OPERATIONAL UPDATE FOR 2009 :)VENDTEK SYSTEMS ANNOUNCESOPERATIONAL UPDATE FOR 2009
VANCOUVER - February 24, 2010 -VendTek Systems Inc. (VSI - TSX Venture) (the "Company"), a developerand licensor of software for the global prepaid and financial servicesmarkets, today provided an update on its 2009 operational activities tocoincide with the release of its financial statements for the quartersended July 31, 2009, April 30, 2009, and January 31, 2009, and for theyears ending October 31, 2008, 2007 and 2006. The Company has todayissued a separate release reviewing the contents of those financialstatements. Complete copies of these financial statements and relatedManagement Discussion and Analysis may be found on
www.sedar.com.
Selected2009 Operational Highlights
? Signed licenses in five countriesinternationally, three under the Company?s software as a service model(?SaaS?);
? Partnered with Alleet LLC, a leading prepaid servicesdistributor in the U.S.;
? Grew the number of terminals deployed inthe U.S. from 110 to 650
? Grew the number of terminals deployed inCanada by approximately 12%;
? Launched International Wirelessre-charge with MoreMagic Solutions Inc. allowing Canadians to purchasemobile phone top ups from international wireless carriers;
? Signedan agreement with UKash and launched product to provide alternativeonline payment solution to consumers; and
? Partnered with Vancouver,BC-based Peoples Card Services (?Peoples?), an affiliate of PeoplesTrust Company, and Visa Canada, to launch Canada?s first prepaid virtualVisa program, the 3V Visa®.
?Operationally, VendTek had a strong2009 as we substantially increased the number of POS terminals deployedand transactions processed globally, added new products and services toour evolving product portfolio, and diversified our operationalpresence into rapidly growing international prepaid-focused markets,?said Doug Buchanan, President and Chief Executive Officer of VendTek.?The need to restate prior years? financial statements had minimalimpact on operations and we continued to grow our business against thebackdrop of a severe global economic downturn.?
International
Consumersin other countries generally use prepaid products and services morethan their North American counterparts and VendTek has experienced agreater number of transactions per terminal in international markets.
Internationally,VendTek licenses its e-Fresh? software to third-parties (serviceproviders, retailers and retail distributors) allowing them todistribute electronic products and services with increased efficiency.By licensing to customers, the Company is developing sources ofrecurring license revenues from a global and growing market. Typically,VendTek receives recurring revenues from fees paid each time atransaction is completed on a customers? terminal. VendTek works closelywith its international licensees to assist them in developing thenecessary infrastructure so they can focus on their businesses and theCompany can increase the size of its e-Fresh? network. To help licenseesexpand their distribution networks (and grow VendTek revenues), theCompany often provides customized solutions as was the case forCarrefour in the United Arab Emirates. In the UAE, Carrefour requiredthe e-Fresh? system to integrate into their retail POS system so thattransactions could be
processed from each of the check out locationsin every store.
In 2009, the Company signed licence agreementsin a number of countries including Thailand, India, Nigeria, Kenya, andSwaziland plus the South African Development Region (comprising another14 countries). This is in addition to the licence agreements already inplace in the United Arab Emirates (as well as countries in the MiddleEast and North Africa) and China. The Company?s partner in China now hasmore than 1,200 POS terminals deployed. All of these countries havesignificantly higher levels of consumer prepaid product and services usethan Canada and the United States. As an example, prepaid users accountfor approximately 80% of the mobile user base in Africa. Licenserevenue grew by 32% in the first nine months of 2009, compared with theprior year period.
In 2009, VendTek completed a number of customintegrations for retailers in the UAE. For example, the Companycompleted an integration for Dubai Duty Free. Generation Research namedDubai International Airport as the world?s top duty free/travel retaillocation, based on 2008 sales of US$1.1 billion.
In March 2009,VendTek licensed its technology to iPlay Corporation Co. Ltd (?iPlay?), acompany based in Bangkok, Thailand. VendTek provides iPlay with eFresh?to electronically distribute their long distance calling card products.iPlay?s products are sold in all major department stores and shoppingcenters along with more than 400 retail stores throughout Bangkok andother major tourist cities. Thailand is ranked 19th in the world on anumber of mobile phones in use basis, with more than 51 millioncurrently active. The Company received minimal software license feesfrom iPlay in 2009.
In November 2009, the Company licensed itssoftware to Dups Holdings Pty for Swaziland and the South AfricanDevelopment Region. Members include Angola, Botswana, the DemocraticRepublic of Congo, Lesotho, Madagascar, Malawi, Mauritius, Mozambique,Namibia, Seychelles, South Africa, Swaziland, United Republic ofTanzania, Zambia and Zimbabwe. There are more than 130 million prepaidtelecommunications users in the region. Management expects this partnerto launch its e-Fresh? based system in 2010.
In 2009, VendTeksuccessfully licensed its software as a service (SaaS) model, signingthree countries during the year.
In October 2009, the Companysigned a license and services agreement with JIL Meridian Venture(?JIL?) to provide SaaS for Nigeria. Nigeria is ranked sixteenth in theworld on a number of mobile phones in use basis, with more than 64million currently active, but is growing rapidly with more than 22million subscribers added in 2008. The initial focus under thisagreement will be a satellite TV subscription service followed byprepaid mobile phone top up. A custom bill payment card system is partof this integration with the service provider. JIL launched its networkin January 2010.
In October 2009, VendTek also signed a licenseand services agreement with Mobi Pay K Ltd. to provide SaaS for Kenya.Mobi Pay is affiliated with the largest data processing services networkin North East Africa and will be deploying terminals to primarilyreplace the hard card mobile phone top-up market. Kenya hasapproximately 15 million mobile users representing a penetration rate ofapproximately 40%. A launch of Mobi Pay?s system is anticipated in thefirst half of 2010.
In November 2009, VendTek signed a licenseand services agreement with Shreya Tech to provide SaaS for India. Indiais ranked second in the world, behind only China, with more than 500million active mobile phones; however, this represents less than 50%penetration. Management expects this partner to launch its system in2010.
?VendTek made a number of inroads into the internationalmarket in 2009, signing licensing agreements in a number of developedand developing countries,? said Doug Buchanan. ?International marketsremain an important growth target for VendTek. Many developing countrieshave large populations, with significantly lower technology penetrationrates than most developed nations, and an overwhelming preference forpre-paid over post-paid services. This combination of factors affordsVendTek a range of attractive growth opportunities to exploitinternationally in the quarters and years ahead.?
United States
VendTekemploys its North American business model in the U.S. The Company hasrelationships with two large ISOs, Payment Alliance International(?PAI?) and United Bank Card Inc (?UBC?). PAI is a leading provider ofpayment processing solutions for business offering credit card, checkprocessing, ATM network management and business information services.UBC is a payment and transaction processor serving businessesnationwide. Ranked by the Nilson Report as one of the largest paymentprocessors in the United States, UBC currently handles the merchantaccounts for more than 110,000 merchant locations and processes inexcess of $9 billion annually, and continues to grow. The number ofterminals deployed in the United States grew from nominal levels in 2008to approximately 650 in 2009. Revenues from the U.S. market grew byapproximately $80,000 (or 310%) in the first nine months of 2009compared with the first nine months 0f 2008.
In 2009, VendTekpartnered with Alleet LLC, a distributor of prepaid mobile phones andservices in the eastern U.S. Alleet is strictly a prepaid servicesdistributor and does not pair the e-Fresh application with a paymentprocessing service. As a dedicated prepaid channel they focus efforts onhigh productivity accounts. VendTek has been able to displace acompetitor with its eFresh solution at some Alleet clients, andmanagement expects this displacement to continue in 2010.
VendTekcontinues to introduce additional products in the U.S. market with thegoal of expanding its portfolio of products and services. The additionof Boost Real Time Refill (RTR) solutions, a direct real time mobilephone top up service, has proven to be an industry leader in 2009.
?InNorth America, we remain keenly focused on growing the number ofterminals actively processing transactions, particularly at theconvenience store level,? said Doug Buchanan. ?While terminal theterminal roll-out has been slower than anticipated, we believe the U.S.market offers an attractive growth opportunity for VendTek.?
Canada
TheCompany continues to employ its traditional business model in NorthAmerica under the Now Prepay? (NPP) brand, using Independent SalesOrganizations (ISOs) to place terminals and install the Company?svalue-added endpoint device software, building the e-Fresh? network.VendTek operates the network earning profits by reselling purchasedproducts and services, such as cellular and long distance products,financial products, prepaid gift cards and prepaid internet cards, withthe goal of driving transaction volumes by supporting an expandingnumber of products and services available on the e-Fresh? platform.
Thenumber of terminals deployed in Canada remained constant asnon-performing terminals were removed and new performing terminals wereadded, totaling 14,646 terminals at October 31, 2009. Despite the impactof the global economic downturn, revenues grew by nearly 2% in thefirst nine months of 2009, compared with the prior year period.
InJune 2008, VendTek signed a distribution agreement with MoreMagicSolutions Inc. (?More Magic?), a company offering payment solutions formobile operators, financial institutions, content providers, anddistributors, enabling consumers to purchase goods and services ondemand using a mobile phone, POS, or the web. More Magic currently hasdeployments in more than 50 countries worldwide.
The additionalinternational products available through the agreement are a value addedservice for the Company and broaden the customer base from traditionalprepaid customers. Customers in Canada are able to purchase mobilephone top ups from international wireless carriers, allowing them to addvalue to the mobile phones of family, friends or associates in foreigncountries from VendTek retailers across Canada. Initially, the agreementcovered countries in the Caribbean and Latin America, as well asPakistan and India, and international wireless carriers includingDigicel, Cable and Wireless, Telefonica, Telenor Pakistan and AirtelIndia. In 2009, the Company expanded the number of countries andwireless carriers where the service was available to include additionalcountries throughout the world.
In September 2009, VendTekentered into an agreement with UKash, to provide alternative paymentsolution to consumers. Established in 2001, Ukash has grown to more than275,000 physical points of purchase globally and enables consumers fromanywhere in the world to shop, pay and play online safely using cashthrough a secure payment method, developed to protect personal identityand financial information when making online transactions.
Throughthe agreement with VendTek, Canada will be the first country in NorthAmerica to make Ukash e-cash available to consumers through VendTek?sNow Prepay division. Users receive a voucher containing a 19-digit codewhich can be used to pay at thousands of online merchants. Through NowPrepay, Ukash was initially made available from 4,000 point of saleterminals in Ontario, which has grown to a total of approximately 14,735outlets across Canada. Ukash is particularly popular with ?unbanked?consumers who do not have access to credit and debit cards, or thosethat are fearful of online fraud.
In December 2009, VendTek,partnered with Vancouver, BC-based Peoples Card Services (?Peoples?), anaffiliate of Peoples Trust Company, and Visa Canada, to launch Canada?sfirst prepaid virtual Visa program, the 3V Visa®. The launch follows anagreement between VendTek, Peoples and 3V Transaction Services Ltd(?3V?), Ireland?s leading online payments company.
The 3V Voucheris an easy to use online payment method, allowing customers to shoponline or by phone using a prepaid disposable 16-digit Visa number.These virtual Visa numbers can be used just like a standard credit card,allowing access to people who currently want to shop online but don?thave access to credit, as well as those that do not want to use theircredit or debit card due to the fear of fraud or overspending. Theprogram was introduced to the Canadian market in December, allowingcustomers to buy 3V Vouchers from participating Now Prepay servicedretail outlets in the same way they currently purchase credit for theirprepaid mobile phones.
Under the terms of the agreement, Peopleswill act as the Visa issuer and VendTek will be responsible formarketing and distribution of the 3V product. VendTek, Peoples and 3Vexpect to spend up to $300,000 in marketing costs in the first year.
Latein the 2009, the Company also launched a prepaid Visa® gift Card tocustomers in Canada. This product is a fixed value gift card that isaccepted at multiple unaffiliated merchant locations anywhere that Visais accepted. It can be used like a regular Visa card and has proven tobe one of the most popular form of gift cards among consumers.
Inearly 2009, VendTek received Esso?s "2008 Supplier Excellence Award forField Execution Support" demonstrating the Company?s ability andcommitment in providing its customers with a high standard of qualityand service. This award recognized VendTek?s Now Prepay division?sefforts in the Fall 2008 merchandizing program. The company developedthis program to position Esso for Gift Card sales during the criticalChristmas sales season.
Outlook
VendTek has a multi-pointstrategy to drive growth with the primary goal of increasing the numberof transactions processed through its e-Fresh? system globally. TheCompany employs context-specific strategies for different geographicmarkets. Generally, it will either create and operate an eFresh? networkearning profits by reselling purchased services, or will license thee-Fresh? software on a turnkey basis earning profits by charging atransaction-based license fee.
To date, much of the Company?sgrowth has come from its Canadian operations. Although VendTek continuedto grow the number of terminals deployed in Canada in 2009, aspenetration rates increase and terminal growth slows, the Company willlook at ways to increase the number of transactions completed perterminal. VendTek intends to drive transaction volumes through acombination of sales and marketing initiatives as well as a broaderproduct offering.
VendTek?s terminal deployment in the U.S.market is substantially lower than in Canada. Management believes thatthe potential for growth in the U.S. is more robust as there is still anopportunity to place thousands of additional terminals by working withexisting ISO and cultivating new ISO relationships, while drivingadditional transactions on a per terminal basis through the launch ofnew products and services and the generation of additional publicawareness. Management anticipates adding a prepaid Mastercard® as wellas bill payment services in the first half of 2010.
Adding newproducts and services forms an important piece of the Company?s growthstrategy. Increasing the range of products available should help drivetransaction volumes, however products and services such as Ukash andprepaid credit cards, including Visa® and Mastercard®, as well as billpayment services, are higher margin than VendTek?s traditional resale ofprepaid telecommunications products.
Recently the Company movedto providing a SaaS solution for some of its international customers.This allows VendTek to leverage its existing operations, infrastructureand core competencies while at the same time letting internationalcustomers focus on growing their business quickly, without thedistraction and effort of setting up a back office system. The SaaSsolution takes advantage of devices that can use the internet tosecurely connect to the Company?s North American servers. These devicesinclude POS terminals that use a cellular data connection, mobile phonesand PC?s running eFresh PC software. Depending on the extent of theservices provided, VendTek is able to charge a higher license fee tothose customers using its SaaS offering than under its traditionallicensing arrangements. The strategy further benefits the Company bydeepening the relationship between VendTek and its customers.
TheCompany?s customer in the United Arab Emirates (?UAE?) has contributedthe majority of license revenues to-date from transactions in the UAEand Africa. Management expects to see continued growth in higher-marginlicense revenues from international customers.
Conference Call
VendTekmanagement intends to host a conference call on Thursday, February 25,2010 at 4:15 p.m. EST (1:15 p.m. PST) to discuss its financial resultsand 2009 operational highlights.
To access the conference call bytelephone, dial 647-427-7450 or 1-888-231-8191 and reference thecompany name, VendTek Systems Inc, or the conference code 59292845.Please connect approximately 15 minutes prior to the beginning of thecall to ensure participation. The conference call will be archived forreplay until Thursday March 4, 2010, at midnight. To access the archivedconference call, dial 1-800-642-1687 and enter the conference code59292845.
A live audio webcast of the conference call will beavailable at
https://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2979460Please connect at least 15 minutes prior to the conference call toensure adequate time for any software download that may be required tojoin the webcast. The webcast will be archived at thewww.vendteksys.com.
About VendTek
VendTek develops andlicenses automated transaction system software and supportingtechnologies that improve the efficiency of product delivery, reducecosts to clients and offer superior safety measures. VendTek'scustomers, subsidiaries and its Now Prepay division use e-Fresh?software to build electronic, prepaid services networks that enableconsumers to purchase prepaid products and services via POS andself-serve terminals connected to a central e-Fresh? server. This systemcreates significant value through improved efficiencies compared to atraditional distribution model. e-Fresh? reduces shrinkage and inventoryrequirements for vendors while improving consumer access to prepaidproducts and services by completely eliminating physical cards andvouchers. VendTek has deployed its software around the world includingCanada, United States, Asia, the Middle East and Africa. For furtherinformation please visit the Company's websites
www.vendteksystems.comand
www.nowprepay.com.
Forward-Looking Information
Thisnews release contains statements which are not current statements orhistorical facts and are ?forward-looking information? within themeaning of applicable Canadian securities laws. All statements, otherthan statements of historical fact, contained in this news releaseconstitute forward-looking information. Wherever possible, words suchas ?plans?, ?expects? or ?does not expect?, ?budget?, ?forecasts?,?projections?, ?anticipate? or ?does not anticipate?, ?believe?,?intent?, ?potential?, ?strategy?, ?schedule?, ?estimates? and similarexpressions or statements that certain actions, events or results ?may?,?could?, ?would?, ?might? or ?will? be taken, occur or be achieved andother similar expressions have been used to identify forward-lookinginformation. These forward-looking statements relate to, among otherthings the Company?s expectations regarding future growth, results ofoperations (including, without limitation, future production and sales,and operating and
capital expenditures), performance (bothoperational and financial), business and political environment andbusiness prospects (including the timing and development of new depositsand the success of exploration activities) and opportunities.
Althoughthe forward-looking information in this news release reflects theCompany?s current beliefs on the date of this news release based uponinformation currently available to management and based upon whatmanagement believes to be reasonable assumptions, the Company cannot becertain that actual results, performance, achievements, prospects andopportunities, either expressed or implied, will be consistent with suchforward-looking information. By its very nature, forward-lookinginformation necessarily involves significant known and unknown risks,assumptions, uncertainties and contingencies that may cause theCompany?s actual results, assumptions, performance, achievements,prospects and opportunities in future periods to differ materially fromthose expressed or implied by such forward-looking information. Theserisks and uncertainties include, among other things, revenue growth,operating results, the market demand for our products, productdevelopment, and litigation as
well other factors described in theRisks Related to Our Business Section in our 2008 annual ManagementDiscussion and Analysis. There may be other factors that cause results,assumptions, performance, achievements, prospects or opportunities infuture periods not to be as anticipated, estimated or intended.
Therecan be no assurances that forward-looking information and statementswill prove to be accurate, as many factors and future events, both knownand unknown could cause actual results, performance or achievements tovary or differ materially, from the results, performance or achievementsthat are or may be expressed or implied by such forward-lookingstatements contained in this news release. Accordingly, all suchfactors should be considered carefully when making decisions withrespect to the Company, and prospective investors should not place unduereliance on forward-looking information. The Company assumes noobligation to update or revise forward-looking information to reflectchanges in assumptions, changes in circumstances or any other eventsaffecting such forward-looking information, except as required byapplicable law.
Neither TSX Venture Exchange nor its RegulationServices Provider (as that term is defined in the policies of the TSXVenture Exchange) accepts responsibility for the adequacy or accuracy ofthis release.
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