VersaPay Announces 2010 Third Quarter Results

- Company achieved 62% year-over-year growth in recurring revenue -

TORONTO, Nov. 24 /CNW/ - VersaPay Corporation (TSXV: VPY) ("VersaPay" or the "Company"), a provider of merchant credit, debit, gift and loyalty card payment processing and electronic funds transfer solutions, today announced its financial and operational results for the three- and nine-month periods ended September 30, 2010. All amounts are in Canadian dollars unless otherwise noted.

Q3 2010 Highlights

• Increased total gross quarterly transaction value processed 154% to $208 million from $82 million in Q3 2009¹
• Ranked 8^th on the 11^th Annual Profit Hot 50 list after achieving annual revenue growth of 1,107% from 2007 to 2009
• Sequential  improvement in Adjusted EBITDA² to $(0.2) million from $(0.5) million in Q2 2010, as a result of Company's sales growth and cost-cutting initiatives
• Subsequent to the quarter, signed five-year contract renewal to provide Brewers Distributor Ltd. (BDL) with VersaPay EFT, the Company's proprietary Electronic Funds Transfer (EFT) platform

Q3 2010 Financial Summary³

	Q3 2010	Q3 2009	9-mos. 2010	9-mos. 2009
Recurring revenue^4	$3.4M	$2.1M	$8.9M	$5.3M
Non-recurring revenue^5	$0.1M	$0.04M	$0.4M	$0.3M
TOTAL REVENUE	$3.6M	$2.2 M	$9.3M	$5.7M
Gross Profit	$0.7M	$0.6M	$2.1M	$1.6M
Cash Operating Expenses^6	$1.0M	$0.9M	$3.4M	$2.0M
Adjusted EBITDA	$(0.2)M	$(0.3)M	$(1.2)M	$(0.4)M
Income (loss) from continuing operations	$(0.4)M	$(0.4)M	$(1.8)M	$(0.7)M
	Sept. 30, 2010		Dec 31, 2009
Cash and cash equivalents	$0.7M		$0.2M

"Our improved top line and Adjusted EBITDA results for the quarter reflect the continued expansion of our merchant customer base along with greater transaction processing activity from our existing customers," said Bill McGill, CEO of VersaPay. "In addition, our strengthened Adjusted EBITDA benefited from the cost controls we implemented in Q2, with our cash operating expenses decreasing 25% sequentially. During the quarter, we also gained further traction with our VersaPay EFT offering, signing a major contract renewal with BDL, our longest standing EFT client, subsequent to quarter end. Looking ahead, we will continue to work to grow our merchant customer base, and believe we are positioned to further improve our results in the coming periods."

Q3 2010 Financial Review

Total revenue for Q3 2010 increased 64% to $3.6 million from $2.2 million in Q3 2009. The year-over-year improvement was driven primarily by growth in the Company's transaction processing fees. Recurring revenue for Q3 2010 increased 60% to $3.4 million (96% of total revenue), compared to $2.1 million, (98% of total revenue) in Q3 2009.

Gross profit for Q3 2010 increased 35% to $0.7 million from $0.6 million in Q3 2009, reflecting VersaPay's improved top line results, which offset its increased investment to support its growing merchant customer base.

Cash operating expense (excluding amortization and stock-based compensation) decreased 24% to $1.0 million from $1.3 million in Q2 2010, reflecting the benefits of the cost control measures the Company implemented during Q2 2010. Cash operating expenses for Q3 2009 were $0.9 million. Total expenses for Q3 2010 were $1.1 million, compared to $1.3 million in Q2 2010 and $1.0 million in Q3 2009.

Adjusted EBITDA for Q3 2010 was $(0.2) million, compared to $(0.5) million in Q2 2010 and $(0.3) million in Q3 2009, reflecting the Company's revenue growth and the implementation of new cost control measures.

Loss from continuing operations for Q3 2010 was $(0.4) million. This is consistent with a loss from continuing operations of $(0.4) million for Q3 2009. For Q3 2010, reflecting a $(0.05) million non-cash gain for the reversal of expired options related to the Company's sale of its 75% interest in Positive in Q2 2010, net loss was $(0.3) million, or $(0.03) per share, compared to a net loss of $(0.4) million or $(0.05) per share in Q3 2009.

As at September 30, 2010, VersaPay had cash and cash equivalents of $0.7 million, compared to $0.2 million as at December 31, 2009.

¹     Total quarterly gross transaction value processed represents the total volume of credit and debit card transactions processed by VersaPay's merchant customers

²    Adjusted EBITDA is defined as Earnings Before Interest, Taxes, Depreciation, Amortization and Stock-based compensation. See table A.

³    A complete set of financial statements and notes and MD&A for the three- and nine-month periods ended September 30, 2010 will be available on the Company's website at www.versapay.com and on SEDAR.

⁴   Defined as Transaction processing fees + VersaCard/EFT fees

⁵   Defined as Product sales (point-of-sale devices) and other

⁶   Defined as operating expense excluding amortization and stock-based compensation

Table A

	Q3 2010	Q3 2009	9-mos. 2010	9-mos. 2009
Adjusted EBITDA	$(195,463)	$(313,123)	$(1,235,409)	$(352,081)
Stock-based compensation	$(114,188)	$(77,494)	$(417,924)	$(280,419)
Interest expense	$(2,639)	$(13,584)	$9,552	$(38,641)
Amortization	$(34,285)	$(20,834)	$(85,857)	$(42,323)
Amortization of EFT	$(13,960)	-	$(13,960)	-
Loss from continuing operations	$(360,535)	$(425,035)	$(1,743,597)	$(713,464)

About VersaPay
VersaPay's financial technology enables businesses and consumers across Canada to accept and process credit, debit and gift card transactions. As a payment services and financial technology company serving more than 2,500 Canadian businesses, VersaPay, in conjunction with its partners, provides the hardware, technology, infrastructure and support services that businesses of all types require to accept and process electronic payments from their consumers and clients.

While its core business is payment processing services, VersaPay also provides enhanced financial technology solutions such as VersaEFT - the Company's proprietary Electronic Bill Presentment and Payment solution - which enables merchants and consumers to easily transact with one another.

VersaPay is headquartered in Vancouver, Canada and has operations in Toronto and Montreal. To learn more about VersaPay, visit http://www.versapay.com. 

Forward Looking and Other Cautionary Statements
This news release contains forward-looking statements and information that are based on the beliefs of management and reflect the Company's current expectations. When used in this news release, the words "estimate", "project", "belief", "anticipate", "intend", "expect", "plan", "predict", "may" or "should" and the negative of these words or such variations thereon or comparable terminology, are intended to identify forward-looking statements and information. Such statements and information reflect the current view of the Company with respect to risks and uncertainties that may cause actual results to differ materially from those contemplated in those forward-looking statements and information.

By their nature, forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements, or other future events, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, risks relating to the speculative nature of the Company's business, the Company's formative stage of development and the Company's financial position. Forward-looking statements are made based on management's beliefs, estimates and opinions on the date that statements are made and the Company undertakes no obligation to update forward looking statements if these beliefs, estimates and opinions or other circumstances should change.

Investors are cautioned against attributing undue certainty to forward-looking statements. There are a number of important factors that could cause the Company's actual results to differ materially from those indicated or implied by forward-looking statements and information. Such factors include, among others, risks related to following: the Company's financial position and the potential need for future financings, the ability of the Company to maintain its relationship with its strategic partner for payment processing, the efforts and abilities of the senior management team, the ability of the Company to attract and retain skilled management, competition in the payment processing industry, and the Company's ability to respond to technological change and protect its intellectual property rights.

The Company cautions that the foregoing list of material factors is not exhaustive. When relying on the Company's forward-looking statements and information to make decisions, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. The Company has assumed a certain progression, which may not be realized. It has also assumed that the material factors referred to in the previous paragraph will not cause such forward-looking statements and information to differ materially from actual results or events. There can be no assurance that such assumptions will reflect the actual outcome of such items or factors.

THE FORWARD-LOOKING INFORMATION CONTAINED IN THIS NEWS RELEASE REPRESENTS THE EXPECTATIONS OF THE COMPANY AS OF THE DATE OF THIS NEWS RELEASE AND, ACCORDINGLY, IS SUBJECT TO CHANGE AFTER SUCH DATE. READERS SHOULD NOT PLACE UNDUE IMPORTANCE ON FORWARD-LOOKING INFORMATION AND SHOULD NOT RELY UPON THIS INFORMATION AS OF ANY OTHER DATE. WHILE THE COMPANY MAY ELECT TO, IT DOES NOT UNDERTAKE TO UPDATE THIS INFORMATION AT ANY PARTICULAR TIME EXCEPT AS REQUIRED IN ACCORDANCE WITH APPLICABLE SECURITIES LEGISLATION.

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.

												(Unaudited) As at Sept 30				(Audited) As at December 31
												2010 $				2009 $
ASSETS
Current
	Cash and cash equivalents											656,262				206,763
	Funds held for merchants											789,302				365,518
	Receivables											452,860				307,675
	Inventory
	Prepaid expenses											19,619				17,133
	Current assets of discontinued operations											-				29,133
												1,918,043				926,222
Share issue costs												-				425,536
Equipment												381,041				318,735
Intangible assets												153,560				101,592
Non-current assets of discontinued operations												-				161,012
												2,452,644				1,933,097
LIABILITIES
Current
	Accounts payable and accrued liabilities											616,069				1,259,384
	Funds due to merchants											789,302				365,518
	Deferred revenue											6,061				9,688
	JG Capital Loan											-				225,000
	Current portion of obligation under capital lease											55,826				36,819
	Current liabilities of discontinued operations											-				76,728
												1,467,258				1,973,137
Obligation under capital lease, net of current portion												97,024				97,546
												1,564,282				2,070,683
Non‑controlling interest in Positive Inc.												-				7,569
SHAREHOLDERS' EQUITY (DEFICIENCY)
Share capital												7,176,543				4,872,073
Shares subscriptions received												6,250				288,958
Contributed surplus												1,000,048				618,955
Warrants												388,160
Deficit												(7,682,639)				(5,925,141)
												888,362				(145,155)
												2,452,644				1,933,097

			3 months ended September 30			9 months ended Sept 30
			2010	2009		2010	2009
			$	$		$	$
Revenue
	Transaction processing fees		3,387,064	2,080,455		8,743,275	5,153,527
	Product sales and other		149,909	38,848		405,350	329,852
	VersaCard/EFT fees		47,222	62,485		144,393	192,365
			3,584,195	2,181,788		9,293,018	5,675,744
Expenses
	Cost of services		2,355,313	1,349,161		5,939,424	3,383,350
	Cost of products sold and other		459,442	248,642		1,173,262	607,112
	VersaCard/EFT costs		22,299	30,981		49,313	101,229
	Amortization		34,285	20,834		85,857	42,323
	Amortization of Intangible		13,960	-		13,960	-
	Bad debts		-	1,391		11,693	3,044
	Bank charges and interest		2,639	13,584		(9,552)	38,641
	Consulting fees		27,511	192,424		174,640	472,823
	General and administrative		88,506	49,762		264,630	126,474
	Marketing and promotion		29,296	40,290		139,542	70,520
	Professional fees		138,921	173,151		478,540	274,878
	Rent and occupancy		69,627	46,714		209,280	146,471
	Salaries and benefits		457,133	276,306		1,700,416	670,055
	Stock‑based compensation		114,188	77,494		417,924	280,419
	Telecom and wireless connection fees		111,398	72,849		305,565	120,650
	Travel		20,212	13,240		82,121	51,219
			3,944,730	2,606,823		11,036,615	6,389,208
Operating Loss from Continuing Operations			(360,535)	(425,035)		(1,743,598)	(713,465)
Loss from continuing operations			(360,535)	(425,035)		(1,743,597)	(713,464)
Results from discontinued operations			50,000	(5,494)		26,496	(17,021)
Loss on Sale of business			-	-		-	-
Reversal of expired option on sale of Positive				-			-
Non-controlling interest			-	(1,503)		1,667	6,076
Net loss and comprehensive loss for the period			(310,535)	(432,032)		(1,715,434)	(724,409)
Deficit, beginning of period			(7,372,104)	(4,876,269)		(5,925,141)	(4,583,892)
Charges on share purchase warrant modification			-	-		(42,064)	-
Deficit, end of period			(7,682,639)	(5,308,301)		(7,682,639)	(5,308,301)
Loss per Share ‑ basic and fully diluted			$(0.02)	$(0.05)		$(0.13)	$(0.08)
Weighted average number of common shares outstanding			12,828,517	9,366,059		12,657,128	8,909,579

			3 Months ended Sept 30			9 Months ended Sept 30
			2010	2009		2010	2009
			$	$		$	$
Cash Provided By (Used In) Operating Activities
	Net loss for the period		(310,535)	(432,032)		(1,715,434)	(724,409)
	Items not affecting cash:
	- amortization of equipment		34,285	20,834		85,857	42,323
	- amortization of intangible		13,960	-		13,960	-
	- cancellation of JG Capital loan interest		-	-		14,271	-
	- stock‑based compensation		114,188	77,494		417,924	280,419
	- non‑controlling interest		-	1,503		(7,569)	(6,076)
	- discontinued operations		-	5,493		(10,212)	17,021
Change in non‑cash working capital items
	receivables		8,353	47,617		(129,767)	(85,277)
	inventory		-	-		-	(1,386)
	prepaid expenses		1,389	(4,069)		(2,493)	(3,906)
	accounts payable and accrued liabilities		(103,072)	321,121		(643,316)	334,392
	deferred revenue		(1,209)	-		(3,627)	1,996
			(242,641)	37,961		(1,980,406)	(144,903)
Cash Provided by (Used In) Financing Activities
	issuance of convertible debt		-	(120,000)		-	(120,000)
	proceeds from JGC Capital loan		-	(41,517)		-	(41,517)
	issuance of common shares, net of issuance costs		31,750	117,290		2,624,013	533,106
	capital lease payments		(14,016)	-		(31,671)	(5,498)
			17,734	(44,227)		2,592,342	366,091
Cash Provided by (Used in) in Investing Activities
	Purchase of Positive Inc., net of cash		-			-
	acquisition of equipment		(2,377)	(173,480)		(96,509)	(194,849)
	developed technology		-	-		(65,928)	-
	discontinued operations		-	(29,477)		-	(17,078)
			(2,377)	(202,957)		(162,437)	(211,927)
(Decrease) increase in cash and cash equivalents			(227,284)	(209,223)		449,499	9,261
Cash and cash equivalents, beginning of period			883,546	557,293		206,763	338,809
Cash and cash equivalents, end of period			656,262	348,070		656,262	348,070
Supplementary Cash Flow Information:
Interest paid			2,044	9,511		5,743	17,982

%SEDAR: 00029483E

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