cause actual results, performance or achievements to vary or differ materially, from the results, performance or achievements that are or may be expressed or implied by such forward-looking statements contained in this news release. Accordingly, all such factors should be considered carefully when making decisions with respect to the Company, and prospective investors should not place undue reliance on forward-looking information. The Company assumes no obligation to update or revise forward-looking information to reflect changes in assumptions, changes in circumstances or any other events affecting such forward-looking information, except as required by applicable law.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
VENDTEK SYSTEMS INC.
Consolidated Balance Sheets
(Unaudited)
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January 31, October 31,
2010 2009
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Assets
Current assets:
Cash $ 2,434,808 $ 2,676,158
Accounts receivable 3,649,280 3,544,251
Income tax recoverable 618,373 618,373
Inventories 2,226,631 2,418,738
Prepaid expenses and deposits 105,030 85,437
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9,034,122 9,342,957
Equipment 585,187 613,094
Intangible assets 281,280 310,184
Goodwill 907,342 907,342
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$ 10,807,931 $ 11,173,577
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Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 7,904,684 $ 8,222,939
Current portion of capital lease
obligation 8,362 13,145
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7,913,046 8,236,084
Capital lease obligation 5,965 8,503
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7,919,011 8,244,587
Shareholders' equity:
Share capital 8,580,012 8,460,132
Contributed surplus 2,150,842 2,204,518
Accumulated deficit (7,841,934) (7,735,660)
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2,888,920 2,928,990
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$ 10,807,931 $ 11,173,577
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VENDTEK SYSTEMS INC.
Consolidated Statements of Operations, Comprehensive Income (Loss) and
Accumulated Deficit
(Unaudited)
For the three months ended January 31, 2010 and 2009
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2010 2009
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Revenue:
Prepaid telecommunication $ 29,999,456 $ 30,221,912
Hardware and equipment 33,488 18,938
Software license and services 318,294 386,000
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30,351,238 30,626,850
Cost of revenues:
Prepaid telecommunication 28,866,174 29,111,510
Hardware and equipment 2,937 870
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28,869,111 29,112,380
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1,482,127 1,514,470
Operating expenses:
General and administrative 997,734 1,192,775
Selling and marketing 200,071 161,358
Research and development 172,700 204,272
Restatement costs 120,000 -
Amortization 89,492 100,468
Interest on capital lease obligations 1,355 3,901
Foreign exchange (gain) loss 7,049 7,506
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1,588,401 1,670,280
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Net loss and comprehensive loss (106,274) (155,810)
Deficit, beginning of period (7,735,660) (6,626,694)
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Deficit, end of period $ (7,841,934) $ (6,782,504)
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Basic and diluted loss per share $ (0.00) $ (0.00)
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Weighted average shares outstanding:
Basic 45,980,723 45,126,826
Diluted 45,980,723 45,126,826
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VENDTEK SYSTEMS INC.
Consolidated Statements of Cash Flows
(Unaudited)
For the three months ended January 31, 2010 and 2009
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2010 2009
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Cash provided by (used in):
Operations:
Net loss $ (106,274) $ (155,810)
Items not involving cash:
Amortization 89,492 100,468
Stock-based compensation 1,404 118,524
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(15,378) 63,182
Changes in non-cash operating working
capital items (250,765) (6,695)
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(266,143) 56,487
Financing:
Repayment of lease obligations (7,321) (10,546)
Proceeds from options exercised 64,800 -
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57,479 (10,546)
Investments:
Purchase of equipment (32,686) (12,257)
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Increase (decrease) in cash (241,350) 33,684
Cash, beginning of period 2,676,158 2,102,666
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Cash, end of period $ 2,434,808 $ 2,136,350
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Supplemental information:
Interest paid $ 1,355 $ 2,219
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For further information: or to receive the complete statements please contact Samantha White at (604) 805-4653 or 1-800-806-4958 or [email protected]
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