TORONTO, March 21 /CNW/ - Sirit Inc. (TSX: SI), a leading provider of
radio frequency identification ("RFID") technology, today reported its
financial results for the fourth quarter and year ended December 31, 2005. All
amounts are stated in Canadian Dollars unless otherwise noted.
2005 Financial Highlights
-------------------------
- Total revenue for the year was $16.4 million bolstered by Q4 2005
revenue of $4.3 million, up 36.9% from Q3 2005 revenue
- Radio Frequency Solutions ("RFS") revenue grew by 8.6% in 2005
reaching $3.8 million compared to $3.5 million in 2004
- Automatic Vehicle Identification ("AVI") revenue comprised 77.0% of
total revenue compared to 83.1% in 2004
- Gross margin of 35.0% for 2005 (42.6% in 2004) reflects the impact of
fixed overhead costs on a lower revenue base
- During 2005 the Company invested $3.2 million ($2.2 million in 2004)
into primarily RFS development efforts to support its growing product
portfolio including the INfinity 210 and INfinity 196
- Operating loss for the year was $6.8 million compared to a
$1.5 million loss in 2004 reflecting lower gross profit, non-recurring
costs of $1.0 million, increased stock compensation costs and
development expenditures during 2005
- Cash utilized during the year was $3.9 million with a balance of
$6.1 million at December 31, 2005
Fourth Quarter Ended December 31, 2005
For the fourth quarter ended December 31, 2005, Sirit reported revenue of
$4.3 million, representing a 36.9% increase from Q3 2005. The growth during
the last quarter of 2005 when compared to the third quarter represents a
return to expected toll tag supply levels. During Q4 2004 the Company won a
Transportation Management System project in the state of Florida which was a
non-recurring revenue win. By excluding the revenue generated from this win
for comparison purposes, 2005 fourth quarter revenue was slightly higher than
2004 fourth quarter revenue.
Gross margin for the quarter was 35.8% up from 33.4% in Q3 2005 and down
from 44.5% in Q4 2004.
Total expenses in the fourth quarter were $2.7 million, down from
$2.9 million in Q3 2005 and $3.1 million in Q4 2004. The third quarter results
benefited from a reduction of year end bonuses. As a result, on a comparative
basis the fourth quarter operating results were approximately $0.3 million
lower than the third quarter.
The Company recorded a fourth quarter operating loss of $1.2 million
compared to an operating loss of $1.0 million in the same period of the
previous year.
As of December 31, 2005, cash and cash equivalents totaled $6.1 million
compared to the cash position of approximately $7.0 million at September 30,
2005 and $10.0 million at December 31, 2004. The Company's working capital
position was $6.5 million at December 31, 2005 compared to $11.5 million at
December 31, 2004.
"We have started to see revenue growth return in the last quarter of 2005
and expect this to continue throughout 2006 as the Company introduces new
products and focuses on medium and long-term revenue generating
opportunities," said Anastasia Chodarcewicz, Chief Financial Officer and
Secretary, Sirit Inc. "We are confident that the non-recurring items which
impacted AVI are behind us and we are excited to enter 2006 continuing the
growth momentum from the fourth quarter of 2005."
Twelve Months Ended December 31, 2005
Total revenue for the twelve months ended December 31, 2005 totaled
$16.4 million, compared to $20.5 million in 2004, a 19.9% decrease. As sales
are primarily in US Dollars, the strength of the Canadian Dollar relative to
the US Dollar negatively impacted reported revenue by $1.0 million as the
average value of the US Dollar declined approximately 7% in relation to the
Canadian Dollar in 2005.
Revenue from the AVI vertical was $12.6 million in 2005 down from
$17.0 million in 2004. The Company has not lost a single toll customer but was
subject to several non-recurring items each with a negative impact on top line
revenue. These include three toll agencies consolidating to one utilizing
excess inventory during 2005, a large promotion for tags in 2004 which shifted
sales into 2004 from 2005 and the impact of foreign exchange.
RFS revenue increased by 8.6% to $3.8 million in 2005 compared to
$3.5 million in 2004. The growth is attributed to increased sales of handheld
reader modules, the introduction of the Infinity 210 UHF reader module and
pilots associated with new and existing customers.
Gross profit for 2005 was 35.0% down from 42.6% in 2004. The decline in
gross profit is due to the lower overall revenue base as fixed overhead costs
remained constant as well as the mix of AVI customers.
Operating expenses of $12.6 million are $2.3 million higher than 2004
operating expenses of $10.3 million. Increased resources directed towards
engineering and development efforts, non-recurring items and increased
non-cash, stock compensation costs contributed to the higher expenditures
during the year. The Company will continue to invest in people and development
activities as these are critical to the future growth of the operations.
For 2005, the Company reported an operating loss of $6.8 million compared
with an operating loss of $1.5 million in 2004. Net loss for the year was
$8.7 million or a loss of $0.09 per share. Total shares outstanding at
December 31, 2005 are approximately 93.3 million compared to 92.1 million at
December 31, 2004.
Cash utilized in 2005 was $3.9 million with a cash balance of
$6.1 million as at December 31, 2005. This available cash in combination with
the anticipated sale of the non-core investments and revenue growth is
expected to provide sufficient resources to fund ongoing operations throughout
2006 and into 2007.
"We are entering fiscal 2006 with new products and an intense focus on
operational and financial performance," said Norbert Dawalibi, President and
Chief Executive Officer, Sirit Inc. "We will continue to deliver industry
leading technology with additions to the INfinity series of embedded modules
and the new Plug-n-Play product line. We are aggressively implementing
concrete programs in the areas of delivery performance, product cost
improvements and operational efficiencies. Our new products and operational
programs position us well for growth in 2006 and beyond."
Subsequent Event
Subsequent to year end, on February 27, 2006 the Company announced the
acquisition of TradeWind Technologies LLC, a Tennessee based High Frequency
("HF") RFID development Company. TradeWind specializes in the development of
HF products and brings to Sirit an immediate complementary suite of HF plug
and play readers that will expand the Company's closed loop opportunities.
Conference Call & Webcast
Sirit will host a conference call to discuss the quarterly and year end
results on Tuesday, March 21, 2006 at 10:00 am EST. The conference call will
be Webcast over the Internet and will be accessible at www.sirit.com.
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 12 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 are easily customized to address new and traditional RFID market
applications including Supply Chain & Logistics, Cashless Payment, Access
Control, Automatic Vehicle Identification, 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. 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 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.
Consolidated Balance Sheets
(expressed in thousands of Canadian dollars)
As at As at
December 31 December 31
2005 2004
----------- -----------
Assets
Current Assets
Cash and cash equivalents $ 6,079 $ 10,021
Accounts receivable 2,941 3,319
Inventory 2,020 1,296
Prepaids and deposits 108 716
----------- -----------
11,148 15,352
Long-term investments 3,182 5,191
Property and equipment, net 838 896
Intangible asset, net 370 573
Deferred development costs, net 59 123
Goodwill 2,829 2,829
----------- -----------
$ 18,426 $ 24,964
----------- -----------
----------- -----------
Liabilities
Current Liabilities
Accounts payable and accrued liabilities $ 3,526 $ 2,596
Deferred revenue 815 913
Warranty obligations 290 310
----------- -----------
4,631 3,819
Shareholders' Equity
Share capital 35,195 34,763
Contributed surplus 1,316 400
Deficit (22,716) (14,018)
----------- -----------
13,795 21,145
----------- -----------
$ 18,426 $ 24,964
----------- -----------
----------- -----------
Sirit Inc.
Consolidated Statements of Operations
(expressed in thousands of Canadian dollars except per share amounts)
Three months ended Twelve months ended
December 31 December 31
2005 2004 2005 2004
------------------------ ------------------------
Revenue $ 4,254 $ 4,877 $ 16,419 $ 20,500
Cost of sales 2,731 2,709 10,680 11,776
------------------------ ------------------------
Gross Profit 1,523 2,168 5,739 8,724
Expenses
Selling, general
and administrative 1,865 2,000 8,700 7,009
Development 704 787 3,185 2,176
Amortization 188 146 645 534
Foreign exchange (18) 203 47 554
------------------------ ------------------------
2,739 3,136 12,577 10,273
------------------------ ------------------------
Operating (Loss) (1,216) (968) (6,838) (1,549)
Gain on disposal of
long-term investment - - - 2,019
Write-down of
long-term investments (1,109) - (2,009) -
Other income - 18 - 312
Interest income, net 46 37 149 142
------------------------ ------------------------
Net (Loss)/Income
for the period $ (2,279) $ (913) $ (8,698) $ 924
------------------------ ------------------------
------------------------ ------------------------
Deficit, beginning
of period (20,437) (13,105) (14,018) (14,942)
------------------------ ------------------------
------------------------ ------------------------
Deficit, end
of period $ (22,716) $ (14,018) $ (22,716) $ (14,018)
------------------------ ------------------------
------------------------ ------------------------
Basic and Diluted Net
(Loss)/Income for
the period $ (0.02) $ (0.01) $ (0.09) $ 0.01
------------------------ ------------------------
------------------------ ------------------------
Sirit Inc.
Consolidated Statements of Cash Flows
(expressed in thousands of Canadian dollars)
Three months ended Twelve months ended
December 31 December 31
2005 2004 2005 2004
------------------------ ------------------------
Cash (used in)/
provided by
Operating activities
Net (loss)/income
for the period $ (2,279) $ (913) $ (8,698) $ 924
Items not involving
cash and cash
equivalents 1,498 221 3,641 (1,225)
------------------------ ------------------------
(781) (692) (5,057) (301)
Net change in
non-cash working
capital items (102) 148 1,074 (662)
------------------------ ------------------------
(883) (544) (3,983) (963)
------------------------ ------------------------
Investing activities
Investment in
Horizon Wimba, Inc. - - - (36)
Additions to property
and equipment (82) (273) (320) (567)
Proceeds on sale of
long-term investment - - - 3,036
------------------------ ------------------------
(82) (273) (320) 2,433
------------------------ ------------------------
Financing activity
Issuance of common
shares, net of
associated expenses 51 570 361 5,943
------------------------ ------------------------
51 570 361 5,943
------------------------ ------------------------
Exchange rate impact on
cash and cash
equivalents (21) 1 - 4
------------------------ ------------------------
(Decrease)/increase in
cash and cash
equivalents (935) (246) (3,942) 7,417
Cash and cash
equivalents, beginning
of period 7,014 10,267 10,021 2,604
------------------------ ------------------------
Cash and cash
equivalents, end
of period $ 6,079 $ 10,021 $ 6,079 $ 10,021
------------------------ ------------------------
------------------------ ------------------------
Cash and cash
equivalents consist of:
Cash and deposit
accounts with banks $ 251 $ 3,521 $ 251 $ 3,521
Short-term
commercial paper 5,828 6,500 5,828 6,500
------------------------ ------------------------
$ 6,079 $ 10,021 $ 6,079 $ 10,021
------------------------ ------------------------
------------------------ ------------------------
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