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VendTek Systems Announces Fiscal 2014 Financial Results

February 25, 2015

Vancouver, British Columbia (FSCwire) - VendTek Systems Inc. (VSI - TSX Venture) (the "Company"), a developer and licensor of software for the global prepaid telecom and financial services markets, today reported its financial results for its fiscal year ended October 31, 2014 (“FY2014”).

Selected Financial Information

Revenue for the year ended October 31, 2014 decreased $79,000 to $1.600 million, or 4.7% from $1.679 million in the prior fiscal year;
Gross profit for FY2014 was $1.600 million compared to $1.649 million in the prior year.
Operating expenses were $3.5 million compared to $4.2 million in the prior year; FY2013 operating expenses included a non-cash $672,000 impairment charge;
Adjusted EBITDA[1] loss was $1.8 million for FY2014 compared to a loss of $1.7 million for the prior year;
Net income was $732,000 compared to a net loss of $4.4 million in the prior year;
Cash used in operations was $2.9 million for FY2014, compared to $500,000 cash used in operations in the prior fiscal year;
Cash and cash equivalents was $291,000 at October 31, 2014 compared to $2.7 million in at October 31, 2013.

These consolidated financial statements have been prepared on the going concern basis, which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business. For the year ended October 31, 2014 the Company has incurred a net loss from continuing operations of $2.4 million and negative cash flows of $2.4 million from operating activities. The Company also has a working capital deficiency of $3 million and a shareholders’ deficiency of $3.5 million as at October 31, 2014. These conditions raise significant doubt about the ability of the Company to continue as a going concern without additional financing or renegotiate the terms of existing financing. In addition to the funds raised subsequent to year end (note 20), Management is pursuing several sources of additional financing (both debt and equity) and is of the opinion that sufficient working capital will be obtained from: external financing, renegotiation of existing financing; and improved operations to meet the Company’s liabilities and commitments as they become due, although there is significant risk that this may not happen on a timely basis or on terms acceptable to the Company.

These consolidated financial statements do not give effect to any adjustments which would be necessary should the Company be unable to continue as a going concern and therefore be required to realize its assets and discharge its liabilities in other than the normal course of business and at amounts different from those reflected in the accompanying consolidated financial statements.

Subsequent to year end, we announced the sale of 14,288,179 units (the "Units"), on a private placement basis on January 15, 2015, at the purchase price of $0.0105 per Unit to raise gross proceeds of $150,026. Each Unit consists of one common share of the Company and one common share purchase warrant. Each warrant is exercisable until January 15, 2018 to acquire one common share at a price of $0.05 per common share.

Also on February 5, 2015, the Company issued $350,000 of secured convertible debentures (“Convertible Debentures”) on a private placement basis that will mature on February 4, 2018. These bear interest at a rate of 1.0% per annum and have a conversion price of $0.05 per common share in the first year of the term and $0.10 in the remainder of the term. In addition, the Company issued 7,000,000 additional warrants exercisable at $0.05 per common share with the issuance of these Convertible Debentures.

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.

VendTek Systems Inc.

Consolidated Statements of Financial Position

October 31, 2014 and 2013

		2014		2013

Assets

Current assets:
Cash and cash equivalents	$	291,366	$	2,653,198
Restricted cash		-		146,606
Accounts receivable		101,776		2,172,495
Inventories		-		1,423,827
Prepaid expenses and deposits		81,943		518,506
		475,085		6,914,632

Non-current assets:
Property, plant and equipment		87,053		855,880
Intangible assets		60,198		86,638
Goodwill		-		907,342

Total assets	$	622,336	$	8,764,492

Liabilities and Shareholders’ Deficiency

Current liabilities:
Accounts payable and accrued liabilities	$	1,997,969	$	9,686,126
Current portion of finance lease obligations		25,051		263,083
Current portion of convertible debentures		860,000		3,045,394
Deferred revenue		-		306,981
Short term loans		597,206		-
		3,480,226		13,301,584

Non-current liabilities:
Long term portion of finance lease obligations		34,314		196,200
Long term portion of convertible debenture		635,754		-
		670,068		196,200

Shareholders’ deficiency:
Share capital		12,188,130		12,188,130
Contributed surplus		4,090,033		3,916,136
Deficit		(19,847,980)		(20,579,957)
Accumulated other comprehensive income (loss)		41,859		(257,601)
		(3,527,958)		(4,733,292)

Total liabilities and shareholders’ deficiency	$	622,336	$	8,764,492

Approved on behalf of the Board:

_____________________________ Director ______________________________ Director

VendTek Systems Inc.

Consolidated Statements of Operations and Comprehensive Loss

Years ended October 31, 2014 and 2013

			2014		2013
					(Restated)

Continuing operations:
Revenue:
Software license and services		$	1,600,164	$	1,679,371
Cost of software license and services			-		30,786
“CP”
Gross profit			1,600,164		1,648,585

Operating expenses:
General and administrative			2,769,432		2,678,519
Research and development			777,857		873,247
Impairment of non-financial assets			-		671,942
“CP”
Total operating expenses			3,547,289		4,223,708

Loss before finance costs, gain on
disposal of assets and foreign exchange loss (gain)			(1,947,125)		(2,575,123)

Finance costs			406,003		686,900
Gain on disposal of assets			(2,666)		-
Foreign exchange loss (gain)			49,988		(35,827)

Net loss from continuing operations before tax			(2,400,450)		(3,226,196)

Income tax recovery			43,554		-

Net loss from continuing operations			(2,356,896)		(3,226,196)

Discontinued operations:

Net income (loss) from discontinued operations			3,088,873		(1,131,229)

Net income (loss) for the year			731,977		(4,357,425)

Other comprehensive income (loss):
Foreign currency translation adjustment			13,960		(3,919)
Foreign currency translation realized on deconsolidation of Brazil			285,500		-

Comprehensive income (loss)	$		1,031,437	$	(4,361,344)

Net earnings (loss) per common share:
Basic and diluted		$	0.01	$	(0.07)

Weighted average shares outstanding:
Basic and diluted			58,357,652		58,357,652

VendTek Systems Inc.

Consolidated Statements of Changes in Equity

Years ended October 31, 2014 and 2013

	Share capital
	Number	Value	Contributed surplus	Accumulated other comprehensive income (loss)	Deficit	Total shareholders’ deficiency

Balance, October 31, 2012	$ 58,357,652	$ 12,188,130	$ 3,813,238	$ (253,682)	$ (16,222,532)	$ (474,846)

Stock based compensation	‑	‑	102,898	‑	‑	102,898

Currency translation adjustment	‑	‑	‑	(3,919)	‑	(3,919)

Loss for year	‑	‑	‑	‑	(4,357,425)	(4,357,425)

Balance, October 31, 2013	58,357,652	12,188,130	3,916,136	(257,601)	(20,579,957)	(4,733,292)

Stock based compensation	-	-	49,936	-	-	49,936

Equity components of convertible
debentures and warrants	‑	-	123,961	-	-

Currency translation adjustment	-	-	-	13,960	-	123,961

Currency translation realized on deconsolidation of Brazil	-	-	285,500	-	285,500	13,960

Income for year	-	-	-	-	731,977

Balance, October 31, 2014	$ 58,357,652	$ 12,188,130	$ 4,090,033	$ 41,859	$ (19,847,980)	$ 731,977

VendTek Systems Inc.

Consolidated Statements of Cash Flows

Years ended October 31, 2014 and 2013

	2014	2013

Cash provided by (used in):

Operating activities:
Income (loss) for the year	$ 731,977	$ (4,357,425)
Items not involving cash:
Amortization	453,510	496,583
Accretion on convertible debentures	125,164	319,328
Mark to market loss on derivatives	120,711	144,000
Foreign exchange loss (gain)	49,988	(35,827)
Loss (gain) on disposal of assets	(2,666)	121,900
Gain on disposal of discontinued operations	(4,792,384)	-
Gain on deconsolidation of Brazilian operations	(400,079)	-
Stock-based compensation expense	49,936	102,898
Impairment of non-financial assets	-	671,942
Income tax recovery	(43,554)	‑
Change in non-cash operating working capital	307,110	1,723,578
Interest expense on long-term debt	237,670	313,104
	(3,162,617)	(499,919)

Financing activities:
Interest paid on long-term debt	(207,650)	(298,119)
Short term loans	250,000	-
Repayment of convertible debentures	(1,628,000)	-
Repayment of capital lease obligations	(287,685)	(213,553)
	(1,873,335)	(511,672)

Investing activities:
Purchases of equipment	(225,106)	(235,034)
Decrease (increase) in restricted cash	(10,270)	69,255
Proceeds on disposition of equipment	-	20,195
Net proceeds received from disposition of
discontinued Canadian operations	3,577,953	-
Cash used in deconsolidation of Brazil operations	(723,076)	-
Payments to develop intangible assets	-	‑
	2,619,501	(145,584)

Foreign exchange effect on cash and cash equivalents	54,619	17,754

Decrease in cash and cash equivalents	(2,361,832)	(1,139,421)

Cash and cash equivalents, beginning of year	2,653,198	3,792,619

Cash and cash equivalents, end of year	$ 291,366	$ 2,653,198

[1] Management defines Adjusted EBITDA as net income adjusted for financing, taxes, depreciation, amortization expenses, impairment of non-financial assets, foreign exchange differences and stock based compensation expense. Please see the Management Discussion and Analysis for more details.

To view this press release as a PDF file, click onto the following link:
public://news_release_pdf/vendtekPR02252015.pdf

Source: VendTek Systems Inc (TSX Venture:VSI) www.vendteksystems.com

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