Versar, Inc. Announces Second Quarter Financial Results for Fiscal Year 2010

Versar, Inc. (NYSE Amex: VSR) today announced second quarter financial results for fiscal year 2010 for the period ending December 25, 2009. Gross revenue for the second quarter of fiscal year 2009 was $24,387,000 a decrease of $3,580,000 (13%) from the second quarter of fiscal year 2009. The decrease was due to reduced work in support of Iraq reconstruction efforts, delays in Federal funding, and a decline in spending by State and Municipal agencies. The Company reported a loss of $300,000, or ($0.03) per share compared to a profit of $565,000, or $0.06 per share, in the second quarter of fiscal year 2009. The decrease in net income is due to reduced profit margins as our Iraq business transitions into more traditional program management and lower revenue in our domestic business as a result of the economic downturn.

Gross revenue for the first six months of fiscal year 2010 was $49,101,000, a decrease of $3,864,000 (7%) compared to $52,965,000 in the first six months of the last fiscal year. The Company reported a loss of $63,000, or ($.01) per share, for the first six months of fiscal year 2010 compared to net income of $1,089,000, or $0.12 per share, during the same period in 2009. The decrease in net income was due to the same factors described above.

“Management does not anticipate any economic improvement in the near future and, as a result, has taken significant steps to reduce our cost structure by over $3.3 million on an annualized basis,” said Dr. Ted Prociv, President and CEO of Versar. “We have implemented corrective actions and are committed to return to competitive margins. In addition, we also expect revenue and earnings growth from our merger and acquisition activities and our new business initiatives in Telecom, Munitions Management and Green Energy which we expect to positively impact the remainder of fiscal year 2010.”

VERSAR, INC., headquartered in Springfield, VA, is a publicly held international professional services firm supporting government and industry in national defense/homeland defense programs, environmental health and safety and infrastructure revitalization. VERSAR operates a number of web sites, including the corporate Web sites, http://www.versar.com, http://www.homelanddefense.com, http://www.geomet.com; http://www.viap.com; http://www.dtaps.com; and www.ppsgb.com.

This press release contains forward-looking information. The forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be significantly impacted by certain risks and uncertainties described herein and in Versar’s Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended June 26, 2009. The forward-looking statements are made as of the date hereof and Versar does not undertake to update its forward-looking statements.

VERSAR, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited – in thousands, except per share amounts)
		For the Three-Month								For the Six-Month
		Periods Ended								Periods Ended
		December 25, 2009				December 26, 2008				December 25, 2009				December 26, 2008
GROSS REVENUE		$	24,387			$	27,967			$	49,101			$	52,965
Purchased services and materials, at cost			13,350				15,651				26,120				29,200
Direct costs of services and overhead			9,309				9,111				18,900				17,382
GROSS PROFIT			1,728				3,205				4,081				6,383
Selling, general and administrative expenses			2,238				2,198				4,213				4,234
OPERATING (LOSS) INCOME			(510	)			1,007				(132	)			2,149
OTHER EXPENSE
(Gain) loss on marketable securities			---				(7	)			---				346
Interest (income)			(33	)			---				(65	)			(2	)
Interest expense			9				74				22				21
(LOSS) INCOME BEFORE INCOME TAXES			(486	)			940				(89	)			1,784
Income tax (benefit) expense			(186	)			375				(26	)			695
NET (LOSS) INCOME		$	(300	)		$	565			$	(63	)		$	1,089
NET (LOSS) INCOME PER SHARE – BASIC		$	(0.03	)		$	0.06			$	(0.01	)		$	0.12
NET (LOSS) INCOME PER SHARE – DILUTED		$	(0.03	)		$	0.06			$	(0.01	)		$	0.12
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING – BASIC			9,121				9,068				9,065				9,064
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING – DILUTED			9,121				9,112				9,065				9,134