VSI Third Quarter Results (Ending July 31 2015)
Price: $0.04
Common Shares: 16,743,151
Insider/Institutional Holdings : 80%
Although the numbers below show a loss in the quarter, the company revenues are increasing year over year while costs are decreasing. As well, the amount of time and capital injection that has occurred over the past 10 months is quite impressive, over $2 million and all from insiders/institutions. There are bigger plans for this company and the market has not recognized it just yet. This leads me to believe that the two institutions and new insiders will keep funding VSI until their goals of profitability have been met. With only a couple million shares in retail hands, some positive news would move this stock quickly.
Financial Results
ASSETS
Cash: $134,089 ($1 million debenture closed in September)
Accounts Receivable: $195,744
Prepaid Expenses: $84,622
Property & Equipment: $83,131
Intangible Assets: $48,119
LIABILITIES
Payables: $2,152,142
Lease: $25,975
Current Convertible Deb: $735,757
Short Term Loan: $764,702
Long-term lease: $14,107
Long Term Debenture: $877,415
Quarter Sales: $391K(Last year $304K)
G&A Expenses: $639K(Last year $820K)
Research: $175K (Last year 196K)
Loss: $544K(Last year $762K)
MD&A Highlights
The Company is principally a software applications and services company. We develop, market and license automated transaction software and supporting technologies that improve the efficiency of product delivery, reduce costs to clients and offer superior transaction security measures. Our business focuses primarily in the prepaid telecom and financial services industries. We license our software to third parties around the world including countries like Canada, Brazil, Mozambique, England, and the United Arab Emirates.
Our Strategy
Our primary goal is to maximize our revenue by helping our clients to develop their own networks, seeking a higher number of transactions and higher volume of products processed through our eFresh™ software. To achieve this goal, our focus is:
To offer eFresh® as a Service to third party networks that have chosen not to develop their own technologyExpand eFresh’s® capability to create multiple solutions to multiple industries within the payment and transaction processing segment.
Overview of Revenues
As part of our new strategy to develop recurring sources of revenue, we have focused in offering eFresh® to distributors of electronic products and serices in Canada, United Kingdom and the United Arab Emirates. This new strategy followed the sale of substantially all of our former Canadian operations effective January 31, 2014, the discontinuation of our less significant U.S. operations at March 31, 2014 and the de-consolidation of NPS (Brazil) August 31, 2014, which halted its operations as of August 2014 due to the parent company’s inability to financially sustain that operation, which was generation significant negative operational cash flow. With this new strategy, the entirety of our revenue going forward will be generated from selling eFresh® as a service.
Research and Development Expenses
Our research and development expenses consist primarily of compensation costs for engineering personnel, costs associated with various software projects, including testing, developing prototypes and related expenses. Our engineering personnel are located in our offices in Canada and China along with certain sales/support staff in the Middle East. We believe the international structure of our engineering group allows us to continue our development in a cost effective way. As a percentage of revenue, we expect our research and development expense to decrease as revenue increases. We normally expense our development costs associated with advancing our eFresh® software.
Revenue
Our revenue for the quarter ended July 31, 2015 increased $86,000, or 28.3%, to $391,000 from $305,000 for the corresponding period in 2014. This increase is mainly due to a new revenue contracts acquired during the quarter. Our revenue for the nine months ended July 31, 2015 decreased $385,000, or 29.5%, to $921,000 from $1.3 million for the corresponding period in 2014. This decrease is mainly due to a large multi-year contract that had expired in April 2014 valued at USD$50,000 per month.
General and Administrative
General and administrative expenses were $639,000 and $820,000 for the three months ended July 31, 2015, and 2014 respectively. This $181,000 decrease is due mainly to the reduction of salaries and wages from the restructuring changes. As a percentage of revenue, general and administrative expenses were 163.3% and 269.1% for the three months ended July 31, 2015 and 2014 respectively. Included in general and administrative expenses for the three months ended July 31, 2015 and 2014 were $16,000 and $17,000, respectively, of non-cash stock-based compensation expense
Research and Development
Product development costs for the three months ended July 31, 2015, and 2014 were $175,000 and $196,000. This $21,000 decrease is due mainly to the reduction of salaries and wages from the restructuring changes. As a percentage of revenue, research and development costs were 44.8% and 64.3% during the second quarters of 2015 and 2014, respectively.
Subsequent event
On September 2, 2015 the Company closed its previously announced private placement of $1,000,000 in secured convertible debentures.
The debentures bear interest at a rate of 12% per annum and mature on September 2, 2018. These debentures are convertible into common shares of the Company any time until maturity at a price of $0.10 per common share on conversion.
The net proceeds from the Offering will be used for general corporate purposes, including working capital. As at July 31, 2015, $326,000 of the proceeds had been received as a bridge loan by the Company and are included in short term loans.
Outlook
We have a multi-point strategy to drive growth with the primary goal of increasing the number of transactions processed through our eFresh® system globally.
We have three main priorities for fiscal 2015: 1. Increasing international license revenues, 2. Continuing to invest in and build out our eFresh® platform, and 3. Drive towards overall Company EBITDA and cash flow profitability. |
