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Versatile Reports Second Quarter Results

MECHANICSBURG, PENNSYLVANIA -- (Marketwired) -- 02/24/14 -- Versatile Systems Inc. (TSX VENTURE:VV), announces its results for the second quarter of the 2014 fiscal year.

Revenue for the three months ended December 31, 2013 was $9,857,689, generating a gross profit of $1,686,298 or 17.1 percent of sales compared to $9,550,579, generating a gross profit of $1,842,628 or 19.3 percent of sales for the same quarter last year. The net loss for the quarter amounted to $951,894 ($0.01 per share), which includes non-recurring expenses of $407,419, compared to a net loss of $494,389 ($0.00 per share) for the same quarter last year.

Highlights for the quarter included:

--  Revenue for the three months ended December 31, 2013 was $9,857,689
    compared to $9,550,579 for the same quarter last year, an increase of
    $307,110; 
--  The gross profit for the three months ended December 31, 2013 was
    $1,686,298 or 17.1 percent of sales compared to $1,842,628 or 19.3
    percent of sales for the same quarter last year; 
--  The research and development expense for the quarter amounted to
    $239,981 compared to $322,849 for the same quarter last year; and 
--  Deferred revenue at December 31, 2013 was $6,577,606 (of which
    $5,661,284 is expected to be recognized in the next four quarters)
    compared to $6,835,938 at June 30, 2013.

During the current quarter, the company appointed Kenny Kahn as the chief executive officer and Kelly Boyer as the interim chief financial officer. The company also announced that it will close its Vancouver, Canada head office in order to centralize finance and administrative functions at its operations facility, located in Mechanicsburg, Pa.

Revenue for the six months ended December 31, 2013 was $16,497,164 generating a gross profit of $2,967,155 or 18.0 percent of sales compared to $17,466,427 generating a gross profit of $3,675,407 or 21.0 percent of sales for the same period last year. The net loss for the period amounted to $2,201,315 ($0.01 per share) compared to $898,683 ($0.01 per share) for the same period last year.

About Versatile

Versatile is a multi-disciplinary technology company with solutions across the mobile, digital signage, IT infrastructure, software and hardware landscape. The company's products are utilized by Fortune 500 companies, leading financial institutions and large and small retail organizations. For more information, please visit www.versatilecredit.com, www.versatilemobile.com and www.versatile.com.

Forward-Looking Statements

This document may contain forward-looking statements relating to Versatile's operations or to the environment in which it operates, which are based on Versatile's operations, estimates, forecasts and projections. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict or are beyond Versatile's control. A number of important factors including those set forth in other public filings could cause actual outcomes and results to differ materially from those expressed in these forward-looking statements. Consequently, readers should not place any undue reliance on such forward-looking statements. In addition, these forward-looking statements relate to the date on which they are made. Versatile disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

Neither TSX Venture Exchange nor its Regulation Service Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release. All amounts are expressed in U.S. dollars unless otherwise stated. © 2014 Versatile Systems Inc. All rights reserved.

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Versatile Systems Inc.                                                      
Condensed Consolidated Statements of Financial Position                     
(Unaudited - Prepared by Management)                                        
----------------------------------------------------------------------------
                                                                            
Expressed in U.S. dollars                  December 31, 2013  June 30, 2013 
                                           ---------------------------------
                                                  (unaudited)               
ASSETS                                                                      
Current Assets                                                              
  Cash and cash equivalents                    $      63,111  $      83,724 
  Investment in Equus                              1,798,203  $   1,798,203 
  Accounts receivable                              7,228,114      6,379,629 
  Prepaid expenses                                 5,028,710      4,588,012 
  Inventory                                        1,778,501      2,406,355 
                                           ---------------------------------
                                                  15,896,639     15,255,923 
                                                                            
Long-term accounts receivable                          1,140         14,368 
Long-term prepaid expenses                           831,568      1,140,311 
Capital Assets                                       155,430        189,274 
Intangible assets                                    166,936        169,959 
Deferred income tax assets                           336,275        336,275 
Goodwill                                           2,718,970      2,718,970 
                                           ---------------------------------
                                               $  20,106,958  $  19,825,080 
                                           ---------------------------------
                                           ---------------------------------
                                                                            
LIABILITIES                                                                 
Current Liabilities                                                         
  Line of credit and bank overdraft            $   4,126,960  $   3,602,269 
  Accounts payable and accrued liabilities         8,413,006      6,963,126 
  Bridge Loan                                        739,376              - 
  Current portion of deferred revenue              5,661,284      5,586,738 
                                           ---------------------------------
                                                  18,940,626     16,152,133 
Deferred Revenue                                     916,322      1,249,200 
                                           ---------------------------------
                                                  19,856,948     17,401,333 
                                           ---------------------------------
SHAREHOLDERS' EQUITY                                                        
  Share Capital                                   54,433,709     54,433,709 
  Equity Reserve                                   4,637,968      4,637,968 
  Deficit                                        (58,514,351)   (56,313,036)
  Accumulated other comprehensive loss              (307,315)      (334,894)
                                           ---------------------------------
                                                     250,011      2,423,747 
                                           ---------------------------------
                                                                            
                                               $  20,106,958  $  19,825,080 
                                           ---------------------------------
                                           ---------------------------------
                                                                            
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Versatile Systems Inc.                                                      
Condensed Consolidated Statements of Operations and Comprehensive Income    
(Loss)                                                                      
(Unaudited - Prepared by Management)                                        
----------------------------------------------------------------------------
                                                                            
Expressed in U.S.               Three months ended Six months ended December
 dollars                               December 31                        31
                                 2013         2012         2013         2012
SALES                    $  9,857,689 $  9,550,579 $ 16,497,164 $ 17,466,427
                                                                            
COST OF SALES               8,171,391    7,707,951   13,530,009   13,791,020
                        ----------------------------------------------------
                                                                            
                            1,686,298    1,842,628    2,967,155    3,675,407
                        ----------------------------------------------------
                                                                            
EXPENSES                                                                    
  Selling and marketing       784,437    1,085,949    1,655,226    2,148,492
  General and                                                               
   administrative           1,148,195      845,714    2,364,583    1,654,730
  Research and                                                              
   development                239,981      322,849      624,756      559,095
  Non recurring expenses      407,419            -      407,419            -
  Amortization of                                                           
   capital assets              19,945       36,753       40,947       77,001
  Share-based                                                               
   compensation                     -        2,187            -        4,373
  Foreign exchange                                                          
   (gain) loss                (5,293)      (2,588)      (2,669)        9,546
                        ----------------------------------------------------
                            2,594,684    2,290,864    5,090,262    4,453,237
                        ----------------------------------------------------
                                                                            
LOSS FROM OPERATIONS        (908,386)    (448,236)  (2,123,107)    (777,830)
                                                                            
  Interest expense           (42,376)     (19,899)     (75,620)     (38,814)
  Equity loss from                                                          
   Investment in Equus              -     (25,259)            -     (78,899)
  Loss on sale of                                                           
   capital assets                   -            -        (461)            -
                        ----------------------------------------------------
LOSS BEFORE INCOME TAXES    (950,762)    (493,394)  (2,199,188)    (895,543)
                                                                            
Current income tax                                                          
 expense                      (1,132)        (995)      (2,127)      (3,140)
                        ----------------------------------------------------
                                                                            
NET LOSS                 $  (951,894) $  (494,389) $(2,201,315) $  (898,683)
                        ----------------------------------------------------
                        ----------------------------------------------------
                                                                            
Other comprehensive                                                         
 income (loss)                                                              
  Foreign exchange                                                          
   translation                 18,085      (1,015)       27,579         (97)
                        ----------------------------------------------------
Total comprehensive loss $  (933,809) $  (495,404) $(2,173,736) $  (898,780)
                        ----------------------------------------------------
                        ----------------------------------------------------
                                                                            
LOSS PER SHARE (basic                                                       
 and diluted)                 ($0.01)      ($0.00)      ($0.01)      ($0.01)
                        ----------------------------------------------------
                        ----------------------------------------------------
                                                                            
Weighted average number                                                     
 of common shares                                                           
 oustanding, basic and                                                      
 diluted                  157,285,643  157,285,643  157,285,643  157,285,643
                        ----------------------------------------------------
                        ----------------------------------------------------
                                                                            
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Versatile Systems Inc.                                                      
Condensed Consolidated Statements of Changes in Shareholders' Equity        
(Unaudited - Prepared by Management)                                        
----------------------------------------------------------------------------
                                                                            
Expressed in U.S. dollars                                                   
                                                                            
                                                                            
                                            Share      Equity               
                                          Capital     Reserve       Deficit 
                                    ----------------------------------------
                                                                            
                                                                            
Balance, June 30, 2012               $ 54,433,709 $ 4,629,219 $ (52,458,434)
                                                                            
Net loss                                        -           -      (898,683)
Foreign exchange on the translation                                         
 of VMS-UK                                      -           -             - 
Share-based compensation expense                -       4,373             - 
                                    ----------------------------------------
                                                                            
Balance, December 31, 2012             54,433,709   4,633,592   (53,357,117)
                                    ----------------------------------------
                                    ----------------------------------------
                                                                            
                                                                            
Balance, June 30, 2013                 54,433,709   4,637,968   (56,313,036)
                                                                            
Net loss                                        -           -    (2,201,315)
Foreign exchange on the translation                                         
 of VMS-UK                                      -           -             - 
                                    ----------------------------------------
                                                                            
Balance, December 31, 2013           $ 54,433,709 $ 4,637,968 $ (58,514,351)
                                    ----------------------------------------
                                    ----------------------------------------

                                                                            
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Versatile Systems Inc.                                                      
Condensed Consolidated Statements of Changes in Shareholders' Equity        
(Unaudited - Prepared by Management)                                        
----------------------------------------------------------------------------
                                                                            
Expressed in U.S. dollars                                                   
                                            Accumulated                     
                                                  other                     
                                          comprehensive                     
                                                   loss               Total 
                                    ----------------------------------------
                                                                            
                                                                            
Balance, June 30, 2012               $         (337,622) $        6,266,872 
                                                                            
Net loss                                              -            (898,683)
Foreign exchange on the translation                                         
 of VMS-UK                                          (97)                (97)
Share-based compensation expense                      -               4,373 
                                    ----------------------------------------
                                                                            
Balance, December 31, 2012                     (337,719)          5,372,465 
                                    ----------------------------------------
                                    ----------------------------------------
                                                                            
                                                                            
Balance, June 30, 2013                         (334,894)          2,423,747 
                                                                            
Net loss                                              -          (2,201,315)
Foreign exchange on the translation                                         
 of VMS-UK                                       27,579              27,579 
                                    ----------------------------------------
                                                                            
Balance, December 31, 2013           $         (307,315) $          250,011 
                                    ----------------------------------------
                                    ----------------------------------------
                                                                            
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Versatile Systems Inc.                                                      
Condensed Consolidated Statements of Cash Flows                             
(Unaudited - Prepared by Management)                                        
----------------------------------------------------------------------------
                                                                            
Expressed in U.S.              Three months ended Six months ended December 
 dollars                              December 31                        31 
                                2013         2012         2013         2012 
                        ----------------------------------------------------
                                                                            
                                                                            
OPERATING ACTIVITIES                                                        
Net loss                 $  (951,894) $  (494,389) $(2,201,315) $  (898,683)
Items not involving cash                                                    
  Amortization of                                                           
   capital assets             19,945       36,753       40,947       77,001 
  Share-based                                                               
   compensation                -            2,187            -        4,373 
  Loss on sale of                                                           
   capital assets              -                -          461            - 
  Equity loss from                                                          
   Investment in Equus         -           25,259            -       78,899 
  Unrealized foreign                                                        
   exchange loss                 991        1,092          991        1,092 
                        ----------------------------------------------------
Cash flow used in                                                           
 operations before other    (930,958)    (429,098)  (2,158,916)    (737,318)
 items                                                                      
  Net change in non-cash                                                    
   working capital           (56,169)    (462,265)     867,861     (584,966)
                        ----------------------------------------------------
                            (987,127)    (891,363)  (1,291,055)  (1,322,284)
                                                                            
INVESTING ACTIVITIES                                                        
  Proceeds from                                                             
   disposition of                  -            -        1,418            - 
   capital assets                                                           
  Intangible assets -                                                       
   contract cost             (67,033)     (59,574)    (109,895)    (137,979)
   additions                                                                
  Intangible assets -                                                       
   contract cost            61,041         60,797      118,753      145,373 
   recognized                                                               
  Purchase of capital                                                       
   assets                     (2,458)      (7,938)      (6,762)     (27,504)
                        ----------------------------------------------------
                              (8,450)      (6,715)       3,514      (20,110)
                        ----------------------------------------------------
                                                                            
FINANCING ACTIVITIES                                                        
  Proceeds from the                                                         
   bridge loan               742,237            -      742,237            - 
  Proceeds from line of                                                     
   credit and bank           160,168      703,174      524,691      978,449 
   overdraft                                                                
                        ----------------------------------------------------
                             902,405      703,174    1,266,928      978,449 
                        ----------------------------------------------------
                                                                            
Decrease in cash and                                                        
 cash equivalents            (93,172)    (194,904)     (20,613)    (363,945)
                                                                            
Cash and cash                                                               
 equivalents, beginning      156,283      265,684       83,724      434,725 
 of period                                                                  
                        ----------------------------------------------------
                                                                            
Cash and cash                                                               
 equivalents, end of     $    63,111  $    70,780  $    63,111  $    70,780 
 period                                                                     
                        ----------------------------------------------------
                        ----------------------------------------------------

Contacts:
Versatile Systems Inc.
Kenny Kahn
CEO
717-620-2531
[email protected]
www.versatile.com

Daum Weigle Inc.
Jon Daum
858-538-9755
[email protected]

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