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Viscount Systems Inc., (“Viscount”) (OTCQB:VSYS), a manufacturer of physical access control systems (“PACS” or “Freedom PACS”) and telephone entry products, which protect buildings from unauthorized access, announced its first quarter of year 2016 financial results.
First Quarter of 2016 Highlights:
Sales for the three months ended March 31, 2016 and 2015 were $981,878 and $1,054,480, respectively, reflecting a decrease of $72,602 or 7%. Freedom sales for the three months ended March 31, 2016 and 2015 were $329,707 and $441,105, respectively, reflecting a decrease of $111,398 or 25%, which was mostly due to lower freedom equipment sales during the three months ended March 31, 2016. The decrease in Freedom sales were partially offset by an increase of $38,796 or 6% from Mesh/Enterphone sales for the three months ended March 31, 2016, compared to 2015. Mesh/Enterphone sales for the three months ended March 31, 2016 and 2015 were, $652,171 and $613,375, respectively.
Gross profit
Gross profit for the three months ended March 31, 2016 and 2015 was $530,079 and $490,817, respectively, an increase of $39,262 or 8%. For the three months ended March 31, 2016 and 2015, cost of sales were $451,799 and $563,663 or, as a percentage of sales, was 46% and 53%, respectively. Included in cost of sales is a recovery of inventory obsolescence and shrinkage amounting to $51,278 and $0 for the three months ended March 31, 2016 and 2015, respectively.
Gross margin for the three months ended March 31, 2016 and 2015 was 54% and 47%, respectively. During the three months ended March 31, 2016, management has continued to focus on controlling costs by using multiple suppliers to ensure that the best and most cost effective raw materials are used in all of our products.
The gross margin percentage for three months ended March 31, 2016 of our product categories of Mesh/Enterphone and Freedom, were 47% and 67%, respectively. The gross margin percentage for the three months ended March 31, 2015 of product categories of MESH/Enterphone and Freedom were 28% and 73%, respectively.
Income from Discontinued Operations
Discontinued operations represent the Company’s servicing business, as a result of the Company’s decision to sell this line of business.
Income from discontinued operations is attributable to the net income related to the Service Division as a result of our decision in January 2016 to sell the Service Division. Income from discontinued operations of $82,993 for the three months ended March 31, 2016 is comprised of sales revenues of $222,965, cost of sales of $89,061 and operating expenses of $50,911. Income from discontinued operations of $96,728 for the three months ended March 31, 2015 is comprised of sales revenues of $270,416, cost of sales of $96,715 and operating expenses of $76,973.
For more information please visit: www.viscount.com
Safe Harbor Statement
Forward looking statements: This press release and other statements by Viscount Systems Inc. may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act with respect to the outlook for earnings and revenues, other future financial or business performance, strategies and expectations. Forward-looking statements are typically identified by words or phrases such as "believe," "expect," "estimate," "position," "assume," "potential," "outlook," "continue," "remain," "maintain," and similar expressions, or future or conditional verbs such as "will," "would," "should," "could," or similar expressions.
VISCOUNT SYSTEMS, INC.
Condensed Consolidated Balance Sheets
(Expressed in Canadian dollars)
|
|
|
March 31, 2016 |
|
|
December 31, 2015 |
| ||
|
|
|
(Unaudited) |
|
|
|
| ||
|
Assets |
|
|
|
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
|
|
|
Cash |
|
$ |
51,796 |
|
|
$ |
250,270 |
|
|
Short term investments |
|
|
55,000 |
|
|
|
55,000 |
|
|
Trade accounts receivable, net |
|
|
542,443 |
|
|
|
506,264 |
|
|
Prepaid expenses |
|
|
40,724 |
|
|
|
31,791 |
|
|
Inventory |
|
|
461,689 |
|
|
|
569,796 |
|
|
Current assets held for sale |
|
|
37,135 |
|
|
|
59,317 |
|
|
Total Current Assets |
|
|
1,188,787 |
|
|
|
1,472,438 |
|
|
Equipment - net |
|
|
162,256 |
|
|
|
162,332 |
|
|
Deposits |
|
|
8,391 |
|
|
|
8,391 |
|
|
Long-term assets held for sale |
|
|
17,243 |
|
|
|
18,151 |
|
|
Total Assets |
|
$ |
1,376,677 |
|
|
$ |
1,661,312 |
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Deficit |
|
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
974,431 |
|
|
$ |
900,211 |
|
|
Accrued liabilities |
|
|
592,947 |
|
|
|
532,003 |
|
|
Capital lease obligation - current portion |
|
|
16,687 |
|
|
|
16,348 |
|
|
Deferred revenue |
|
|
28,978 |
|
|
|
47,780 |
|
|
Due to related parties |
|
|
134,583 |
|
|
|
91,683 |
|
|
Loans payable |
|
|
114,536 |
|
|
|
114,536 |
|
|
Interest payable - Convertible Debt |
|
|
982,039 |
|
|
|
373,841 |
|
|
Notes liability - Convertible Debt |
|
|
3,279,871 |
|
|
|
3,491,802 |
|
|
Derivative liabilities |
|
|
3,635,121 |
|
|
|
4,383,668 |
|
|
Convertible redeemable preferred stock |
|
|
269,880 |
|
|
|
269,880 |
|
|
Total Current Liabilities |
|
|
10,029,073 |
|
|
|
10,221,752 |
|
|
Capital lease obligation - non-current |
|
|
5,346 |
|
|
|
9,647 |
|
|
Total Liabilities |
|
|
10,034,419 |
|
|
|
10,231,399 |
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible redeemable preferred stock - US$0.001 par value; 20,000,000 shares authorized: |
|
|
- |
|
|
|
- |
|
|
Series A convertible redeemable preferred stock, stated value $1,000; 132 and 130 shares outstanding at March 31, 2016 and December 31, 2015, respectively; aggregate liquidation preference of $132,436 and $130,000 as of March 31, 2016 and December 31, 2015, respectively |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Deficit |
|
|
|
|
|
|
|
|
|
Series B Preferred Stock, par value $0.001 per share. 50 shares issued and outstanding at March 31, 2016 and December 31, 2015. |
|
|
1 |
|
|
|
1 |
|
|
Common stock, par value US$0.001 per share, 300,000,000 shares authorized, 130,297,236 shares issued, 126,047,236 shares outstanding at March 31, 2016 and December 31, 2015 |
|
|
130,297 |
|
|
|
130,297 |
|
|
Additional paid-in capital |
|
|
7,610,096 |
|
|
|
7,558,416 |
|
|
Accumulated deficit |
|
|
(16,398,136 |
) |
|
|
(16,258,801 |
) |
|
Total Stockholders’ Deficit |
|
|
(8,657,742 |
) |
|
|
(8,570,087 |
) |
|
Total Liabilities and Stockholders’ Deficit |
|
$ |
1,376,677 |
|
|
$ |
1,661,312 |
|
|
|
Condensed Consolidated Statements of Operations
(Expressed in Canadian dollars)
For the three months ended March 31, 2016 and 2015
(Unaudited)
|
|
|
Three months ended |
| |||||
|
|
|
March 31 |
| |||||
|
|
|
2016 |
|
|
2015 |
| ||
|
|
|
|
|
|
|
| ||
|
Sales |
|
$ |
981,878 |
|
|
$ |
1,054,480 |
|
|
Cost of sales |
|
|
451,799 |
|
|
|
563,663 |
|
|
Gross profit |
|
|
530,079 |
|
|
|
490,817 |
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
849,554 |
|
|
|
879,860 |
|
|
Research and development |
|
|
236,502 |
|
|
|
189,215 |
|
|
Total operating expenses |
|
|
1,086,056 |
|
|
|
1,069,075 |
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss |
|
|
(555,977 |
) |
|
|
(578,258 |
) |
|
|
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
Interest income |
|
|
3 |
|
|
|
10 |
|
|
Interest expense |
|
|
(635,460 |
) |
|
|
- |
|
|
Foreign exchange gain on revaluation of notes liability |
|
|
211,930 |
|
|
|
- |
|
|
Change in fair value of derivative liabilities |
|
|
757,176 |
|
|
|
621,373 |
|
|
|
|
|
333,649 |
|
|
|
621,383 |
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations |
|
|
(222,328 |
) |
|
|
43,125 |
|
|
Income from discontinued operations of servicing business, net of tax |
|
|
82,993 |
|
|
|
96,728 |
|
|
Net (loss) income |
|
|
(139,335 |
) |
|
|
139,853 |
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock: |
|
|
|
|
|
|
|
|
|
Series A convertible - contractual dividends |
|
|
(3,131 |
) |
|
|
(18,696 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income attributable to common stockholders |
|
$ |
(142,466 |
) |
|
$ |
121,157 |
|
|
|
|
|
|
|
|
|
|
|
|
Per share data: |
|
|
|
|
|
|
|
|
|
Continuing operations |
|
$ |
(0.00 |
) |
|
$ |
0.00 |
|
|
Discontinued operations |
|
$ |
0.00 |
|
|
$ |
0.00 |
|
|
Net (loss) income attributable to common stockholders – basic and diluted |
|
$ |
0.00 |
|
|
$ |
0.00 |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares of common stock outstanding: |
|
|
|
|
|
|
|
|
|
Basic and diluted |
|
|
126,047,236 |
|
|
|
126,026,928 |
|
|
|
Condensed Consolidated Statements of Cash Flows
(Expressed in Canadian dollars)
For the Three Months Ended March 31, 2016 and 2015
(Unaudited)
|
|
|
For the three months ended |
| |||||
|
|
|
March 31, 2016 |
|
|
March 31, 2015 |
| ||
|
Cash Flows from Operating Activities |
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(139,335 |
) |
|
$ |
139,853 |
|
|
Adjustments to reconcile net (loss) income to net cash used in operating activities: |
|
|
|
|
|
|
|
|
|
Income from discontinued operations |
|
|
(82,993 |
) |
|
|
(96,728 |
) |
|
Depreciation and amortization |
|
|
9,678 |
|
|
|
10,685 |
|
|
Recovery of uncollectible receivables |
|
|
(3,782 |
) |
|
|
(66,607 |
) |
|
Recovery of inventory obsolescence |
|
|
(51,488 |
) |
|
|
- |
|
|
Change in fair value of derivative liabilities |
|
|
(757,176 |
) |
|
|
(621,373 |
) |
|
Stock based compensation |
|
|
54,811 |
|
|
|
908 |
|
|
Foreign exchange gain on revaluation of notes liability |
|
|
(211,931 |
) |
|
|
|
|
|
Fair value of warrants issued |
|
|
5,498 |
|
|
|
- |
|
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
(32,397 |
) |
|
|
(80,092 |
) |
|
Inventory |
|
|
159,595 |
|
|
|
(21,866 |
) |
|
Prepaid expenses |
|
|
(8,933 |
) |
|
|
- |
|
|
Accounts payable & accrued liabilities |
|
|
135,164 |
|
|
|
361,296 |
|
|
Notes interest payable |
|
|
608,198 |
|
|
|
- |
|
|
Deferred revenue |
|
|
(18,802 |
) |
|
|
(7,723 |
) |
|
Due to related parties |
|
|
42,900 |
|
|
|
12,640 |
|
|
Net Cash used in operating activities from continuing operations |
|
|
(290,993 |
) |
|
|
(369,007 |
) |
|
Net Cash provided by operating activities from discontinued operations |
|
|
106,083 |
|
|
|
124,310 |
|
|
Net Cash used in Operating Activities |
|
|
(184,910 |
) |
|
|
(244,697 |
) |
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities |
|
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
|
(9,602 |
) |
|
|
(1,371 |
) |
|
Net cash used in investing activities |
|
|
(9,602 |
) |
|
|
(1,371 |
) |
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities |
|
|
|
|
|
|
|
|
|
Capital lease payments |
|
|
(3,962 |
) |
|
|
(2,490 |
) |
|
Proceeds from sale of common stock and warrants |
|
|
- |
|
|
|
3,050 |
|
|
Proceeds from sale of preferred stock |
|
|
- |
|
|
|
234,000 |
|
|
Net cash (used in) provided by financing activities |
|
|
(3,962 |
) |
|
|
234,560 |
|
|
|
|
|
|
|
|
|
|
|
|
Decrease in cash |
|
|
(198,474 |
) |
|
|
(11,508 |
) |
|
Cash, beginning of period |
|
|
250,270 |
|
|
|
135,308 |
|
|
Cash, end of period |
|
$ |
51,796 |
|
|
$ |
123,800 |
|
|
|
|
|
|
|
|
|
|
|
|
Supplementary Information: |
|
|
|
|
|
|
|
|
|
Interest paid |
|
$ |
4,572 |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash investing and financing activities: |
|
|
|
|
|
|
|
|
|
Fair value of preferred shares issued as dividends |
|
$ |
3,131 |
|
|
$ |
18,696 |
|
|
Fair value of warrants issued |
|
$ |
5,498 |
|
|
$ |
- |
|
|
Fair value of embedded conversion option from Series A shares |
|
$ |
- |
|
|
$ |
184,835 |
|
Results of discontinued servicing business operations:
|
|
|
Three Months Ended March 31, |
| |||||
|
|
|
2016 |
|
|
2015 |
| ||
|
Sales |
|
$ |
222,965 |
|
|
$ |
270,416 |
|
|
Cost of sales |
|
|
89,061 |
|
|
|
96,715 |
|
|
Operating expenses |
|
|
50,911 |
|
|
|
76,973 |
|
|
Income from discontinued operations, net of tax |
|
$ |
82,993 |
|
|
$ |
96,728 |
|
|
|
|
|
|
|
|
|
|
|
|
Income per share from discontinued operations, basic and diluted |
|
$ |
0.00 |
|
|
$ |
0.00 |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding, basic and diluted |
|
|
126,047,236 |
|
|
|
126,026,928 |
|
Assets and liabilities of discontinued operations:
|
|
|
March 31, 2016 |
|
|
December 31, 2015 |
| ||
|
|
|
|
|
|
|
| ||
|
Accounts receivable |
|
$ |
37,135 |
|
|
$ |
59,317 |
|
|
Equipment, net |
|
$ |
17,243 |
|
|
$ |
18,151 |
|
