Q2 Financials
endTek loses $1.22-million in Q2 fiscal 2014
2014-06-24 16:17 ET - News Release
Mr. Doug Buchanan reports
VENDTEK SYSTEMS ANNOUNCES FISCAL second quarter 2014 FINANCIAL RESULTS
VendTek Systems Inc. has released 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 per cent, from $688,000 in the prior fiscal quarter of fiscal 2013.
- Gross profit for second quarter fiscal 2014 increased to $842,000 compared with $582,000 in the prior fiscal quarter, with gross margin decreasing to 66.1 per cent from 81.1 per cent, respectively.
- Operating expenses were $1.9-million compared with $2.4-million in the prior fiscal quarter.
- Adjusted EBITDA (1) loss was $1.0-million for second quarter fiscal 2014 compared with a loss of $1.1-million for the prior fiscal quarter.
- Net loss was $1.2-million compared with a $1.7-million loss in the prior fiscal quarter.
- Cash used in operations was $2.0-million for second quarter fiscal 2014, compared with $1.4-million in the prior fiscal quarter.
"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 and chief executive officer of VendTek.
During the quarter, the company announced the closing of its Canadian operations divestiture to Payment Source Inc. for $6.0-million, effective Jan. 31, 2014, 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 Nov. 15, 2013, $3.9-million, which was paid on Feb. 3, 2014, and a $450,000 holdback, which is due 90 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 totalled $828,204. In connection with the PSI transaction, the company will also receive a minimum of two years of licence fee payments for its efresh software and transition service fees for a six-month period.
On Feb. 6, 2014, the company repaid $1.6-million of the remaining $2.3-million in principal payments that matured on Jan. 25, 2014, to its convertible debentureholders. The $672,000 balance in convertible debentures was cancelled and reissued as either new convertible debentures bearing interest of 7.5 per cent per annum with attached warrants or 9.0 per cent per annum without warrants.
During the quarter, the company announced an agreement between its Brazil subsidiary, Now Prepay Servicos de Informatica Ltda., 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 which 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 prepaid credit will be able to add a health insurance feature to their purchases. The insurance feature is sold as a package bundled with mobile prepaid 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 microinsurance was estimated to be 128 million people at that time.
With 3,158 terminals at April 30, 2014 (up from approximately 2,700 at Jan. 31, 2014), the company is targeting an additional 3,500 registered terminals, or about 6,600 total registered by Dec. 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 management's discussion and analysis and complete financial statements and notes are available at SEDAR and the company's website. For more information or to receive the complete statements, please contact Sam