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VersaPay Reports Q2 2014 Results, Achieves Record Transaction Volumes

TORONTO, ONTARIO -- (Marketwired) -- 08/29/14 -- VersaPay Corporation (TSX VENTURE: VPY) ("VersaPay" or the "Company"), a leading provider of cloud-based invoicing, accounts receivable management and payment solutions, is pleased to report financial results for the second quarter of 2014. Revenue for Q2 2014 grew to $4.8 million from $4.4 million in the previous year. Revenue growth occurred across both of the Company's operating units, the VersaPay Solutions business and the POS Merchant Services business, as synergies accrued.

Q2 2014 Highlights:

--  Heartland Payment Systems, the fifth largest payment processor in the
    United States completes integration with Arc™ and rolls out reseller
    program to its world class sales distribution network
--  The Company's strategic investment in the Solutions business advanced
    significantly, with the build-out of the product and support teams, the
    launch of new Solutions product branding, the opening of a new leading
    edge development center in Toronto and the expansion of the Company's
    cloud infrastructure
--  Grew total credit card processing volume to $246 million for Q2 2014
    versus $221 million in Q2 2013, representing a record quarter

Subsequent to Q2 2014 Highlights:

--  Art Mesher appointed chairman of VersaPay's board of directors,
    effective August 20, 2014

Q2 2014 Financial Summary(1)

----------------------------------------------------------------------------
                                   Three months ended,     Six months ended,
                                               June 30               June 30
                                --------------------------------------------
                                       2014       2013       2014       2013
----------------------------------------------------------------------------
Total Revenue                     $    4.8M  $    4.4M  $    9.2M  $    8.5M
----------------------------------------------------------------------------
Cash Operating Expenses(2)        $    1.5M  $    1.0M  $    2.8M  $    2.1M
----------------------------------------------------------------------------
Adjusted EBITDA(3)                $  (0.6)M  $  (0.1)M  $  (1.1)M  $  (0.4)M
----------------------------------------------------------------------------
Net Loss                          $  (0.7)M  $  (0.3)M  $  (1.5)M  $  (0.6)M
----------------------------------------------------------------------------
                                         June 30, 2014
------------------------------------------------------
Cash                              $              5.0 M
------------------------------------------------------
Notes:
(1)  The unaudited condensed interim consolidated financial statements for
     the three and six months ended June 30, 2014 and the related
     Management's Discussion and Analysis for the period will be available
     on the Company's website at www.versapay.com and on SEDAR at
     www.sedar.com.
(2)  Cash operating expense is defined as operating expense excluding
     depreciation, amortization and share-based payments.
(3)  Adjusted EBITDA is defined as earnings before interest, taxes,
     depreciation, amortization, share-based payments, and other income. See
     table A below.

"We are pleased with our results in Q2, especially with respect to the record results achieved by our POS Merchant Services business and our progress launching the Arc™ product into the market," said Craig O'Neill, VersaPay's CEO. "The strong results from our POS business continue to support the strategic investment we are making in Arc™" as we build the foundation for future growth. After a good start in Q1 we have remained on course meeting our business objectives for Q2: enhancing the Arc™ team with top software talent, winning additional customers, going live with two major partners, rolling sales training out across Heartland's US-wide sales force and improving our direct sales capabilities. The sales pipeline has continued to build in both businesses as we see a growing level of interest in both Arc™ and our existing payment processing products and services. Furthermore, the expected synergies between the businesses are yielding improved results, with our Arc™ products opening up new opportunities for our POS salesforce and our credit card processing enhancing the revenue potential of some of our new Arc™ customers."

Q2 2014 Financial Review

Total revenues for Q2 2014 increased 11% to $4.8 million from $4.4 million in Q2 2013. Total revenues for the six months ended June 30, 2014 increased 8% from $9.2 million from $8.5 million in the six months ended June 30, 2013. The year-over-year improvement was driven primarily by growth in the Company's transaction processing fees.

Cash operating expense (excluding amortization and share-based payments) increased 49% to $1.5 million from $1.0 million in Q2 2014 from the same period in 2013. Cash operating expense for the six months ended June 30, 2013 were $2.8 million compared to $2.1 million for the six months ended June 30, 2013, an increase of 35%.

Adjusted EBITDA for Q2 2014 was $(0.6) million, compared to $(0.1) million in Q2 2013. Adjusted EBITDA for the six months ended June 30, 2014 was $(1.1) million, compared to $(0.4) million for the six months ended June 30, 2013. Loss from continuing operations for Q2 2014 was $(0.7) million compared to a loss from continuing operations of $(0.3) million for Q2 2013. Loss from continuing operations for the six months ended June 30, 2013 was $(1.5) million compared to $(0.6) million for the same period in 2013.

Table A

----------------------------------------------------------------------------
                                Three months ended,       Six months ended,
                                            June 30                 June 30
                                   2014        2013        2014        2013
                                      $           $           $           $
----------------------------------------------------------------------------
Adjusted EBITDA(1)             (570,211)   (141,451) (1,074,457)   (393,073)
Share based payments            (69,901)    (64,550)   (329,917)   (125,722)
Interest expense                (44,530)    (41,006)    (87,675)    (80,816)
Amortization                    (21,408)    (34,975)    (38,051)    (71,590)
Other income                          -      23,028           -      85,774
----------------------------------------------------------------------------
Net Loss                       (706,050)   (258,954) (1,530,100)   (585,427)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Notes:
(1)  Adjusted EBITDA is defined as earnings before interest, taxes,
     depreciation, amortization, share-based payments, and other income.

Grant of Options

The Company also announces the grant of incentive stock options to certain directors of the Company to purchase up to 125,000 common shares in the capital stock of the Company under its share option plan. The options are exercisable at a price of $1.25 per share on or before August 28, 2019, subject to the approval of the TSX Venture Exchange and applicable hold and Company vesting periods.

About VersaPay

VersaPay is a leading cloud-based invoice presentment and payment provider for businesses of all sizes. VersaPay's Arc and ArcPay software-as-a-service offerings allow businesses to easily deliver customized electronic invoices to their customers, to accept credit card and EFT payments and automatically reconcile payments to their ERP and accounting software. VersaPay is headquartered in Toronto, Canada and has operations in Montreal and New York.

More information about VersaPay can be found at www.versapay.com.

Forward-Looking and Other Cautionary Statements

This news release contains forward-looking statements and information that are based on the beliefs of management and reflect the Company's current expectations. When used in this news release, the words "estimate", "project", "belief", "anticipate", "intend", "expect", "plan", "predict", "may" or "should" and the negative of these words or such variations thereon or comparable terminology, are intended to identify forward-looking statements and information. Such statements and information reflect the current view of the Company with respect to risks and uncertainties that may cause actual results to differ materially from those contemplated in those forward-looking statements and information.

By their nature, forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements, or other future events, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, risks relating to the speculative nature of the Company's business, the Company's formative stage of development and the Company's financial position.

Forward-looking statements are made based on management's beliefs, estimates and opinions on the date that statements are made and the Company undertakes no obligation to update forward looking statements if these beliefs, estimates and opinions or other circumstances should change.

Unaudited Condensed Interim Consolidated Statements of Financial Position

----------------------------------------------------------------------------
                                                    June 30,   December 31,
                                                        2014           2013
                                                           $              $
----------------------------------------------------------------------------

ASSETS
Current
Cash and cash equivalents                          4,825,957      1,276,410
Restricted cash                                      185,790              -
Funds held for merchants                           5,809,990      4,063,599
Receivables                                          591,471        407,949
Prepaid expenses                                     149,852         33,441
----------------------------------------------------------------------------
                                                  11,563,060      5,781,399
Non-current
Equipment                                            299,149        194,999
Intangible assets                                      5,859          7,215
----------------------------------------------------------------------------
Total Assets                                      11,868,068      5,983,613
----------------------------------------------------------------------------
----------------------------------------------------------------------------

LIABILITIES
Current
Accounts payable and accrued liabilities             511,941        289,465
Funds due to merchants                             5,809,990      4,063,599
Current portion of obligations under finance
 lease                                                12,913         24,367
----------------------------------------------------------------------------
                                                   6,334,844      4,377,431
Non-current
Obligations under finance lease, net of
 current portion                                           -          2,953
Promissory note                                      740,253        698,927
----------------------------------------------------------------------------
Total Liabilities                                  7,075,097      5,079,311
----------------------------------------------------------------------------
----------------------------------------------------------------------------

EQUITY
Share capital                                     16,227,272     11,133,048
Reserve                                            1,559,330      1,608,613
Warrants                                             425,977         52,149
Deficit                                          (13,419,608)   (11,889,508)
----------------------------------------------------------------------------
Total Equity                                       4,792,971        904,302
----------------------------------------------------------------------------
Total Liabilities and Equity                      11,868,068      5,983,613
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Unaudited Condensed Interim Consolidated Statements of Loss and Comprehensive Loss

----------------------------------------------------------------------------
                              Three months ended,         Six months ended,
                                          June 30                   June 30
                                2014         2013         2014         2013
                                   $            $            $            $
----------------------------------------------------------------------------

Revenue
  VersaPay Solutions         128,056       92,565      225,922      163,614
  POS Merchant Services    4,719,863    4,291,596    8,956,807    8,358,520
----------------------------------------------------------------------------
                           4,847,919    4,384,161    9,182,729    8,522,134
----------------------------------------------------------------------------

Cost of Sales
  VersaPay Solutions          82,739       62,450      152,723      119,809
  POS Merchant Services    3,888,812    3,504,607    7,387,819    6,796,664
----------------------------------------------------------------------------
                           3,971,551    3,567,057    7,540,542    6,916,473
----------------------------------------------------------------------------
Gross Profit                 876,368      817,104    1,642,187    1,605,661
----------------------------------------------------------------------------

Expenses
  Depreciation and
   amortization               21,408       34,975       38,051       71,590
  General and office
   expenses                  205,088      146,690      403,851      291,949
  Interest expense (note
   15 and 20)                 44,530       41,006       87,675       80,816
  Marketing and
   promotion                  96,799       79,381      193,061      124,517
  Professional and
   consulting fees           280,202      150,219      517,064      361,692
  Rent and occupancy          46,221       52,249      120,822      127,361
  Research and
   development               192,568       95,860      330,111      199,117
  Salaries and benefits      625,701      434,156    1,151,735      894,098
  Share based payments        69,901       64,550      329,917      125,722
----------------------------------------------------------------------------
Total Expenses             1,582,418    1,099,086    3,172,287    2,276,862
----------------------------------------------------------------------------

Other Income (note 19)             -       23,028            -       85,774

----------------------------------------------------------------------------
Net Loss and
 Comprehensive Loss for
 the Period                 (706,050)    (258,954)  (1,530,100)    (585,427)
----------------------------------------------------------------------------
----------------------------------------------------------------------------


----------------------------------------------------------------------------

Loss per share, basic    $     (0.03) $     (0.02) $     (0.08) $     (0.04)

Weighted average number
 of common shares
 outstanding, basic       20,932,875   15,485,044   19,943,541   15,426,700

----------------------------------------------------------------------------

Unaudited Condensed Interim Consolidated Statements of Changes in Equity

----------------------------------------------------------------------------
                        Issued                                        Total
                       Capital   Reserve  Warrants      Deficit      Equity
                             $         $         $            $           $
----------------------------------------------------------------------------
As at December 31,
 2012                9,981,720 1,497,517   372,260  (10,778,860)  1,072,637
Net loss for the
 period                      -         -         -     (585,427)   (585,427)
Shares Issued                -         -         -            -           -
Exercise of options    284,917  (148,984)        -            -     135,933
Share based
 payments                    -   125,722         -            -     125,722
----------------------------------------------------------------------------
At June 30, 2013    10,266,637 1,474,255   372,260  (11,364,287)    748,865
----------------------------------------------------------------------------
----------------------------------------------------------------------------


----------------------------------------------------------------------------
                        Issued                                        Total
                       Capital   Reserve  Warrants      Deficit      Equity
                             $         $         $            $           $
----------------------------------------------------------------------------
At December 31,
 2013               11,133,048 1,608,613    52,149  (11,889,508)    904,302
Net loss for the
 period                      -         -         -   (1,530,100) (1,530,100)
Shares Issued        3,996,813         -   425,977            -   4,422,790
Exercise of options    638,736  (205,400)        -            -     433,336
Exercise of
 warrants              284,875         -   (52,149)           -     232,726
Share based
 payments              173,800   156,117         -            -     329,917
----------------------------------------------------------------------------
At June 30, 2014    16,227,272 1,559,330   425,977  (13,419,608)  4,792,971
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Unaudited Condensed Interim Consolidated Statements of Cash Flows

----------------------------------------------------------------------------
                                                  Six months ended June 30,
                                                        2014           2013
                                                           $              $
----------------------------------------------------------------------------

Cash Provided By (Used In) Operating
 Activities
  Net loss for the period                         (1,530,100)      (585,427)
    Items not affecting cash:
    Depreciation of equipment                         36,695         42,314
    Amortization of intangible assets                  1,356         29,277
    Interest accreted on promissory note              41,326         32,237
    Loss on disposal of equipment                          -         15,795
    Share based payments                             329,917        125,722

  Change in non-cash working capital items
    Receivables                                     (183,522)       (17,296)
    Prepaid expenses                                (116,411)       (10,781)
    Accounts payable and accrued liabilities         222,476       (161,768)
----------------------------------------------------------------------------
                                                  (1,198,263)      (529,927)

Cash Provided By (Used in) in Investing
 Activities
  Acquisition of equipment                          (140,845)        (2,954)
  Proceeds on disposal of equipment                        -         11,900
----------------------------------------------------------------------------
                                                    (140,845)         8,946

Cash Provided by (Used In) Financing
 Activities
  Issuance of common shares, net of issuance
   costs                                           5,088,852        135,933
  Finance lease payments                             (14,407)       (22,707)
----------------------------------------------------------------------------
                                                   5,074,445        113,226

Increase (decrease) in cash and cash
 equivalents                                       3,735,337       (407,755)

Cash and cash equivalents, beginning of period     1,276,410      1,461,388

----------------------------------------------------------------------------
Cash and cash equivalents, end of period           5,011,747      1,053,633
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Cash and cash equivalents consist of the following:

----------------------------------------------------------------------------
                                                          2014          2013
                                                             $             $
----------------------------------------------------------------------------
Cash at bank and in hand                             1,008,091       195,922
Demand deposits                                      3,817,866       857,711
Restricted cash                                        185,790             -
----------------------------------------------------------------------------
                                                     5,011,747     1,053,633
----------------------------------------------------------------------------

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Contacts:
VersaPay Corporation
David CW Chan
CFO
(647) 258-9475
[email protected]

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