ENP Newswire - 27 June 2014
Release date- 24062014 - VANCOUVER - VendTek Systems Inc. (VSI - TSX Venture), a developer and licensor of software for the global prepaid telecom and financial services markets, today reported its financial results for its second quarter of fiscal 2014 ended April 30, 2014.
Selected Financial Information (2)
Revenue for the quarter ended April 30, 2014 increased $586,000 to $1.3 million, or 85.2% from $688,000 in the prior fiscal quarter of FY2013;
Gross profit for Q2 FY2014 increased to $842,000 million compared to $582,000 in the prior fiscal quarter, with gross margin decreasing to 66.1% from 81.1%, respectively;
Operating expenses were $1.9 million compared to $2.4 million in the prior fiscal quarter;
Adjusted EBITDA1 loss was $1.0 million for Q2 FY2014 compared to a loss of $1.1 million for the prior fiscal quarter;
Net loss was $1.2 million compared to a $1.7 million loss in the prior fiscal quarter;
Cash used in operations was $2.0 million for Q2 FY2014, compared to $1.4 million in the prior fiscal quarter;
Cash and cash equivalents was $1.9 million at April 30, 2014 compared to $2.7 million in at October 31, 2013;
Reflects restated financial information of the Company's continuing operations following the divestiture of its Canadian assets, effective January 31, 2014.
'Our results in the second quarter 2014 indicate our ability to grow our Brazil operations, but with a continued need for growth capital. We have aggressively worked to provide such growth capital through a combination of non-dilutive means - Canadian government sponsored export financing, Brazilian government sponsored lease financing, Brazilian bank sponsored letters of credit financing and of course our own working capital following the divestiture of our Canadian operations.
Our plan is to roll-out about 3,500 additional points of presence in Brazil by Dec 31, 2014 now that we have acquired needed lease financing and additional supplier letters of credit to support the growth as we announced during the quarter,' said Doug Buchanan, President & CEO of VendTek.
During the quarter 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.
Subsequent to quarter-end, the Company completed its analysis and reached agreement with PSI on the working capital amount that was due to PSI which totaled $828,204. 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.
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.
During the quarter 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. Implementation of this agreement is expected to commence in early 2015 and, once fully implemented later in that year, the Company expects it to have a significant impact on NPS's growth prospects in Brazil.
Also during the quarter, 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 3,158 terminals at April 30, 2014, (up from approximately 2,700 at January 31, 2014), the Company is targeting an additional 3,500 registered terminals, or about 6,600 total registered by December 31, 2014. Vendtek's long-term strategy is to develop and maintain high margin licensing relationships of its e-Fresh 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.
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 38601409.