Record volumes of EPC UHF handheld modules shipped during first half
TORONTO, Aug. 11 /CNW/ - Sirit Inc. (TSX: SI), a leading provider of
radio frequency identification (RFID) technology, today reported its financial
results for the second quarter ended June 30, 2005. All amounts are stated in
Canadian Dollars unless otherwise noted.
Q2 2005 Financial Highlights
----------------------------
- Total revenue of $4.6 million (net of one-time adjustment of
$0.4 million) in Q2 2005 increased from $4.4 million in Q1 2005
- For the second quarter, sales of modules supporting RF Solutions
(RFS), previously referred to as Supply Chain Management group (SCM),
applications contributed $1.3 million or 28% of revenue, the highest
quarterly total in Company history
- RFS revenue included a single order of over 1,000 'INfinity 200'
modules for deployment into a large US retailer for an item level
inventory management application
- Sales of products for Automatic Vehicle Identification applications
(AVI) contributed $3.3 million or 72% of quarterly revenue; delays in
integration projects shift revenue earning potential into 2006
- Net loss for Q2 2005 was $2.6 million including one-time adjustments
of $1.2 million: this is compared to a net loss of $1.0 million in the
first quarter of 2005
Three and Six Months Ended June 30, 2005
----------------------------------------
Revenue for the six months ended June 30, 2005 totaled $9.1 million, a
13.3% or $1.4 million decrease from $10.5 million in the first half of 2004.
The decline is due to a negative impact from foreign exchange fluctuations of
$0.7 million, a decline in AVI revenue (before foreign exchange impact) by
$1.5 million offset by an increase in RFS revenue (before foreign exchange
impact) of $0.8 million.
Revenue from sales of our RFS related products was $1.3 million during
the quarter, the Company's highest quarterly RFS revenue to date.
Year-to-date, RFS revenue totaled $2.4 million. The Company supports the view
that the overall RFID market in the supply chain remains in the very early
stages of implementation. It is, therefore, impossible to reasonably estimate
future deployment wins and associated revenue potential.
Revenue from sales of our AVI related products was $3.3 million for the
second quarter, including a one-time adjustment of $0.4 million to cover a
potential liability related to old orders, and $6.7 million year-to-date.
Sirit continues to supply tags and readers to all of its AVI customers and
those customers who built inventory levels in 2004 have not required the same
volumes in the current year. The Company continues to see a solid pipeline for
integration opportunities, but delays in this pipeline have reduced the
earnings potential for the current year. As a result, for the remainder of the
year, revenue from AVI applications is expected to be below prior year level.
Gross margin for the second quarter of 2005 was 32.8%. This includes the
$0.4 million one-time adjustment to cover a potential liability regarding old
orders. Without this adjustment, the margin for the second quarter would have
been 37.8%, in-line with margins for the first quarter of 2005. Year-to-date
gross margin would have been 37.6%.
Total operating expenses during the second quarter were $4.2 million
compared to $2.7 million in the first quarter. The increase is primarily
attributable to $0.8 million of non-recurring salary costs, as well as
increased development, sales and marketing costs. The resultant net loss was
$2.6 million in the second quarter compared to $1.0 million in the first
quarter.
The Company utilized $1.5 million to fund ongoing operations and
development efforts ending the quarter with $7.9 million in cash compared to
$9.4 million at the beginning of the quarter. The working capital balance at
June 30, 2005 remains solid at $8.9 million with the change from March 31,
2005 primarily attributable to the use of cash during the quarter. The Company
remains financially secure and has sufficient resources to fund operations.
"Sales of Sirit's embedded 'INfinity' series of RFID modules demonstrated
strong growth in the quarter led by the supply chain win in which Sirit's
technology outperformed the incumbant's offering," noted Anastasia
Chodarcewicz, Chief Financial Officer, Sirit Inc. "Our overall financial
position remains stable as we experience delays in revenue generating
opportunities with some of our AVI related products and services. We are
confident these delays are temporary and will not have a long-term impact on
the future of our AVI applications."
"We are excited by the Company's largest shipment to date of its EPC(TM)-
compliant UHF modules supporting a retail supply chain application. Sirit has
once again demonstrated its ability to take a product from concept stage to
successful implementation," said Norbert Dawalibi, President and CEO, Sirit
Inc. "Sirit continues to make significant strides in the development of its
next generation of products including UHF modules which will meet/read the
EPC Gen2 standard. We remain encouraged by the overall potential in our AVI
and RFS applications as we continue to participate in new proposals,
evaluations, tests and pilots."
Conference Call
Sirit will host a conference call to discuss the quarterly results on
Thursday, August 11, 2005 at 10:00 am EDT. The conference call will be
accessible at www.sirit.com.
About Sirit Inc.
Founded in 1993, Sirit Inc. (TSX: SI) is a leading provider of Radio
Frequency Identification (RFID) solutions to customers worldwide. The Company
designs, manufactures, integrates and sells RFID solutions with an emphasis in
several vertical markets including Supply Chain Management, Product
Authentication, Asset Tracking, Security and Access Control and Automatic
Vehicle Identification. Building upon years of success deploying traditional
RFID products, Sirit continues to capitalize on the growing demand for next
generation RFID solutions. For more information on Sirit visit www.sirit.com
or call 1-800-498-8760.
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. 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 which are discussed in the section
entitled "Description of the Business - Risks Factors" in Sirit's Initial
Annual Information Form dated March 22, 2005 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.
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Sirit Inc.
Interim Consolidated Balance Sheets
(expressed in thousands of Canadian dollars)
Unaudited
As at As at
June 30 December 31
2005 2004
------------ -----------
Assets
Current Assets
Cash and cash equivalents $ 7,924 $ 10,021
Accounts receivable 2,974 3,319
Inventory 1,551 1,296
Prepaids and deposits 436 716
------------ -----------
12,885 15,352
Long-term investments 5,191 5,191
Property, plant and equipment, net 880 896
Intangible asset, net 472 573
Deferred development costs, net 91 123
Goodwill 2,829 2,829
------------ -----------
$ 22,348 $ 24,964
------------ -----------
------------ -----------
Liabilities
Current Liabilities
Accounts payable and accrued liabilities $ 2,948 $ 2,596
Deferred revenue 815 913
Warranty obligations 236 310
------------ -----------
3,999 3,819
Shareholders' equity
Share capital 35,107 34,763
Contributed surplus 920 400
Deficit (17,678) (14,018)
------------ -----------
18,349 21,145
------------ -----------
$ 22,348 $ 24,964
------------ -----------
------------ -----------
Sirit Inc.
Interim Consolidated Statements of Operations
(expressed in thousands of Canadian dollars except per share amounts)
Unaudited
Three Months Ended Six Months Ended
June 30 June 30
2005 2004 2005 2004
--------------------- ---------------------
Revenue $ 4,632 $ 5,525 $ 9,058 $ 10,462
Cost of Sales 3,113 3,249 5,879 6,142
--------------------- ---------------------
Gross profit 1,519 2,276 3,179 4,320
Expenses
Selling, general and
administrative 3,134 1,564 5,117 3,247
Development 937 598 1,582 799
Amortization 152 128 300 259
Foreign exchange (46) (80) (84) (86)
--------------------- ---------------------
4,177 2,210 6,915 4,219
--------------------- ---------------------
Operating income/(loss) (2,658) 66 (3,736) 101
Gain on sale of long-term
investment - 1,789 - 2,019
Other income - - - 294
Interest income, net 39 34 76 65
--------------------- ---------------------
Net income/(loss) for the
period $ (2,619) $ 1,889 $ (3,660) $ 2,479
--------------------- ---------------------
--------------------- ---------------------
Deficit, beginning of
period (15,059) (14,352) (14,018) (14,942)
--------------------- ---------------------
Deficit, end of period $(17,678) $(12,463) $(17,678) $(12,463)
--------------------- ---------------------
--------------------- ---------------------
Basic and diluted income/
(loss) per share $ (0.03) $ 0.02 $ (0.04) $ 0.03
--------------------- ---------------------
--------------------- ---------------------
Sirit Inc.
Interim Consolidated Statements of Cash Flows
(expressed in thousands of Canadian dollars except per share amounts)
Unaudited
Three Months Ended Six Months Ended
June 30 June 30
2005 2004 2005 2004
--------------------- ---------------------
Cash provided by/(used in):
Operating Activities
Income/(loss) from
continuing operations $ (2,619) $ 1,889 $ (3,660) $ 2,479
Items not involving cash
and cash equivalents 576 (1,592) 883 (1,647)
--------------------- ---------------------
(2,043) 297 (2,777) 832
Net change in non-cash
working capital items 446 (178) 550 3
--------------------- ---------------------
(1,597) 119 (2,227) 835
--------------------- ---------------------
Investing Activities
Additions to property, plant
and equipment (100) (151) (165) (174)
Proceeds on sale of long-term
investment - 2,701 - 3,036
Investment in Horizon Wimba,
Inc. - (36) - (36)
--------------------- ---------------------
(100) 2,514 (165) 2,826
--------------------- ---------------------
Financing Activities
Issuance of common shares,
net of associated expenses 188 3 281 5,015
--------------------- ---------------------
188 3 281 5,015
--------------------- ---------------------
Exchange rate impact on cash
and cash equivalents 14 10 14 3
--------------------- ---------------------
Increase/(decrease) in cash
and cash equivalents (1,495) 2,646 (2,097) 8,679
Cash and cash equivalents,
beginning of period 9,419 8,637 10,021 2,604
--------------------- ---------------------
Cash and cash equivalents,
end of period $ 7,924 $ 11,283 $ 7,924 $ 11,283
--------------------- ---------------------
--------------------- ---------------------
Cash and cash equivalents
consist of:
Cash and deposit accounts
with banks $ 1,238 $ 11,283 $ 1,238 $ 11,283
Short-term commercial paper 6,686 - 6,686 -
--------------------- ---------------------
$ 7,924 $ 11,283 $ 7,924 $ 11,283
--------------------- ---------------------
--------------------- ---------------------
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