CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS. (Unaudited)

Transcription

1 CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Three and Six Months Ended June 30, 2015 and 2014

2 TABLE OF CONTENTS Three and Six Months Ended June 30, 2015 and 2014 Page Condensed Interim Consolidated Financial Statements Condensed Interim Consolidated Statements of Financial Position 1 Condensed Interim Consolidated Statements of Loss and Comprehensive Loss 2 Condensed Interim Consolidated Statements of Changes in Equity 3 Condensed Interim Consolidated Statements of Cash Flows 4 Notes to Condensed Interim Consolidated Financial Statements 5 16

3 Unaudited Condensed Interim Consolidated Statements of Financial Position As at June 30, As at December 31, $ $ ASSETS Current Cash and cash equivalents 5,158,469 2,996,714 Funds held for merchants (note 6) 8,331,727 6,666,347 Receivables 516, ,207 Prepaid expenses 171,300 88,789 Total Current Assets 14,177,856 10,170,057 Non-current Restricted cash (note 7) 148, ,790 Property and equipment (note 8) 576, ,060 Intangible assets 3,147 4,503 Total Assets 14,906,461 10,982,410 LIABILITIES Current Accounts payable and accrued liabilities 631, ,909 Funds due to merchants (note 6) 8,331,727 6,666,347 Current portion of obligations under finance lease - 2,009 RSU obligation (note 11) 42,014 - Total Current Liabilities 9,005,294 7,213,265 Non-current Lease incentive allowance (note 9) 188, ,285 Total Liabilities 9,194,090 7,412,550 EQUITY Share capital (note 11) 20,987,606 17,078,083 Share based payment reserve 1,816,817 1,501,884 Warrants reserve (note 11) 778, ,064 Deficit (17,972,439) (15,445,889) Other comprehensive income 101,673 55,718 Total Equity 5,712,371 3,569,860 Total Liabilities and Equity 14,906,461 10,982,410 Economic Dependence (note 5) Commitments (note 10) Approved on behalf of the board: Signed "Brian Kyle" Signed "Craig O'Neill" Director Director See accompanying notes to the unaudited condensed interim consolidated financial statements. 1

4 Unaudited Condensed Interim Consolidated Statements of Loss and Comprehensive Loss Three months ended, June 30 Six months ended, June (restated - note 3) (restated - note 3) PROFIT AND LOSS $ $ $ $ Revenue VersaPay Solutions 199, , , ,922 POS Merchant Services 1,207,638 1,282,916 2,291,908 2,399,907 Total Revenue 1,407,094 1,410,972 2,649,662 2,625,829 Cost of Sales VersaPay Solutions 130,582 82, , ,723 POS Merchant Services 463, , , ,919 Total Cost of Sales 593, ,604 1,091, ,642 Gross Profit 813, ,368 1,558,579 1,642,187 Expenses General and Administrative 1,243, ,311 2,470,237 2,054,788 Research and Development 361, , , ,823 Sales and Marketing 548, , , ,001 Total Expenses 2,153,541 1,537,889 4,130,765 3,084,612 Loss before other income and expense (1,340,220) (661,521) (2,572,186) (1,442,425) Finance income (expense) (note 15) 16,870 (44,530) 12,005 (87,675) Foreign exchange gain (loss) from operation 28,778-33,631 - NET LOSS (1,294,572) (706,051) (2,526,550) (1,530,100) OTHER COMPREHENSIVE INCOME Exchange difference arising on translating foreign operations 18,161-45,955 - Total Other Comprehensive Income 18,161-45,955 - TOTAL COMPREHENSIVE LOSS (1,276,411) (706,051) (2,480,595) (1,530,100) Loss per share, basic $ (0.05) $ (0.03) $ (0.11) $ (0.08) Weighted average number of common shares outstanding, basic 24,082,838 20,932,875 23,062,759 19,943,541 See accompanying notes to the unaudited condensed interim consolidated financial statements. 2

5 Unaudited Condensed Interim Consolidated Statements of Changes in Equity Share Capital Share Based Payments Reserve Warrants Reserve Deficit Other Comprehensive Income (Loss) Total Equity $ $ $ $ $ $ As at December 31, 2013 (restated - note 3) 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 (note 11) 3,974,951 87, , ,422,789 Exercise of options (note 11) 638,736 (205,400) 433,336 Exercise of warrants (note 3 and 11) 284,875 - (52,149) ,726 Share based payments (note 11) 173, , ,917 As at June 30, ,205,410 1,646, ,503 (13,419,608) - 4,792,970 Share Capital Share Based Payments Reserve Warrants Reserve Deficit Other Comprehensive Income (Loss) Total Equity $ $ $ $ $ $ As at December 31, ,078,083 1,501, ,064 (15,445,889) 55,718 3,569,860 Net loss for the period (2,526,550) (2,526,550) Other comprehensive income for the period ,955 45,955 Shares Issued (note 11) 3,909,523 91, , ,399,562 Share based payments (note 11) - 223, ,544 As at June 30, ,987,606 1,816, ,714 (17,972,439) 101,673 5,712,371 See accompanying notes to the unaudited condensed interim consolidated financial statements. 3

6 Unaudited Condensed Interim Consolidated Statements of Cash Flows Six months ended June 30, $ $ Cash Provided by (Used in) Operating Activities Net loss for the period (2,526,550) (1,530,100) Items not affecting cash: Amortization of lease incentive allowance (10,489) - Depreciation of property and equipment and intangible asset 77,370 38,051 Interest accreted on promissory note - 41,326 Share based payments 223, ,917 Change in non-cash working capital items Receivables (98,153) (183,522) Prepaid expenses (82,511) (116,411) Accounts payable and accrued liabilities 86, ,476 RSU obligation 42,014 - Cash Used in Operating Activities (2,288,130) (1,198,263) Cash Provided by (Used in) Investing Activities Restricted cash 37,158 (185,790) Acquisition of property and equipment (30,781) (140,845) Cash Provided by (Used in) Investing Activities 6,377 (326,635) Cash Provided by (Used in) Financing Activities Issuance of common shares, net of issuance costs 4,399,562 5,088,852 Finance lease payments (2,009) (14,407) Cash Provided by Financing Activities 4,397,553 5,074,445 Increase in Cash and Cash Equivalents 2,115,800 3,549,547 Cash and Cash Equivalents, Beginning of period 2,996,714 1,276,410 Exchange Gains on Cash and Cash Equivalents 45,955 - Cash and Cash Equivalents, End of Period 5,158,469 4,825,957 Cash and cash equivalents consist of the following: As at June 30, $ $ Cash at bank and in hand 999,885 1,008,091 Demand deposits 4,158,584 3,817,866 5,158,469 4,825,957 See accompanying notes to the unaudited condensed interim consolidated financial statements. 4

7 1. Nature of Business VersaPay Corporation ("the Company") is incorporated under the laws of British Columbia, Canada, and its principal place of business is Suite 210, 214 King Street West, Toronto, Canada. The Company has operations in Canada and the United States. The Company is a financial technology company that provides cloud accounts receivable automation software and integrated payment solutions for businesses. Through its VersaPay Solutions segment ("Solutions"), the Company focuses on cloud based electronic invoice presentment with its ARC software ("ARC ") and develops value added payment technologies such as its PayPort and VersaPay Gateway (previously known as Electronic Money Transfer, or "EMT"). Through its Point of Sales Merchant Services segment ("POS"), the Company acts on behalf of financial institutions to provide merchants with the ability to process credit and debit card payments for card-not-present and card-present transactions, including internet businesses, mail-order/telephone-order merchants and retail point-of-sale merchants. 2. Basis of Presentation The unaudited condensed interim consolidated financial statements, including comparatives, have been prepared in accordance with International Accounting Standard ("IAS") 34, Interim Financial Reporting. The accounting policies applied in these financial statements are consistent with those used in the Company's audited consolidated financial statements for the year ended December 31, There have been no changes from the accounting policies applied in the December 31, 2014 financial statements. The preparation of interim financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the related amounts of assets and liabilities, revenues and expenses. In management's opinion, all adjustments considered necessary for fair presentation have been included in these financial statements. Interim results are not necessarily indicative of the results expected for the financial year. Annual results may differ from interim estimates. The significant judgments made by management applied in the preparation of these financial statements are consistent with those applied and disclosed in the Company's audited financial statements for the year ended December 31, For a description of the critical accounting estimates and assumptions, please refer to the Company's audited consolidated financial statements for the year ended December 31, These unaudited condensed interim consolidated financial statements are presented in Canadian dollars. They include the accounts of the Company s wholly-owned subsidiary, VersaPay Payment Technology Solutions, Inc. which was incorporated on May 17, All significant intercompany balances and transactions have been eliminated upon consolidation. The board of directors approved these interim consolidated financial statements for issue on August 25,

8 3. Voluntary Changes in Accounting Policies Revenue Presentation on POS Merchant Services Effective January 1, 2014, the Company made a voluntary change in accounting policy related to the revenue presentation of credit card processing services for the POS Merchant Services business. The Company s previous accounting policy was to report this stream of revenue on a gross basis. Under the new accounting policy, this revenue stream is presented on a net basis. Management believes the new accounting policy provides more relevant and no less reliable information to users in assessing the Company s historical performance and future prospects as it better aligns revenues with the actual flow of cash. In accordance with IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors, the change in accounting policy has been applied retrospectively. This change in accounting has no impact on the Company s consolidated statement of financial position, reported gross profit, net loss, net loss per share or total comprehensive loss. The following table summarizes the impact of this change: Three months ended, June 30, 2014 Six months ended, June 30, 2014 Amount Amount Impact of accounting policy change reported after new policy implemented reported prior to accounting policy change Impact of accounting policy change Amount reported prior to accounting policy change Amount reported after new policy implemented $ $ $ $ $ $ Revenue POS Merchant Services 4,719,863 (3,436,947) 1,282,916 8,956,807 (6,556,900) 2,399,907 Total Revenue 4,847,919 (3,436,947) 1,410,972 9,182,729 (6,556,900) 2,625,829 Cost of Sales POS Merchant Services 3,888,812 (3,436,947) 451,865 7,387,819 (6,556,900) 830,919 Total Cost of Sales 3,971,551 (3,436,947) 534,604 7,540,542 (6,556,900) 983,642 Gross Profit 876, ,368 1,642,187-1,642,187 Net Loss (706,051) - (706,051) (1,530,100) - (1,530,100) Loss Per Share (0.03) - (0.03) (0.08) - (0.08) 6

9 3. Voluntary Changes in Accounting Policies (continued) Warrants Exercised The Company made a voluntary change in accounting policy related to the allocation of exercised warrants. Previously, exercised warrants were recognized in reserve. The Company now chooses to recognize exercised warrants in share capital. The Company believes the new accounting policy provides more relevant information as the allocation more clearly reflects the investment, face value of exercised warrants, into share capital. In accordance with IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors, the change in accounting policy has been made retrospectively. The change in accounting policy only impacted 2013 and 2014 fiscal years as warrants have not been exercised in prior years. The effect on the consolidated statement of financial position as at December 31, 2013 is an increase in share capital of $320,111. This accounting policy has no impact on comprehensive loss and cash flows and has no effect on earnings per share for the year ended December 31, Amount reported prior to accounting policy change December 31, 2013 Impact of accounting policy change Amount reported after new policy implemented Share capital 10,812, ,111 11,133,048 Share based payment reserve 1,928,724 (320,111) 1,608,613 Loss per share (0.07) - (0.07) 4. Significant Accounting Policies The accounting policies applied by the Company in these condensed interim consolidated financial statements are the same as those applied by the Company in its consolidated financial statements as at and for the year ended December Economic Dependence For the three months ended June 30, 2015, the Company derived 73% of its POS merchant service revenue (three months ended June 30, %) and for the six months ended June 30, 2015, the Company derived 76% of its POS merchant service revenue (six months ended June 30, % ) through an arrangement with Chase Paymentech ( Chase ) pursuant to a written agreement that expires on September 30, Under the agreement, Chase pays the Company a percentage of the revenues it earns from the Company's POS merchants. The percentage paid to the Company is determined by the number of POS merchants added each quarter. Unless terminated, the agreement automatically renews for successive one year terms. Under the agreement signed with Chase, any material default of the conditions contained in the agreement by the Company could result in a termination of the processing agreement. As at June 30, 2015, the Company is in compliance with these conditions. 7

10 6. Funds Held for Merchants The Company holds funds in trust for customers using the VersaPay Solutions Gateway services. These services allows customers to pay and receive funds electronically. Customers using PayPort and ARC may also be using Gateway to make and receive payments. In providing the Gateway services, the Company temporarily holds its customers' funds while their funds are in transit. The amount of funds held for merchants typically vary with the volume of transactions being processed. The funds are held at a Schedule A bank. Because these are customer funds, there is an associated Funds Due to Merchants liability. 7. Restricted Cash As at June 30, 2015, the Company has restricted cash of $148,632 (as at December 31, $185,790). The restricted cash is held as collateral for a letter of credit for the new office space in Toronto, opened in July The letter of credit obligation is reduced to zero over a five year period from the inception of the Toronto lease. 8. Property and Equipment Computer Equipment Office Furniture and Equipment Leasehold Improvements $ $ $ $ COST Balance as at December 31, , , ,773 1,179,507 Additions 25,593 5,188-30,781 Balance as at June 30, , , ,773 1,210,288 Total ACCUMULATED DEPRECIATION Balance as at December 31, 2014 (423,087) (113,383) (20,977) (557,447) Depreciation for the period (33,699) (21,339) (20,977) (76,015) Balance as at June 30, 2015 (456,786) (134,722) (41,954) (633,462) NET BOOK VALUE As at December 31, , , , ,060 As at June 30, , , , , Lease Incentive Allowance On July 31, 2014, the Company received a lease incentive allowance of $209,773 related to leasehold improvements as an inducement to enter into a 10-year lease term for the Toronto office. This amount is amortized over the term of the lease. The accumulated amortization as at the period ended June 30, 2015 was $20,979 (as at June 30, Nil) with a corresponding credit to rental expense. $ Balance as at December 31, ,285 Amortization for the period (10,489) Balance as at June 30, ,796 8

11 10. Commitments The Company has operating lease commitments for office premises payments for the current and next five years and thereafter in the following amounts: and thereafter Total $ $ $ $ $ $ $ 165, , , , ,518 1,216,618 2,402, Share Capital On May 7, 2015 the Company closed a bought-deal private placement for gross proceeds of $4,840,002. A syndicate of underwriters led by Haywood Securities Inc. and including Cormark Securities Inc. completed the private placement offering of 3,457,144 units of the Company ("Units") at a price of $1.40 per Unit. Each Unit is comprised of one common share of the Company (each, a "Common Share") and one-half (1/2) of one Common Share purchase warrant (each whole Common Share purchase warrant, a "Warrant"). Each Warrant will be exercisable to acquire an additional Common Share (each, a "Warrant Share") at an exercise price of $2.00 per Warrant Share for a period of 24 months following May 7, The Company is authorized to issue an unlimited number of common shares. Common shares $ Balance, December 31, 2014 and March 31, ,031,346 17,078,083 Issued for cash 3,457,144 3,909,523 Issued on exercise of options - - Fair value of exercised stock options - - Issued on exercise of warrants - - Fair value of exercised warrants - - Balance, June 30, ,488,490 20,987,606 9

12 11. Share Capital (continued) Options The Company's Fixed Stock Option Plan ("the Plan") allows for 20% of the issued share capital as at the date that the Company's plan was approved by the TSX Venture Exchange to be reserved for issuance to employees, officers, directors, and consultants of the Company. The Board of Directors of the Company may terminate the Plan at any time provided that the termination does not alter the terms or conditions of any option or impair the right of any shareholder. Share purchase options outstanding as at June 30, 2015 are as follows: Weighted Average Share price Exercise price upon exercise ($) ($) Fair value at grant ($) Number of Share Purchase Options outstanding options Balance, December 31, 2014 and March 31, ,921, N/A N/A Granted 432, Exercised - - Expired - - Forfeited - - Balance, June 30, ,354, N/A N/A On May 27, 2015, 125,000 options were granted to the Company's board of directors. These options are exercisable at a price of $1.38 per share on or before May 27, As part of the equity financing, the underwriters received 207,428 compensation options. Each compensation option is exercisable to acquire one unit at the issue price for a period of 24 months from closing of the offering. The following table summarizes information pertaining to the Company's share purchase options outstanding as at June 30, 2015: Range of exercise prices Awards Outstanding Options outstanding Remaining contractual life (years) Average exercise price Options exercisable Number of options exercisable Average exercise price $ $ , $ ,500 $0.66 $ $ , $ ,000 $0.78 $ $ , $ ,500 $0.96 $ $1.35 2,431, $1.15 1,176,691 $1.10 $ $ , $ ,428 $1.40 $ $ , $ $ $ , $ ,667 $1.60 3,354, $1.17 1,835,786 $

13 11. Share Capital (continued) Option pricing models require the input of highly subjective assumptions including the expected price volatility. Changes in subjective input assumptions can materially affect the fair value estimate and therefore the existing models may not necessarily provide a reliable measure of the fair value of the Company s share purchase options. The exercise price of all share purchase options granted during the year is equal to or greater than the closing market price at the grant date. The fair value of stock options granted during the six months ended June 30, 2015 and 2014 was estimated using the Black-Scholes option-pricing model with the following assumptions: For the six months ended, June 30, Options granted 432, ,000 Strike price $1.40 $1.11 Risk free interest rate 0.50%-0.90% 1.10%-1.44% Expected life (years) Vesting period (years) Expected volatility 52%-57% 50%-64% Expected dividends Nil Nil Share based payment expenses totaling $113,780 was recognized during the three months ended June 30, 2015 (three months ended June 30, $69,901) and $223,545 was recognized during the six months ended June 30, 2015 (six months ended June 30, $329,917). Restricted Share Units Effective January 1, 2015, the Company introduced a Restricted Share Unit ("RSU") Plan. Granted RSU's under the plan entitles employees, management and directors to a cash payment equal to the fair market value of the Company's shares after the end of a performance period multiplied by the number of units that have vested. Granted RSU's vest over a three year period. The share's fair market value is based on a five-day average trading price. Each year, the Company recognizes a compensation expense in operating income for one third of each RSU granted. The compensation expense is equal to the fair market value of VersaPay's common shares at the Balance Sheet date. The compensation expense is prorated over the performance period reflecting changes in the fair market value of VersaPay's common share until the end of the performance period. Any subsequent changes in the fair market value of the share price are be recognized as a gain or loss in the statement of loss and comprehensive loss. A corresponding current liability is recognized for the accumulated RSU obligation. 11

14 11. Share Capital (continued) Warrants The continuity of share purchase warrants is as follows: Warrants Fair Value $ Exercise price $ Balance, December 31, 2014 and March 31, ,123, , Granted 1,728, , Exercised Balance, June 30, ,852, , These warrants, if not exercised, will expire as follows: Expiry Date Total warrants outstanding February 4, ,123,500 May 7, ,728,572 Balance, June 30, ,852,072 As part of the $4,840,002 share issuance in May 2015, the fair value of 207,428 broker warrants granted was $91,389 and the fair value of 1,728,572 non-broker warrants granted was $493,530, less share issuance costs of $94,880 and was estimated using the Black-Scholes option-pricing model with the following assumptions: For the six months ended, June Warrants granted 1,728,572 2,375,190 Strike price $2.00 $1.50 Risk free interest rate 0.68% 0.96% Expected life (years) 2 2 Vesting period (years) N/A N/A Expected volatility 58% 52% Expected dividends NIL NIL 12

15 12. Related Party Transactions The following related party transactions were incurred: Three months ended June 30, Six months ended June 30, $ $ $ $ Senior management compensation 433, , , ,272 Shares issued to management ,800 Share based payments for key employees 58,053 57, , ,314 Share based payments for directors 34,017 23,064 66,921 47,869 Professional fees paid to directors 46,420 27,500 46,420 35,500 Professional fees paid to a law firm in which a director is a partner 75,301 58, , , , ,347 1,220,050 1,038,338 Included in accounts payable and accrued liabilities as of June 30, 2015 is $101,059 (December 31, $103,487) owing to related parties. 13. Capital Management The capital structure of the Company consists of equity. The Company manages its capital structure and makes adjustments to it based on the funds available to the Company. The Board of Directors does not currently establish quantitative return on capital criteria for management, but rather relies on the expertise of the Company s management to enhance and sustain future development of the business. Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size and stage of the Company, is reasonable. There were no changes in the Company s approach to capital management during the year. 14. Segmented Information The Company has two reportable operating segments: VersaPay Solutions and Point of Sale Merchant Services. VersaPay Solutions VersaPay Solutions develops business to business applications for small and medium enterprises. The segment focuses on accounts receivable automation software and integrated electronic payments technologies. Revenues include transaction processing and monthly fees earned from credit card processing and from the Company's PayPort and Gateway service. Revenues also include fees earned from its proprietary cloud-based electronic invoice presentment and payment product, ARC 13

16 14. Segmented Information (continued) Point of Sale Merchant Services (POS) The POS segment encompasses traditional credit card transaction processing services provided to merchants in Canada and the US. This segment is characterized by its recurring revenue stream and has been the primary business of the Company since its inception. The majority of the revenues stems from the reselling of services from Chase. The segment also includes the sales of physical and electronic point of sale terminals and related hardware. Management evaluates performance and allocates resources based on the revenues and earnings before interest, depreciation, amortization, share based payment costs, impairments and other income ("Adjusted EBITDA"). The Adjusted EBITDA of each segment includes the revenues of each segment less those expenses that are directly related to those revenues. Operating overhead, shared costs and certain compensation costs are included in Corporate in the following table: Consolidated (in thousands) Three Months Ended June 30, 2015 Three Months Ended June 30, 2014 VersaPay Solutions POS Corporate Consolidated totals VersaPay Solutions POS (restated) Corporate Consolidated totals Revenue $199 $1,208 - $1,407 $128 $1,283 - $1,411 Cost of sales Gross profit Total comprehensive income (loss) ($1,019) $512 ($769) ($1,276) ($605) $599 ($700) ($706) Adjusted EBITDA ($993) $512 ($678) ($1,159) ($602) $599 ($567) ($570) VersaPay Solutions Six Months Ended June 30, 2015 Six Months Ended June 30, 2014 POS Corporate Consolidated totals VersaPay Solutions POS (restated) Corporate Consolidated totals Revenue $358 $2,291 - $2,649 $226 $2,400 - $2,626 Cost of sales , Gross profit 125 1,433-1, ,569-1,642 Total comprehensive income (loss) ($2,017) $934 ($1,398) ($2,481) ($1,135) $1,094 ($1,489) ($1,530) Adjusted EBITDA ($1,968) $935 ($1,205) ($2,238) ($1,129) $1,094 ($1,039) ($1,074) June 30, 2015 December 31, 2014 Property and equipment $355 $14 $208 $577 $401 $15 $206 $622 Intangible assets Total Assets $8,979 $517 $5,410 $14,906 $7,336 $419 $3,227 $10,982 For the three and six months ended June 30, 2015 and 2014, substantially all of the Company's revenues and assets were in Canada. 14

17 15. Finance income (expense) Finance income (expense) is comprised of: Three months ended June 30, Six months ended June 30, $ $ $ $ Interest income 17,950 2,261 14,166 4,180 Interest expense (1,080) (1,008) (2,161) (1,300) Accreted on the promissory note - (45,783) - (90,555) 16,870 (44,530) 12,005 (87,675) 16. Expenses by nature The following table shows how the Company reclassifies the expenses by function: 1. Salaries and benefits were allocated by function. Three months ended, June 30 Six months ended, June $ $ $ $ General and Administrative: Depreciation and amortization 38,550 21,408 77,024 38,051 General and office expenses 259, , , ,851 Professional and consulting fees 350, , , ,064 Rent and occupancy 73,814 46, , ,822 Salaries and benefits 1 406, , , ,083 Share based payments 113,780 69, , ,917 Total general and administrative expenses 1,243, ,311 2,470,237 2,054,788 Research and Development: Salaries and benefits 1 (research and development combined) 361, , , ,823 Total research and development expenses 361, , , ,823 Sales and Marketing: Marketing and promotion 181,750 96, , ,061 Salaries and benefits 1 366, , , ,940 Total sales and marketing expenses 548, , , ,001 Total Expenses 2,153,541 1,537,889 4,130,765 3,084,612 15

18 17. Subsequent event On July 17, 2015, the Company announced a change to the Company's US strategy and staffing. Based on the Company's recent success with medium to large US suppliers, management has decided to focus its efforts on direct sales in the US marketplace. As the sales organization is managed from Toronto, the US office will close, and Todd Whiton, the President of VersaPay's US subsidiary, VersaPay Payment Technology Solutions Inc., will leave the Company. As a result, the Company is anticipating costs of approximately $280 thousand to close its operations in the US. 16