TORONTO, March 11 /CNW/ - Sirit Inc. ("Sirit") (TSX: SI), a global provider of radio frequency identification ("RFID") technology, today reports its financial results for the fourth quarter and year ended December 31, 2008. All amounts are stated in Canadian Dollars unless otherwise noted.
Q4 2008 Financial Results
As a result of higher revenue and continued expense management, the last quarter of 2008 was the strongest quarter of the year for Sirit. Total revenue reached $6.3 million compared to $5.4 million reported in the fourth quarter of 2007. The increase in revenue for the quarter is attributed to automatic vehicle identification ("AVI") related applications with higher volumes of toll transponder sales as well as new sales into South America.
The Company's cash spend for Q4 2008 was under $0.1 million which is in-line with the cash flow neutral position reported in Q4 2007. This is a significant improvement in the use of cash compared to the first three quarters of 2008 demonstrating once again the Company's ability to adapt to changing economic circumstances and ensuring long-term operational sustainability.
AVI related applications contributed $5.6 million to Q4 2008 revenue compared to $4.2 million in Q4 2007, an increase of $1.4 million. Revenue from Radio Frequency Solutions ("RFS") applications contributed $0.7 million in the last quarter of 2008 compared to $1.3 million in the same period in 2007. The decline in RFS revenue in the last quarter reflects a reduction in spending by customers who are experiencing the impacts of the current economic uncertainty. Revenue from the operations of RSI ID Technologies, Inc. acquired by Sirit on April 1, 2008 is consolidated within either Sirit's AVI or RFS revenue based on the nature of the revenue generated.
"The Company is pleased to have ended the year on an improving trend in accordance with our expectations discussed during the fourth quarter. Revenue was up while cash expenses were down, culminating in the strongest quarter of fiscal 2008. The net result was a considerable reduction in the use of cash resources during the quarter. The Company continues to demonstrate its ability to quickly adapt to challenging situations and we are confident in our long-term future and success," noted Anastasia Chodarcewicz, CFO, Sirit Inc.
Gross profit in the fourth quarter of 2008 was 32.7% similar to the 33.1% reported in the fourth quarter of 2007.
Excluding all non-cash items, total cash operating expenses for the quarter were $2.1 million compared to $2.5 million in both the fourth quarter of 2007 and third quarter of 2008. The Company continues to closely monitor its discretionary spending in an effort to match expenses with revenue levels generated.
Operating loss for the quarter has been reduced by $0.2 million to $1.0 million compared to $1.2 million from the fourth quarter of 2007. Net income for the quarter was $2.1 million. Excluding the future income tax adjustment, the net loss for the quarter is $1.0 million comparable to the $0.8 million loss in the last quarter of 2007.
Q4 2008 Corporate Highlights
The following highlights some of the Company's activities during the last quarter of 2008:
- Sirit announced a worldwide strategic and exclusive partnership with
MIKOH Corporation ("MIKOH") to incorporate MIKOH's Smart&Secure
tamper-indication technology as a key feature in its passive RFID AVI
offerings. The three year exclusive agreement, with two additional
three-year options, licenses Sirit exclusively to promote and sell
MIKOH's patented Smart&Secure technology worldwide in passive AVI
systems where physically secure vehicle tags are required.
- Sirit also announced that its IDentity 5100 readers and transponders
had been selected for deployment on the only automated toll road in
Uruguay. Corporación Vial del Uruguay, a government agency
responsible for overseeing Uruguay's National Highway Concession
program, finalized plans to upgrade the Toll Collection System in all
of the toll plazas operating in Uruguay, selecting Sirit's IDentity
5100 readers and transponders, which are based on ISO 18000-6C open
protocol and designed for long-range, high speed AVI applications.
Phase one of the deployment included 12 readers and 20,000
transponders operating on Uruguay's main highway, connecting the City
of Montevideo with the City of Punta del Este. At the completion of
phase two of the installation by mid-2009, a total of 40 readers will
be installed.
Fiscal 2008 Financial Highlights
Overall 2008 was a challenging year for Sirit, as revenue declined across most application areas. Total revenue in 2008 was $19.2 million compared to the $24.5 million reached in 2007, the highest level of revenue reported by the Company.
AVI related revenue declined by $3.8 million in 2008 totaling $14.9 million for the year compared to $18.7 million in 2007. The most significant impact was from the reduction in sales volumes to Sirit's largest customer during 2008. RFS sales also experienced a decline with total related revenue of $4.3 million compared to $5.8 million in 2007. The decline results from slower sales of reader modules and smaller follow-on orders than originally anticipated, especially in the latter part of 2008.
Gross profit for the year was 32.9% compared to 35.0% in 2007. Margins now include the manufacturing operations of RSI, which incurs higher fixed costs as a percentage of the total cost of sales.
Total operating expenses for the year were $12.4 million compared to $14.1 million in 2007. In response to the lower revenue levels experienced throughout the year, total cash operating expenses were reduced by $1.0 million in the second half of the year compared to the first half. The Company will continue to closely monitor operating expenses throughout 2009.
The reported net loss for the year is $3.3 million or $0.02 per share compared to a $3.5 million loss in 2007 or $0.02 per share. The 2007 results include the gain on sale of the Company's remaining two long-term investments of $1.7 million and the 2008 results include a future income tax recovery of $3.2 million. Total shares outstanding at December 31, 2008 are 161.1 million compared to 145.7 million at December 31, 2007.
The Company ended 2008 with $3.3 million in cash and cash equivalents. During the first nine months of 2008, the Company spent $5.4 million on operations as well as the acquisition of RSI. During the last quarter of the year, the Company's cash spend was just under $0.1 million to finish the year at close to a cash flow neutral spend rate.
"With the successful acquisition and integration of RSI as well as wins in Brazil and Uruguay during 2008, Sirit is establishing itself as a key provider of electronic vehicle identification solutions outside our traditional North American AVI market. While we are pursuing a number of similar opportunities worldwide, we will continue to maintain close control over operational efficiencies. This continued prudent management of discretionary costs as well as anticipated growth in 2009 from new AVI opportunities in emerging countries, will be critical to enable us to reach our ultimate goal of profitability and increased overall value to shareholders," noted Norbert Dawalibi, President and CEO, Sirit Inc.
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; 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 to be dated March 13, 2009 and in Sirit's management's discussion and analysis found in its 2008 annual report to be 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. 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.
Consolidated Balance Sheets
(expressed in thousands of Canadian dollars)
Unaudited
As at December 31
2008 2007
--------- ---------
Assets
Current Assets
Cash and cash equivalents $ 3,325 $ 8,855
Accounts receivable 4,303 2,951
Inventory 3,470 2,450
Prepaids and deposits 287 233
--------- ---------
11,385 14,489
Property and equipment 2,599 1,070
Intangible assets 7,514 1,205
Goodwill 3,905 3,905
--------- ---------
$ 25,403 $ 20,669
--------- ---------
--------- ---------
Liabilities
Current Liabilities
Bank indebtedness $ 1,321 $ -
Accounts payable and accrued liabilities 4,716 4,178
Deferred revenue 339 306
Warranty obligations 108 134
Capital lease obligations 454 -
--------- ---------
6,938 4,618
Long-term deferred revenue 442 569
Long-term warranty obligations 150 124
Long-term capital lease obligations 934 -
Related party debt 1,100 -
--------- ---------
9,564 5,311
--------- ---------
Shareholders' Equity
Share capital 51,252 47,852
Contributed surplus 3,109 2,699
Deficit (38,522) (35,193)
--------- ---------
15,839 15,358
--------- ---------
$ 25,403 $ 20,669
--------- ---------
--------- ---------
Sirit Inc.
Interim Consolidated Statements of Operations, Comprehensive Loss and
Deficit
(expressed in thousands of Canadian dollars)
Unaudited
Three Months Ended Twelve Months Ended
December 31 December 31
2008 2007 2008 2007
--------- --------- --------- ---------
Revenue $ 6,282 $ 5,426 $ 19,155 $ 24,524
Cost of sales 4,230 3,631 12,861 15,942
--------- --------- --------- ---------
Gross profit 2,052 1,795 6,294 8,582
--------- --------- --------- ---------
Expenses
Selling, general and
administrative 1,580 1,757 7,398 8,298
Stock-based compensation 98 151 417 624
Development 519 755 2,993 2,625
Amortization 684 182 1,948 871
Write-down of intangible
assets 392 - 392 -
Foreign exchange (gain)/loss (188) 138 (350) 1,711
--------- --------- --------- ---------
3,085 2,983 12,798 14,129
--------- --------- --------- ---------
Operating loss (1,033) (1,188) (6,504) (5,547)
Other income 20 - 20 -
Gain on sale of long-term
investments - 263 - 1,664
Interest (expense)/income,
net (46) 90 (27) 365
--------- --------- --------- ---------
Net loss before income taxes (1,059) (835) (6,511) (3,518)
Recovery of future income
taxes 3,182 - 3,182 -
--------- --------- --------- ---------
Net income/(loss) and
comprehensive
income/(loss) for
the period $ 2,123 $ (835) $ (3,329) $ (3,518)
Deficit, beginning of period (40,645) (34,358) (35,193) (31,675)
--------- --------- --------- ---------
Deficit, end of period $(38,522) $(35,193) $ (38,522) $(35,193)
--------- --------- --------- ---------
--------- --------- --------- ---------
Sirit Inc.
Interim Consolidated Statements of Cash Flows
(expressed in thousands of Canadian dollars)
Unaudited
Three Months Ended Twelve Months Ended
December 31 December 31
2008 2007 2008 2007
--------- --------- --------- ---------
Cash provided by/(used in):
Operating Activities
Net income/(loss) for the
period $ 2,123 $ (835) $ (3,329) $ (3,518)
Items not involving cash
and cash equivalents (1,889) 333 (50) 1,495
Gain on sale of long-term
investments - (263) - (1,664)
Foreign exchange (gain)/loss (188) 138 (350) 1,711
--------- --------- --------- ---------
46 (627) (3,729) (1,976)
Net change in non-cash
working capital items (532) 431 (3,382) 995
--------- --------- --------- ---------
(486) (196) (7,111) (981)
--------- --------- --------- ---------
Investing Activities
Additions to property and
equipment (40) (45) (232) (316)
Acquisition of RSI ID
Technologies, Inc., net - - (205) -
Proceeds on sale of long-term
investments - 374 - 2,384
--------- --------- --------- ---------
(40) 329 (437) 2,068
--------- --------- --------- ---------
Financing Activities
(Decrease)/increase in bank
indebtedness (53) - 311 -
Issuance of common shares
upon exercise of stock
options - - 15 22
Issuance of shares in private
placement, net of costs (1) - 778 -
Increase in related party debt 160 - 664 -
Increase in capital lease
obligations, net 103 - 50 -
--------- --------- --------- ---------
209 - 1,818 22
--------- --------- --------- ---------
Exchange rate impact on cash
and cash equivalents 244 (124) 200 (1,651)
--------- --------- --------- ---------
(Decrease)/increase in cash
and cash equivalents (73) 9 (5,530) (542)
Cash and cash equivalents,
beginning of period 3,398 8,846 8,855 9,397
--------- --------- --------- ---------
Cash and cash equivalents,
end of period $ 3,325 $ 8,855 $ 3,325 $ 8,855
--------- --------- --------- ---------
--------- --------- --------- ---------
Cash and cash equivalents
consist of:
Cash $ 520 $ 1,826 $ 520 $ 1,826
Short-term commercial paper 2,805 7,029 2,805 7,029
--------- --------- --------- ---------
$ 3,325 $ 8,855 $ 3,325 $ 8,855
--------- --------- --------- ---------
--------- --------- --------- ---------