Selected Financial Information (2)
- Revenue for the quarter ended July 31, 2014 decreased $40,000 to $887,000 or 4.3% from $927,000 in the prior fiscal quarter of FY2013;
- Gross profit for Q3 FY2014 decreased to $517,000 compared to $567,000 in the prior fiscal quarter, with gross margin decreasing to 58.3% from 61.2%, respectively;
- Operating expenses were $2.2 million compared to $1.6 million in the prior fiscal quarter;
- Adjusted EBITDA (1) loss was $1.5 million for Q3 FY2014 compared to a loss of $916,000 for the prior fiscal quarter;
- Net loss was $1.8 million compared to a $860,000 loss in the prior fiscal quarter;
- Cash used in operations was $611,000 for Q3 FY2014, compared to $1.7 million cash provided by operations in the prior fiscal quarter;
- Cash and cash equivalents was $455,000 at July 31, 2014 compared to $2.7 million in at October 31, 2013;
(2) Reflects restated financial information of the Company’s continuing operations following the divestiture of its Canadian assets, effective January 31, 2014.
Subsequent events:
The Company is undergoing a review of the business of its subsidiary, Now Prepay Servicos de Informatica Ltda.("VSI Brazil"), which operates VendTek's Brazilian business, with the intention to restructure that business. The steps to implement and the results of the restructuring are not determined at this time, and could include restricting its Brazilian business to limited operations (including being restricted to a merchant services business), or a complete wind-up of the Brazilian business.
The review and potential restructuring stems from actions taken by one of VSI Brazil's banks, which froze certain of VSI Brazil's bank accounts that contained VSI Brazil's operating funds and payments from customers. The freeze was not in line with VSI Brazil's prior experience with the bank's operations with its accounts and was completed unilaterally without any prior notice to VSI Brazil or VendTek. On questioning, the bank stated that they were replacing their security over VSI Brazil's accounts receivables with cash. The funds that were contained within the frozen accounts have subsequently been released to VSI Brazil. VSI Brazil orders daily from its suppliers and pays most of them in advance through bank letters of credit VSI Brazil has established in their favor. VSI Brazil collects the majority of proceeds from its customers, the retailers, on Wednesdays of each week, except in the case of holidays. Due to the timing and duration of the freezes by its bank, VSI Brazil was unable to make timely payment to certain of its suppliers out of its own funds. Accordingly, the payments are overdue and VSI Brazil expects them to be made entirely by the established bank lines of credit, which lines of credit are expected to be called against VSI Brazil.
These missed payments have caused a disruption to VSI Brazil's relationships and contracts with Brazil's few main wireless suppliers, which would have a material adverse impact on VSI Brazil's continued growth prospects.
VendTek’s MD&A and complete financial statements and notes are available at www.sedar.com and the Company’s website www.vendteksystems.com.
For more information or to receive the complete statements please contact Samantha White at 604-805-4653 or 1-800-806-4958 or investment@vendteksystems.com.
_______________
(1) Management defines Adjusted EBITDA as net income adjusted for financing, taxes, depreciation, amortization expenses, discontinued operations, impairment of non-financial assets, foreign exchange differences and stock based compensation expense. Please see the attached schedule and the Management Discussion and Analysis for more details.
VendTek Systems Inc.
Unaudited Condensed Consolidated Statement of Financial Position
(All amounts expressed in Canadian dollars)
October 31, 2012 and 2011
|
|
|
|
|
|
|
|
|
|
July 31,
|
October 31,
|
|
|
|
Note
|
2014
|
2013
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
$ 454,585
|
$2,653,198
|
|
Restricted cash
|
|
4
|
158,904
|
146,606
|
|
Accounts receivable
|
|
5
|
917,780
|
2,172,495
|
|
Inventories
|
|
|
59,390
|
1,423,827
|
|
Prepaid expenses and deposits
|
|
|
227,002
|
518,506
|
|
|
|
|
1,817,661
|
6,914,632
|
|
Non-current assets:
|
|
|
|
|
|
Property, plant and equipment, net
|
|
6
|
1,628,501
|
855,880
|
|
Intangible assets
|
|
7
|
65,280
|
86,638
|
|
Goodwill
|
|
|
-
|
907,342
|
|
|
|
|
|
|
|
|
|
|
$ 3,511,442
|
$ 8,764,492
|
|
|
|
|
|
|
|
Liabilities and Shareholders' Deficiency
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
Bank indebtedness
|
|
8
|
$ 36,251
|
$ -
|
|
Accounts payable and accrued liabilities
|
|
|
4,153,116
|
9,686,126
|
|
Current portion finance lease obligations
|
|
|
494,255
|
263,083
|
|
Current portion of convertible debentures
|
|
8
|
848,789
|
3,045,394
|
|
Deferred revenue
|
|
|
-
|
306,981
|
|
|
|
|
5,532,411
|
13,301,584
|
|
Non-current liabilities:
|
|
|
|
|
|
Long term portion of capital lease
obligations
|
8
|
870,281
|
196,200
|
|
Long term portion of convertible
debentures
|
8
|
672,000
|
-
|
|
|
|
|
|
|
|
Shareholders’ deficiency:
|
|
|
|
|
|
Share capital
|
|
9
|
12,188,130
|
12,188,130
|
|
Contributed surplus
|
|
9
|
3,949,332
|
3,916,136
|
|
Deficit
|
|
|
(19,462,995)
|
(20,579,957)
|
|
Accumulated other comprehensive income
|
|
|
(237,717)
|
(257,601)
|
|
|
|
|
(3,563,250)
|
(4,733,292)
|
|
|
|
|
|
|
|
|
|
|
$ 3,511,442
|
$ 8,764,492
|
See accompanying notes to consolidated financial statements filed on SEDAR.
VendTek Systems Inc.
Unaudited Consolidated Interim Statements of Operations and Comprehensive Loss (All amounts expressed in Canadian dollars)
Three and nine months ended July 31, 2014 and 2013
|
|
|
|
|
|
|
|
Restated - (note 13)
|
Restated - (note 13)
|
|
|
Three months ended July 31,
|
Nine months ended July 31,
|
|
|
2014
|
2013
|
2014
|
2013
|
|
|
|
|
|
|
|
Continuing operations:
|
|
|
|
|
|
|
|
|
|
|
|
Revenue (note 10):
|
|
|
|
|
|
Products and service revenue
|
$ 886,577
|
$ 926,845
|
$ 3,483,506
|
$ 2,161,517
|
|
Cost of product and service revenue
|
370,009
|
359,706
|
1,233,278
|
576,700
|
|
|
|
|
|
|
|
Gross profit
|
516,568
|
567,139
|
2,250,228
|
1,584,817
|
|
|
|
|
|
|
|
Operating expenses (note 11):
|
|
|
|
|
|
General and administrative
|
1,497,987
|
1,028,514
|
3,929,455
|
3,240,605
|
|
Selling and marketing
|
498,208
|
350,951
|
1,296,088
|
908,080
|
|
Research and development
|
195,959
|
201,355
|
602,277
|
678,351
|
|
Impairment of non-financial assets
|
-
|
-
|
-
|
671,942
|
|
Total operating expenses
|
2,192,154
|
1,580,820
|
5,827,820
|
5,498,978
|
|
|
|
|
|
|
|
Loss before finance cost, loss on
|
|
|
|
|
|
disposal of assets, and
|
|
|
|
|
|
foreign exchange loss (gain)
|
(1,675,586)
|
(1,013,681)
|
(3,577,592)
|
(3,914,161)
|
|
|
|
|
|
|
|
Finance cost (note 12)
|
77,597
|
179,238
|
276,641
|
525,552
|
|
Foreign exchange loss (gain)
|
4,087
|
(13,257)
|
61,703
|
(12,094)
|
|
|
|
|
|
|
|
Net loss from continuing operations
|
(1,757,270)
|
(1,179,662)
|
(3,915,936)
|
(4,427,619)
|
|
|
|
|
|
|
|
Discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
Net income from discontinued
|
|
|
|
|
|
operations (note 13)
|
-
|
319,708
|
5,032,898
|
1,003,950
|
|
Net income (loss)
|
(1,757,270)
|
(859,954)
|
1,116,962
|
(3,423,669)
|
|
|
|
|
|
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
Foreign currency translation difference
|
6,644
|
(70,633)
|
19,884
|
(48,828)
|
|
|
|
|
|
|
|
Comprehensive income (loss)
|
$ (1,750,626)
|
$ (930,587)
|
$ 1,136,846
|
$(3,472,497)
|
|
|
|
|
|
|
|
Earnings per share
|
|
|
|
|
|
Basic and diluted earnings per share
|
$ (0.03)
|
$ (0.01)
|
$ 0.02
|
$(0.06)
|
|
|
|
|
|
|
|
Earnings per share – continuing operations
|
|
|
|
|
|
Basic and diluted earnings per share
|
$ (0.03)
|
$ (0.02)
|
$ (0.07)
|
$(0.06)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
Basic and diluted
|
58,357,652
|
58,357,652
|
58,357,652
|
58,357,652
|
| |
|
|
|
|
|
|
See accompanying notes to consolidated financial statements filed on SEDAR.
VendTek Systems Inc.
Unaudited Condensed Consolidated Statements of Changes in Equity
(All amounts expressed in Canadian dollars)
Nine months ended July 31, 2014 and 2013
|
|
Share capital
|
Contributed surplus
|
Accumulated other comprehensive loss
|
|
Total Shareholders’equity
|
|
|
Number
|
Value
|
Deficit
|
(deficiency)
|
|
|
|
|
|
|
|
|
|
Balance, November 1, 2012
|
58,357,652
|
$12,188,130
|
$3,813,238
|
$(253,682)
|
$(16,222.532)
|
$ (474,846)
|
|
|
|
|
|
|
|
|
|
Stock based compensation
|
‑
|
‑
|
106,882
|
‑
|
‑
|
106,882
|
|
|
|
|
|
|
|
|
|
Currency translation adjustment
|
‑
|
‑
|
-
|
(48,828)
|
-
|
(48,828)
|
|
|
|
|
|
|
|
|
|
Net loss for period
|
-
|
-
|
-
|
-
|
(3,423,669)
|
(3,423,669)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance July 31, 2013
|
58,357,652
|
$12,188,130
|
$3,920,120
|
$ (302,510)
|
$(19,646,201)
|
$(3,840,461)
|
|
|
|
|
|
|
|
|
|
Balance, November 1, 2013
|
58,357,652
|
12,188,130
|
3,916,136
|
(257,601)
|
(20,579,957)
|
(4,733,292)
|
|
|
|
|
|
|
|
|
|
Stock based compensation
|
‑
|
‑
|
33,196
|
‑
|
‑
|
33,196
|
|
|
|
|
|
|
|
|
|
Currency translation adjustment
|
‑
|
‑
|
‑
|
19,884
|
‑
|
19,884
|
|
|
|
|
|
|
|
|
|
Net income (loss) for period
|
‑
|
‑
|
‑
|
‑
|
1,116,962
|
1,116,962
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance July 31, 2014
|
58,357,652
|
$12,188,130
|
$3,949,332
|
$(237,717)
|
$(19,462,995)
|
$(3,563,250)
|
See accompanying notes to consolidated financial statements filed on SEDAR.
VendTek Systems Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
(All amounts expressed in Canadian dollars)
Three and six months ended July 31, 2014 and 2013
|
|
|
|
|
|
|
|
Three months ended July 31,
|
Nine months ended July 31,
|
|
|
2014
|
2013
|
2014
|
2013
|
|
|
|
|
|
|
|
Cash provided by (used in):
|
|
|
|
|
|
|
|
|
|
|
|
Operations:
|
|
|
|
|
|
Net income (loss) for the period
|
$ (1,757,270)
|
$ (859,954)
|
$1,116,962
|
$(3,423,669)
|
|
Items not involving cash:
|
|
|
|
|
|
Accretion on convertible
|
|
|
|
|
|
debentures (note 8)
|
18,096
|
75,896
|
103,396
|
225,212
|
|
Mark to market loss
|
|
|
|
|
|
on derivatives (note 8)
|
-
|
19,089
|
-
|
56,646
|
|
Amortization
|
208,185
|
101,610
|
414,751
|
287,752
|
|
Loss (gain) on disposal of assets
|
-
|
12,605
|
8,199
|
28,048
|
|
Foreign exchange loss (gain)
|
4,087
|
(13,257)
|
61,703
|
(12,091)
|
|
Gain on disposal of
|
|
|
|
|
|
discontinued operations
|
-
|
-
|
(4,792,384)
|
-
|
|
Stock-based compensation
|
|
|
|
|
|
expense
|
16,740
|
24,135
|
33,196
|
106,882
|
|
Impairment of non-financial assets
|
-
|
-
|
-
|
671,942
|
|
Changes in non-cash operating
|
|
|
|
|
|
working capital items (note 17)
|
839,413
|
2,286,928
|
(653,266)
|
1,931,474
|
|
Interest expense on long-term debt
|
59,500
|
84,253
|
173,244
|
243,695
|
|
|
(611,249)
|
1,731,305
|
(3,534,199)
|
115,890
|
|
|
|
|
|
|
|
Financing activities:
|
|
|
|
|
|
Interest paid on long-term debt
|
(79,427)
|
(77,779)
|
(221,034)
|
(159,343)
|
|
Decrease (Increase) in bank
|
|
|
|
|
|
indebtedness
|
(151,105)
|
-
|
36,251
|
-
|
|
Repayment of convertible debentures
|
-
|
-
|
(1,628,000)
|
-
|
|
Repayment of capital lease obligations
|
(200,771)
|
(136,820)
|
(335,891)
|
(276,679)
|
|
|
(431,303)
|
(214,599)
|
(2,148,674)
|
(436,022)
|
|
|
|
|
|
|
|
Investments activities:
|
|
|
|
|
|
Decrease (increase) in restricted cash
|
5,865
|
9,998
|
(9,048)
|
131,749
|
|
Purchase of equipment
|
(117,164)
|
(82,927)
|
(134,801)
|
(185,075)
|
|
Net proceeds received from disposition
|
|
|
|
|
|
of discontinued operations
|
(382,307)
|
-
|
3,602,095
|
-
|
|
|
(493,606)
|
(72,929)
|
3,458,246
|
(53,326)
|
|
Effect of foreign exchange on cash
|
|
|
|
|
|
and cash equivalents
|
51,237
|
(34,613)
|
26,014
|
(43,706)
|
|
|
|
|
|
|
|
Increase (decrease) in cash
|
|
|
|
|
|
and cash equivalents
|
(1,484,921)
|
1,409,164
|
(2,198,613)
|
(417,164)
|
|
|
|
|
|
|
|
Cash and cash equivalents,
|
|
|
|
|
|
beginning of period
|
1,939,506
|
1,966,291
|
2,653,198
|
3,792,619
|
|
|
|
|
|
|
|
Cash and cash equivalents,
|
|
|
|
|
|
end of period
|
$454,585
|
$ 3,375,455
|
$ 454,585
|
$ 3,375,455
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
See accompanying notes to consolidated financial statements filed on SEDAR.
Non-IFRS Measures
Adjusted EBITDA can be calculated from the Company’s consolidated statements of operations, comprehensive loss and accumulated deficit, as follows:
|
|
Three months ended
|
Nine months ended
|
|
July 31,
|
July 31,
|
|
|
|
|
|
2014
|
2013
|
2014
|
2013
|
|
|
|
|
|
|
|
Net loss from continuing operations
|
($1,757,270)
|
($1,179,662)
|
($3,915,936)
|
($4,427,619)
|
|
Add:
|
|
|
|
|
|
Interest
|
59,500
|
84,253
|
173,244
|
243,695
|
|
Accretion on convertible debentures
|
18,096
|
75,896
|
103,396
|
225,212
|
|
Mark to market loss on derivatives
|
-
|
19,089
|
-
|
56,646
|
|
Amortization
|
189,448
|
73,377
|
377,645
|
204,953
|
|
Impairment of non-financial assets
|
-
|
-
|
-
|
671,942
|
|
Foreign-exchange difference
|
4,087
|
(13,257)
|
61,703
|
(12,091)
|
|
Stock-based compensation
|
16,740
|
24,135
|
33,196
|
106,882
|
|
Adjusted EBITDA
|
($1,469,399)
|
($916,169)
|
($3,166,752)
|
($2,930,380)
|
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