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Sirit Reports Second Quarter 2009 Financial Results

^{Published on 2009-08-11 05:36:06, Last Modified on 2009-08-11 05:36:23 - Market Wire}
 

 TORONTO, Aug. 11 /CNW/ - Sirit Inc. ("Sirit") (TSX: SI), a leading provider of radio frequency identification ("RFID") technology, reports its financial results for the second quarter ended June 30, 2009. All amounts are stated in Canadian Dollars unless otherwise noted. Q2 2009 Financial Results Sirit continues to withstand the current weak economic environment achieving consistent revenue levels for the third consecutive quarter in comparison to prior year quarterly results. For the second quarter of 2009, the Company achieved revenue of $5.2 million (US$4.5 million) representing a 9% increase compared to $4.8 million (US$4.7 million) reported for Q2 2008. Year-to-date, revenue has reached $10.8 million compared to $9.1 million in the first half of 2008, an improvement of almost 19%. Revenue growth has been distributed across all application areas when compared to the prior year. In particular, Sirit has experienced strong initial demand from the new Golden Ears Bridge in Vancouver, Canada which opened during 2009 as well as continued sales into Brazil. Ongoing efforts to manage cash spend are a top priority at Sirit. To date, these efforts have been effective as the Company has utilized just over $0.2 million of cash to fund operations during Q2 2009. For the first half of 2009, Sirit has managed its cash spending to approximately $0.4 million compared to $4.1 million in the first half of 2008 which included the acquisition of RSI ID Technologies, Inc. Automatic Vehicle identification ("AVI") related applications contributed $3.8 million or 73% of Q2 2009 revenue with the remaining $1.4 million attributable to Radio Frequency Solutions ("RFS") related applications. This is compared to revenue of $3.3 million and $1.5 million for AVI and RFS respectively in Q2 2008, with AVI representing 70% of total quarterly revenue. While RFS applications revenue has remained consistent with prior year, the growth in AVI during the second quarter relates to the new customers noted above. Timing of future revenue growth in either RFS or AVI will depend on new and large customer orders which have been delayed due to continued weak global economic conditions. "As a technology company, it remains important for Sirit to ensure its future success through current development activities. This investment in the future continues to be possible as Sirit has effectively managed its cash resources," commented Anastasia Chodarcewicz, Chief Financial Officer, Sirit. "While net losses have been reported, these losses are primarily attributable to non-cash items such as amortization and stock compensation expenses. Even in this tough economic environment, Sirit is operating at a sustainable level and will continue to do so as we pursue growth from new opportunities," added Ms. Chodarcewicz. Gross profit for the second quarter of 2009 is reported at 33.5% compared to 30.0% reported in the second quarter of 2008. For the first half of 2009, gross profit is 34.2% up from the 32.9% in the first half of 2008. The improvement in margin experienced to date results from efficiencies achieved in operations as well as efforts to improve the manufacturing costs of key products. Cash operating expenses, consisting of selling, general and administrative as well as development costs amounted to $2.1 million in Q2 2009 compared to $2.9 million in Q2 2008. The reduction in expenses has enabled almost cash neutral levels on a quarterly basis. The remaining expenses including stock compensation, amortization and foreign exchange are all non-cash items, amounting to $0.5 million during Q2 2009 and $0.7 million in Q2 2008. The Company intends to maintain lower operating expense levels until operations are cash flow positive. Net loss reported in the second quarter of 2009 was $0.9 million compared to $2.2 million in the second quarter of 2008 and consistent with the first quarter of 2009. Net loss for the first half of 2009 is reported at $1.9 million compared to $3.5 million in the first half of 2008. The Company's cash balance at June 30, 2009 was $2.9 million compared to $3.3 million at the beginning of 2009. Q2 2009 Corporate Highlights The following highlights some of Sirit's activities during the second quarter of 2009: - As a result of ongoing development activities, Sirit announced the expansion of its RFID reader and tag offerings. The new IDentity 4100 fixed position reader and the IDentity 3100 desktop reader expand form factors and introduce price differentiation to the Sirit reader line. In addition, new HF and UHF inlays enhance the Company's portfolio of specialized tag designs. - Sirit announced its partnership with eriginate Corporation, a subsidiary of HerdStar(TM), LLC and a global integrator of track, trace and monitoring solutions to the livestock food industry. eriginate will utilize Sirit's UHF RFID tag and reader technology to support comprehensive solutions for the livestock food market which traditionally has utilized low frequency technology. - In early June, Sirit replaced and increased its existing borrowing facilities by moving its line of credit facility to Silicon Valley Bank, a specialist technology bank in the US. The Company now has a maximum borrowing facility of US$2.5 million, up from $1.5 million, supported by accounts receivable and inventory balances. - Also in June, Sirit along with its partner, Axiompass, a leading integrator and supplier of tolling equipment and RFID systems across Mexico, and Caminos y Puentes Federales de Ingresos y Servicios Conexos ("CAPUFE"), Mexico's Federal Tolling Authority, announced they had successfully tested Sirit's IDentity 5100 for interoperability between legacy and new tolling systems. This success was immediately followed by the implementation of the first electronic vehicle registration ("EVR") monitoring system in Mexico utilizing Sirit's stationary automatic vehicle identification ("AVI") monitoring technology. The new EVR system tracks vehicles as they pass through the Alpuyeca toll plaza with mobile AVI monitoring technology utilized in Cuernavaca, both in the State of Morelos. The system was inaugurated by Mexican President Felipe Calderin. "As the global economy stabilizes, Sirit has maintained its position enabling the Company to capitalize on future market momentum," said Norbert Dawalibi, President and CEO, Sirit. "We are able to fund our development and regular operations at a sustainable level, despite some of the economic weaknesses we have been experiencing in our traditional markets. At the same time, we have worked diligently and seen growth with new customers. Progress has been achieved in places such as Brazil and Mexico and we are working at converting these opportunities into new revenue channels," added Mr. Dawalibi. About Sirit Inc. Sirit Inc. (TSX: SI) is a leading provider of Radio Frequency Identification (RFID) technology worldwide. Harnessing the power of Sirit's enabling-RFID technology, customers are able to more rapidly bring high quality RFID solutions to the market with reduced initial engineering costs. Sirit's products are built on more than 15 years of RF domain expertise addressing multiple frequencies (LF/HF/UHF), multiple protocols and are compliant with global standards. Sirit's broad portfolio of products and capabilities can be customized to address new and traditional RFID market applications including Supply Chain & Logistics, Cashless Payment (including Electronic Tolling), Access Control, Automatic Vehicle Identification, Near Field Communications, Inventory Control & Management, Asset Tracking and Product Authentication. For more information, visit [ www.sirit.com ]. Cautionary Note Regarding Forward-Looking Statements Safe Harbor Statement under the United States Private Securities Litigation Reform Act of 1995: Except for the statements of historical fact contained herein, the information presented constitutes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and Canadian provincial securities legislation. These forward-looking statements relate to, among other things, Sirit's objectives, goals, strategies, intentions, plans, beliefs, expectations and estimates, and can generally be identified by the use of words such as "may", "will", "could", "should", "would", "suspect", "outlook", "expect", "intend", "estimate", "anticipate", "believe", "plan", "forecast", "objective" and "continue" (or the negative thereof) and words and expressions of similar import, and may include statements concerning possible or assumed future results, financial outlook and/or future-oriented financial information. Although Sirit believes that the expectations reflected in such forward-looking statements are reasonable, such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievement of Sirit to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements. Actual results may differ materially from those indicated by these forward-looking statements as a result of risks and uncertainties impacting Sirit's business. Important factors that could cause actual results to differ materially from expectations include but are not limited to: Sirit's ability to achieve commercialization and/or commercial acceptance of its RFID technology; the evolution of, and adoption rate in, the RFID market; Sirit's inability to expand sales both within and outside its traditional markets; changes in Sirit's strategic relationships; Sirit's dependence on resellers, distributors and significant customers; the utility of research and development expenditures undertaken by Sirit; product defects; increased levels of competition; changes in laws and regulations; foreign exchange fluctuations; and Sirit's overall liquidity and capital resources. These and other important risks are discussed in further detail in the section entitled "Risks Factors" in Sirit's Annual Information Form dated March 13, 2009 and in Sirit's management's discussion and analysis found in its 2008 annual report as filed with the securities regulatory authorities in Canada via SEDAR. Although Sirit has attempted to identify important factors that could cause actual results to differ materially, there may be other factors that cause results not to be as anticipated, estimated or intended. Unless otherwise required by law, Sirit does not undertake any obligation to update any forward-looking statements contained in this news release as a result of new information, further events or otherwise. This cautionary statement expressly qualifies the forward-looking information in this news release. "Sirit", the Sirit Design and "vision beyond sight" are all trademarks of Sirit Inc. All other names of actual companies and products mentioned herein may be the trademarks of their respective owners. Sirit Inc. Interim Consolidated Balance Sheets (expressed in thousands of Canadian dollars) Unaudited As at As at June 30 December 2009 31 2008 --------- --------- Assets Current Assets Cash and cash equivalents $ 2,945 $ 3,325 Accounts receivable 3,435 4,303 Inventory 3,184 3,470 Prepaids and deposits 394 287 --------- --------- 9,958 11,385 Property and equipment 2,146 2,599 Intangible assets 6,653 7,514 Goodwill 3,905 3,905 --------- --------- $ 22,662 $ 25,403 --------- --------- --------- --------- Liabilities Current Liabilities Bank indebtedness $ 1,467 $ 1,321 Accounts payable and accrued liabilities 4,058 4,716 Deferred revenue 212 339 Warranty obligations 83 108 Capital lease obligations 430 454 --------- --------- 6,250 6,938 Long-term deferred revenue 357 442 Long-term warranty obligations 202 150 Long-term capital lease obligations 627 934 Related party debt 1,041 1,100 --------- --------- 8,477 9,564 --------- --------- Shareholders' Equity Share capital 51,252 51,252 Contributed surplus 3,330 3,109 Deficit (40,397) (38,522) --------- --------- 14,185 15,839 --------- --------- $ 22,662 $ 25,403 --------- --------- --------- --------- Sirit Inc. Interim Consolidated Statements of Operations, Comprehensive Loss and Deficit (expressed in thousands of Canadian dollars except per share amounts) Unaudited Three Months Ended Six Months Ended June 30 June 30 2009 2008 2009 2008 --------- --------- --------- --------- Revenue $ 5,205 $ 4,752 $ 10,763 $ 9,058 Cost of sales 3,463 3,328 7,078 6,077 --------- --------- --------- --------- Gross profit 1,742 1,424 3,685 2,981 --------- --------- --------- --------- Expenses Selling, general and administrative 1,606 2,122 3,420 4,074 Stock-based compensation 118 112 221 229 Development 502 754 1,033 1,677 Amortization 530 541 1,077 713 Foreign exchange (gain)/loss (185) 84 (312) (165) --------- --------- --------- --------- 2,571 3,613 5,439 6,528 --------- --------- --------- --------- Operating loss (829) (2,189) (1,754) (3,547) Interest (expense)/income, net (60) (17) (121) 55 --------- --------- --------- --------- Net loss and comprehensive loss for the period $ (889) $ (2,206) $ (1,875) $ (3,492) Deficit, beginning of period (39,508) (36,479) (38,522) (35,193) --------- --------- --------- --------- Deficit, end of period $(40,397) $(38,685) $(40,397) $(38,685) --------- --------- --------- --------- --------- --------- --------- --------- Basic and diluted loss per share $ - $ (0.01) $ (0.01) $ (0.02) --------- --------- --------- --------- --------- --------- --------- --------- Basic and diluted weighted average number of common shares ('000s) 161,137 155,731 161,137 150,689 Sirit Inc. Interim Consolidated Statements of Cash Flows (expressed in thousands of Canadian dollars) Unaudited Three Months Ended Six Months Ended June 30 June 30 2009 2008 2009 2008 --------- --------- --------- --------- Cash provided by/(used in): Operating Activities Net loss for the period $ (889) $ (2,206) $ (1,875) $ (3,492) Items not involving cash and cash equivalents 800 740 1,570 1,029 Foreign exchange (gain)/loss (185) 84 (312) (165) --------- --------- --------- --------- (274) (1,382) (617) (2,628) Net change in non-cash working capital items 107 (1,747) 114 (2,835) --------- --------- --------- --------- (167) (3,129) (503) (5,463) --------- --------- --------- --------- Investing Activities Additions to property and equipment (25) (134) (38) (162) Acquisition of RSI ID Technologies, Inc., net - (205) - (205) --------- --------- --------- --------- (25) (339) (38) (367) --------- --------- --------- --------- Financing Activities Increase in bank indebtedness 158 1,441 146 1,441 Issuance of common shares upon exercise of stock options - 15 - 15 Decrease in related party debt (95) - (59) - (Decrease)/increase in capital lease obligations (264) 11 (332) 11 --------- --------- --------- --------- (201) 1,467 (245) 1,467 --------- --------- --------- --------- Exchange rate impact on cash and cash equivalents 156 (89) 406 243 --------- --------- --------- --------- Decrease in cash and cash equivalents (237) (2,090) (380) (4,120) Cash and cash equivalents, beginning of period 3,182 6,825 3,325 8,855 --------- --------- --------- --------- Cash and cash equivalents, end of period $ 2,945 $ 4,735 $ 2,945 $ 4,735 --------- --------- --------- --------- --------- --------- --------- --------- Cash and cash equivalents consist of: Cash $ 1,768 $ 777 $ 1,768 $ 777 Short-term commercial paper 1,177 3,958 1,177 3,958 --------- --------- --------- --------- $ 2,945 $ 4,735 $ 2,945 $ 4,735 --------- --------- --------- --------- --------- --------- --------- --------- 

For further information: Anastasia Chodarcewicz, Sirit Inc., (416) 367-1897 x227, [ achodarcewicz@sirit.com ]