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Versatile Reports Second Quarter Results

VANCOUVER, CANADA -- (Marketwire) -- 02/06/13 -- Versatile Systems Inc. (TSX VENTURE:VV) announces its results for the second quarter of the 2013 fiscal year.

Revenue for the three months ended December 31, 2012 was $9,550,579, generating a gross profit of $1,842,628 or 19.3% of sales compared to $9,147,552, generating a gross profit of $1,951,833 or 21.3% of sales for the same quarter last year. The Net Loss for the quarter amounted to $494,389 ($0.00 per share) compared to the Net Loss of $263,695 ($0.00 per share) for the same period last year.

Highlights for the quarter included:


--  Revenue for the three months ended December 31, 2012 was $9,550,579
    compared to $9,147,552 for the same quarter last year, an increase of
    $403,027; 
    
--  The gross profit for the three months ended December 31, 2012 was
    $1,842,628 or 19.3% of sales compared to $1,951,833 or 21.3% of sales
    for the same quarter last year; 
    
--  The research and development expense for the quarter amounted to
    $322,849 compared to $275,847 for the same quarter last year. The
    Company incurred $105,277 for research and development activities
    related to an iPad application for Mobiquity Route(TM) and $176,317
    primarily related to Smart Sign TM; and 
    
--  Deferred revenue at December 31, 2012 was $5,969,441 (of which
    $4,924,276 is expected to be recognized in the next four quarters)
    compared to $6,712,216 at June 30, 2012, a decrease of $742,775. 

Revenue for the six months ended December 31, 2012 was $17,466,427 generating a gross profit of $3,675,407 or 21.0% of sales compared to $18,186,764 generating a gross profit of $3,742,211 or 20.6% of sales for the same period last year. The Net Loss for the period amounted to $898,683 ($0.01 per share) compared to $677,522 ($0.00 per share) for the same period last year.

About Versatile

Versatile provides business solutions that enable companies to improve sales, marketing and distribution of their products. Versatile also provides information technology services for the implementation, maintenance and security of mission-critical computer environments. Versatile has the ability to architect solutions involving both proprietary and third party components. For more information: 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.

All amounts are expressed in U.S. dollars unless otherwise stated. © 2013 Versatile Systems Inc. All rights reserved.


Versatile Systems Inc.                                                      
Condensed Consolidated Statements of Financial Position                     
(Unaudited - Prepared by Management)                                        
                                                                            
Expressed in U.S. dollars               December 31, 2012     June 30, 2012 
                                        ------------------------------------
                                              (unaudited)                   
ASSETS                                                                      
Current Assets                                                              
  Cash and cash equivalents                 $      70,780     $     434,725 
  Accounts receivable                           5,585,111         5,994,377 
  Prepaid expenses                              4,443,223         4,152,994 
  Inventory                                     2,272,065         2,347,110 
                                        ------------------------------------
                                               12,371,179        12,929,206 
Long-term accounts receivable                      88,673           181,366 
Long-term prepaid expenses                        938,983         1,278,432 
Investment in Equus                             2,026,574         2,105,473 
Capital Assets                                    200,905           251,591 
Intangible assets                                 159,812           167,206 
Deferred income tax assets                        880,407           880,407 
Goodwill                                        2,718,970         2,718,970 
                                        ------------------------------------
                                            $  19,385,503     $  20,512,651 
                                        ------------------------------------
                                        ------------------------------------
LIABILITIES                                                                 
Current Liabilities                                                         
  Line of credit                            $   2,967,124     $   1,988,675 
  Accounts payable and accrued                                              
   liabilities                                  5,076,473         5,544,888 
  Current portion of deferred revenue           4,924,276         5,292,359 
                                        ------------------------------------
                                               12,967,873        12,825,922 
Deferred Revenue                                1,045,165         1,419,857 
                                        ------------------------------------
                                               14,013,038        14,245,779 
                                        ------------------------------------
SHAREHOLDERS' EQUITY                                                        
  Share Capital                                54,433,709        54,433,709 
  Equity Reserve                                4,633,592         4,629,219 
  Deficit                                     (53,357,117)      (52,458,434)
  Accumulated other comprehensive loss           (337,719)         (337,622)
                                        ------------------------------------
                                                5,372,465         6,266,872 
                                        ------------------------------------
                                            $  19,385,503     $  20,512,651 
                                        ------------------------------------
                                        ------------------------------------
                                                                            
                                                                            
Versatile Systems Inc.                                                      
Condensed Consolidated Statements of Operations and Comprehensive Loss      
(Unaudited - Prepared by Management)                                        
                                                                            
Expressed in U.S.              Three months ended          Six months ended 
 dollars                              December 31               December 31 
                                2012         2011         2012         2011 
                        ----------------------------------------------------
                                       (Restated)                (Restated) 
                                                                            
SALES                    $ 9,550,579  $ 9,147,552  $17,466,427  $18,186,764 
COST OF SALES              7,707,951    7,195,719   13,791,020   14,444,553 
                        ----------------------------------------------------
                           1,842,628    1,951,833    3,675,407    3,742,211 
                        ----------------------------------------------------
EXPENSES                                                                    
  Selling and marketing    1,085,949    1,098,187    2,148,492    2,118,118 
  General and                                                               
   administrative            845,714      827,851    1,654,730    1,788,978 
  Research and                                                              
   development               322,849      275,847      559,095      519,957 
  Amortization of                                                           
   capital assets             36,753       38,092       77,001       86,511 
  Share-based                                                               
   compensation                2,187        4,279        4,373        8,749 
  Foreign exchange loss                                                     
   (gain)                     (2,588)      21,287        9,546       22,111 
                        ----------------------------------------------------
                           2,290,864    2,265,543    4,453,237    4,544,424 
                        ----------------------------------------------------
LOSS FROM OPERATIONS        (448,236)    (313,710)    (777,830)    (802,213)
  Interest expense           (19,899)      (7,594)     (38,814)     (12,817)
  Equity loss from                                                          
   Investment in Equus       (25,259)     (25,534)     (78,899)     (79,450)
  Loss on sale of                                                           
   capital assets and                                                       
   investments                     -       (1,534)           -       (1,534)
                        ----------------------------------------------------
                                                                            
LOSS BEFORE INCOME TAXES    (493,394)    (348,372)    (895,543)    (896,014)
Current income tax                                                          
 expense                        (995)        (995)      (3,140)      (2,340)
Deferred income tax                                                         
 recovery                          -       85,672            -      220,832 
                        ----------------------------------------------------
                                                                            
NET LOSS                 $  (494,389) $  (263,695) $  (898,683) $  (677,522)
                        ----------------------------------------------------
                        ----------------------------------------------------
                                                                            
Other comprehensive loss                                                    
  Foreign exchange                                                          
   translation                (1,015)      (6,670)         (97)      (6,670)
                        ----------------------------------------------------
Total comprehensive loss $  (495,404) $  (270,365) $  (898,780) $  (684,192)
                        ----------------------------------------------------
                        ----------------------------------------------------
                                                                            
LOSS PER SHARE (basic                                                       
 and diluted)                 ($0.00)      ($0.00)      ($0.01)      ($0.00)
                        ----------------------------------------------------
                        ----------------------------------------------------
                                                                            
                                                                            
Versatile Systems Inc.                                                      
Condensed Consolidated Statements of Changes in Shareholders' Equity        
(Unaudited - Prepared by Management)                                        
                                                                            
                                                    Warrant           Equity
Expressed in U.S. dollars    Share Capital          Reserve          Reserve
                         ---------------------------------------------------
                                                                            
                                                                            
Balance, June 30, 2011      $   54,433,709   $       42,000   $    4,578,470
Net loss                                 -                -                -
Foreign exchange on the                                                     
 translation of VMS-UK                   -                -                -
Expiration of warrants                   -                                 -
Share-based compensation                                                    
 expense                                 -                -            8,749
                         ---------------------------------------------------
Balance, December 31,                                                       
 2011                           54,433,709           42,000        4,587,219
                         ---------------------------------------------------
                         ---------------------------------------------------
                                                                            
                                                                            
Balance, June 30, 2012          54,433,709                -        4,629,219
Net loss                                 -                -                -
Foreign exchange on the                                                     
 translation of VMS-UK                   -                -                -
Share-based compensation                                                    
 expense                                 -                -            4,373
                         ---------------------------------------------------
Balance, December 31,                                                       
 2012                       $   54,433,709   $            -   $    4,633,592
                         ---------------------------------------------------
                         ---------------------------------------------------

                                               Accumulated                  
                                                     other                  
                                             comprehensive                  
Expressed in U.S. dollars         Deficit             loss            Total 
                         ---------------------------------------------------
                               (Restated)       (Restated)       (Restated) 
                                                                            
Balance, June 30, 2011      $ (37,741,276)   $    (326,261)   $  20,986,642 
Net loss                         (677,522)               -         (677,522)
Foreign exchange on the                                                     
 translation of VMS-UK                  -           (6,670)          (6,670)
Expiration of warrants                  -                -                - 
Share-based compensation                                                    
 expense                                -                -            8,749 
                         ---------------------------------------------------
Balance, December 31,                                                       
 2011                         (38,418,798)        (332,931)      20,311,199 
                         ---------------------------------------------------
                         ---------------------------------------------------
                                                                            
                                                                            
Balance, June 30, 2012        (52,458,434)        (337,622)       6,266,872 
Net loss                         (898,683)               -         (898,683)
Foreign exchange on the                                                     
 translation of VMS-UK                  -              (97)             (97)
Share-based compensation                                                    
 expense                                -                -            4,373 
                         ---------------------------------------------------
Balance, December 31,                                                       
 2012                       $ (53,357,117)   $    (337,719)   $   5,372,465 
                         ---------------------------------------------------
                         ---------------------------------------------------
                                                                            
                                                                            
Versatile Systems Inc.                                                      
Condensed Consolidated Statements of Cash Flows                             
(Unaudited - Prepared by Management)                                        
                                                                            
Expressed in U.S.              Three months ended          Six months ended 
 dollars                              December 31               December 31 
                                2012         2011         2012         2011 
                        ----------------------------------------------------
                                       (Restated)                (Restated) 
                                                                            
OPERATING ACTIVITIES                                                        
  Net loss               $  (494,389) $  (263,695) $  (898,683) $  (677,522)
  Items not involving                                                       
   cash                                                                     
    Amortization of                                                         
     capital assets           36,753       42,491       77,001       95,000 
    Share-based                                                             
     compensation              2,187        4,279        4,373        8,749 
    Loss on sale of                                                         
     capital assets and                                                     
     investments                   -        1,534            -        1,534 
    Equity loss from                                                        
     Investment in Equus      25,259       25,534       78,899       79,450 
    Unrealized foreign                                                      
     exchange loss                                                          
     (gain)                    1,092      (16,712)       1,092      (16,712)
    Deferred income                                                         
     taxes                         -      (85,672)           -     (220,832)
                        ----------------------------------------------------
Cash flow used in                                                           
 operations before other                                                    
 items                      (429,098)    (292,241)    (737,318)    (730,333)
    Net change in non-                                                      
     cash working                                                           
     capital                (462,265)    (194,553)    (584,966)     139,438 
                        ----------------------------------------------------
                            (891,363)    (486,794)  (1,322,284)    (590,895)
INVESTING ACTIVITIES                                                        
  Short term investments           -      (14,776)           -      (14,776)
  Proceeds from                                                             
   disposition of                                                           
   capital assets                  -       19,089            -       20,430 
  Intangible assets -                                                       
   contract cost                                                            
   additions                 (59,574)     (69,639)    (137,979)    (172,786)
  Intangible assets -                                                       
   contract cost                                                            
   recognized                 60,797       62,200      145,373      143,445 
  Purchase of capital                                                       
   assets                     (7,938)    (102,095)     (27,504)    (109,304)
                        ----------------------------------------------------
                              (6,715)    (105,221)     (20,110)    (132,991)
                        ----------------------------------------------------
FINANCING ACTIVITIES                                                        
  Proceeds from                                                             
   (Repayment of) line                                                      
   of credit                 703,174      160,144      978,449     (122,642)
                        ----------------------------------------------------
                             703,174      160,144      978,449     (122,642)
                        ----------------------------------------------------
                                                                            
Decrease in cash and                                                        
 cash equivalents           (194,904)    (431,871)    (363,945)    (846,528)
                                                                            
Cash and cash                                                               
 equivalents, beginning                                                     
 of period                   265,684      563,999      434,725      978,656 
                        ----------------------------------------------------
                                                                            
Cash and cash                                                               
 equivalents, end of                                                        
 period                  $    70,780  $   132,128  $    70,780  $   132,128 
                        ----------------------------------------------------
                        ----------------------------------------------------

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.

Contacts:
Versatile Systems Inc.
John Hardy
CEO
1-800-262-1633

Versatile Systems Inc.
Fraser Atkinson
CFO
1-800-262-1633

Versatile Systems Inc.
International: 001-206-979-6760
www.versatile.com

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