Revenue Up Nearly 300 Percent; Company Expands North American Customer Base TORONTO, July 6 /CNW/ -- ComnetiX(TM) Inc (TSX: CXI), a leading provider of biometric identification and authentication solutions, announced significant growth in sales for the fiscal third quarter ended May 31, 2005, the second consecutive quarter that revenues have reached record levels. Driven by a rapidly expanding customer base, particularly in New York and other parts of the US, revenue for the third quarter increased by nearly 300 percent compared to the previous year's third quarter, and grew by 168 percent for the first nine months of 2005 compared to the year earlier. Revenue for the quarter also benefited from the Company's fingerprinting services group which contributed CN $447,000 to the growth. The significantly higher revenue pushed the net loss for the period down sharply. Revenue for the third quarter of fiscal 2005 was $3 million with a net loss of $399,800, or $0.03 loss per share, versus revenue for the third quarter ended May 31, 2004, of $756,755 with a net loss of $799,132, or $0.12 loss per share. Excluding a non-cash stock compensation charge of $187,641 the loss for the third quarter of fiscal 2005 was $212,159. For the nine months ended May 31, 2005, revenue was $7.8 million with a net loss of $1.8 million, or $0.15 loss per share, compared to revenues of $2.9 million and a net loss of $1.3 million, or $0.25 loss per share, for the nine months ended May 31, 2004. The year to date non-cash stock compensation charge was $473,774. "Our growth continues to accelerate sharply due to the rapidly expanding biometric technology market in the US and throughout North America," said CEO Jim Scullion. "We believe the services and products we have developed are comprehensive, and they are clearly being well received by law enforcement and other government agencies that are driving the growth in demand. Also, our initiative to extend our sales and marketing efforts outside of the Northeast began to pay off during the third quarter when we received orders from new customers in Canada, California and the Midwest region of the US. "Our relationship with Integrated Biometric Technology, which is closely associated with the Transportation Security Agency (TSA), will be an important source of revenue," Scullion added. "Overall, we are seeing that biometric technology is becoming an increasingly important part of law enforcement, government and corporate security efforts, which is great news for our industry. Our strategy is to expand our sales and marketing efforts and, at the same time, to continue to focus on new products to fulfill the need of the marketplace for comprehensive, integrated software-centric solutions." CFO Tim Zahavich said, "Due to cash management and the private placement that closed in April, our balance sheet continued to strengthen during the quarter, as current assets rose to $12.8 million vs $9.9 million at the end of the last fiscal year. At the same time our current liabilities rose only slightly, with the result of an overall improvement in our current ratio, which stood at 3.7:1 as of the end of the third quarter, vs 3.2:1 at the end of the last fiscal year. Our cash and short-term investments rose to $9.7 million vs $7.4 million at the beginning of the year. It should also be noted that we have no debt." Third Quarter Highlights and Subsequent Events The Company continued to work closely with the State of New York on an initiative to roll out electronic fingerprinting systems statewide. By mid-May the Company had received orders from 24 law enforcement agencies for its proprietary software-centric business automation solutions and accompanying hardware including desktop live scan systems and the IntelliScreen(TM) (Civil Applicant Processing System/CAPS(TM)) and IntelliBook(TM) (Repository for Integrated Criminalistic Imaging/RICI(TM)) software products. An additional nine orders were received in June. The Company received a comprehensive order from the Windsor (Ontario) Police Service for an IntelliBook mug shot/fingerprint live scan system, the Company's open image server (IntelliServ(TM)), the software solution Repository for Integrated Criminalistic Imaging (RICI) customized specifically for Canada's National Police Services. The Company extended its relationship with Integrated Biometric Technology (IBT), which has an extensive contract with the federal Transportation Security Administration, through the US Department of Homeland Security, to screen truck drivers transporting hazardous materials. With IBT, ComnetiX is providing fingerprinting services for potential HazMat drivers in 21 states throughout the US. The Company launched the latest version of its Java-based Intelligent Identification Environment(TM) (IIE). Its features offer increased speed and functionality, with a zero footprint, to make the ComnetiX solutions more compatible with both new and legacy systems. The Company announced its first orders from California and the Midwest, including six orders for the IntelliScreen civil applicant processing solution and desktop live scan system from non-law enforcement organizations in California. Also during the quarter, the Company closed a brokered private placement that it announced on April 22nd. Under the financing, ComnetiX issued 1,926,300 units (each a "Unit") priced at $2.50 per Unit. Each Unit consisted of one common share and one-half of one common share purchase warrant. The proceeds of the offering were designated to fund growth, as working capital and for general corporate purposes. All figures are in Canadian Dollars, unless otherwise noted. About ComnetiX(TM) Inc (www.ComnetiX.com) ComnetiX(TM) Inc provides secure identification and authentication solutions to both the public and private sectors throughout North America. ComnetiX offers multimode biometric identification solutions for use in areas such as applicant screening, financial services, health care, transportation, airlines and airports, casinos and gaming, and energy and utilities. Clients include American Airlines, Lehman Brothers, New York City Health and Hospital Corporation, New York State Division of Criminal Justice Services, Toronto Police Services Board, Boston Police Department and the Royal Canadian Mounted Police. ComnetiX is also Canada's premier applicant fingerprinting services company, facilitating tens of thousands of criminal background checks each year through its chain of ten offices across Canada. In addition, ComnetiX has recently launched its first applicant fingerprinting services office in the US, located in Sacramento, California. Statements made in this news release that relate to future plans, events or performances are forward-looking statements. Any statement in this release containing words such as "believes," "plans," "expects" or "intends" and other statements that are not historical facts are forward-looking, and these statements involve risks and uncertainties and are based on current expectations. Consequently, actual results could differ materially from the expectations expressed in these forward-looking statements. For further information Investor Relations: Jesse Deal Tim Zahavich 1-877-691-8087 (toll-free) ComnetiX Inc [email protected] 905-829-9988 ext 206 [email protected] ComnetiX Inc Interim Consolidated Balance Sheet (in 000s, unaudited) May 31 August 31 2005 2004 ASSETS CURRENT Cash 808,394 907,984 Short term investments 8,904,342 6,529,480 Accounts receivable 2,648,199 1,909,873 Inventory 149,374 432,564 Employee loan 4,732 36,494 Prepaid expenses 286,595 132,392 12,801,636 9,948,787 CAPITAL ASSETS 492,723 380,452 INTANGIBLE ASSET 59,150 -- GOODWILL 1,454,563 -- 14,808,072 10,329,239 LIABILITIES CURRENT Accounts payable and accrued liabilities 1,841,105 2,109,955 Deferred revenue 1,634,927 1,038,238 Current portion of capital lease obligation 421 9,594 3,476,453 3,157,787 CAPITAL LEASE OBLIGATION -- 500 3,476,453 3,158,287 SHAREHOLDERS EQUITY SHARE CAPITAL 17,089,029 12,206,814 CONVERTIBLE DEBENTURE 1,688,618 1,688,618 WARRANTS 933,132 207,538 CONTRIBUTED SURPLUS 1,869,574 1,501,984 DEFICIT (10,248,734) (8,434,002) 11,331,619 7,170,952 14,808,072 10,329,239 ComnetiX Inc Interim Consolidated Statements of Operations and Deficit (in 000s, unaudited) Three Three Nine Nine Months Months Months Months Ended Ended Ended Ended May 31, May 31, May 31, May 31, 2005 2004 2005 2004 SALES $3,001,984 $756,755 $7,809,115 $2,913,430 EXPENSES Cost of hardware sold 649,841 98,466 2,253,082 387,552 Wages 1,332,617 812,843 3,928,824 1,893,898 Sales, general and administrative 1,216,374 531,809 2,909,140 1,589,085 Interest 584 7,220 4,523 168,713 Amortization of capital assets 34,281 19,206 110,944 52,623 Amortization of intangible assets 6,500 -- 13,000 -- Amortization of deferred financing costs -- -- -- 77,539 Stock compensation expense 187,641 86,343 473,774 86,343 3,427,838 1,555,887 9,693,287 4,255,753 LOSS FROM OPERATIONS (425,854) (799,132) (1,884,172) (1,342,323) OTHER INCOME 26,054 -- 69,440 -- LOSS FOR THE PERIOD (399,800) (799,132) (1,814,732) (1,342,323) DEFICIT, BEGINNING OF THE PERIOD (9,848,934) (6,587,403) (8,434,002) (6,044,212) DEFICIT, END OF YEAR TO DATE (10,248,734) (7,386,535) (10,248,734) (7,386,535) NET LOSS PER COMMON SHARE, BASIC $(0.03) $(0.12) $(0.15) $(0.25) NET LOSS PER COMMON SHARE, DILUTED $(0.03) $(0.12) $(0.15) $(0.25) WEIGHTED AVERAGE COMMON SHARES OUTSTANDING (000S) 12,288 6,761 11,739 5,280
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