VSI shows Scorching growth in Q1 VendTek earns $4.1-million in Q1 fiscal 2014
2014-04-01 18:04 ET - News Release
Ms. Samantha White reports
VENDTEK SYSTEMS ANNOUNCES FISCAL Q1 2014 FINANCIAL RESULTS
VendTek Systems Inc. has released its financial results for its first quarter of fiscal 2014 ended Jan. 31, 2014.
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.