TORONTO, Aug. 5 /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, 2008. All amounts are stated in Canadian Dollars unless otherwise noted.
Q2 2008 Corporate Highlights
The following highlights key activities during the quarter:
- The Company announced it had completed the acquisition of RSI ID
Technologies, Inc. ("RSI"), an industry leading, vertically
integrated manufacturer of antennas, inlays and tags for specialized,
passive RFID applications. The deal was structured as an all stock
transaction with an initial payment of 10 million Sirit Common Shares
plus potential additional shares to be issued over a 21 month period
based on achieving certain financial targets. The deal, which closed
as scheduled on April 1, 2008, allows the combined entity to offer
integrated solutions across a number of passive tag applications, in
particular to address the electronic vehicle registration
opportunities worldwide.
- Sirit launched its next generation INfinity 110 high frequency ("HF")
reader module designed for embedded RFID applications. This new
offering leverages Sirit's long history of supplying HF embedded
reader solutions by supporting more tag protocols than competitive
products in a compact footprint.
- Sirit's INfinity 510 UHF RFID reader ("IN510") was announced as being
part of an expanded rollout at METRO Group's Real brand hypermarket
stores. 200 Real locations will be equipped with Checkpoint portals
powered by Sirit readers at the loading doors to track incoming
goods.
- Sirit announced that the IN510 was selected for Finland's postal
delivery service RFID implementation. Readers have been installed
across the country as part of a system to monitor and quantify the
speed and accuracy of real-time postal deliveries.
Q2 2008 Financial Results
Total revenue for the three months ended June 30, 2008 reached $4.8 million (US$4.7 million) compared to $7.0 million (US$6.1 million) in the second quarter of 2007. For the first half of 2008, total revenue is $9.1 million compared to $13.5 million from the first half of 2007. The decline in revenue continues to result primarily from lower toll transponder sales during the first six months of 2008 when compared to 2007, as well as foreign exchange impacts with a stronger Canadian Dollar in 2008. Year-to-date the total decline in US Dollar revenue is 23% compared to a reported decline in revenue in Canadian Dollars of almost 32%.
During the second quarter of 2008, Sirit's Automatic Vehicle Identification ("AVI") applications contributed $3.3 million (US$3.2 million) or 70% of the total revenue, down from $5.2 million (US$4.5 million) or 74% in the second quarter of 2007. Radio Frequency Solutions ("RFS") applications revenue contributed $1.5 million (US$1.5 million) compared to $1.8 million (US$1.6 million) in the second quarter of 2007. This represented a 50% increase from the first quarter of 2008 at $1.0 million (US$1.0 million). Revenue from the operations of RSI acquired on April 1, 2008 are consolidated within either AVI or RFS based on the nature of the application.
"As previously announced, Sirit continued to experience delays in toll transponder orders from our largest toll customer. However, expenses in the second quarter remained consistent with the first quarter, even with the acquisition of RSI," commented Anastasia Chodarcewicz, Chief Financial Officer, Sirit Inc. "In light of the continued slower revenue generation, Sirit has already implemented actions to reduce operating expenses for the second half of 2008."
Gross profit in the second quarter of 2008 was 30% compared to almost 36% in the second quarter of 2007. The change is the result of an overall lower revenue level available to absorb fixed overhead costs as well as the inclusion of manufacturing costs associated with the operations of RSI.
Operating expenses during the quarter, excluding foreign exchange and amortization, were $3.0 million, consistent with both the first quarter of 2008 and second quarter of 2007. Even with the inclusion of the new RSI operations, significant effort was placed on the control of expenses. Additional expense reductions have been taken to bring costs more in-line with the lower revenue levels currently being experienced. Development expenses now include RSI development efforts and are also anticipated to decrease in the second half of 2008. Amortization expense has increased with the assumption of manufacturing assets and creation of intangible assets, both associated with the acquisition of RSI.
Operating loss for the quarter was $2.2 million compared to a $1.5 million loss in the same period last year. Net loss for the quarter was $2.2 million compared to a $1.4 million loss in the second quarter of 2007.
The Company incurred approximately $2.5 million in short-term debt during the quarter and ended the quarter with $4.7 million in cash compared to $6.8 million at the beginning of the quarter. Of the total cash spent during the quarter, approximately $1.8 million was to repay liabilities of RSI assumed upon the acquisition.
Second Half 2008 Perspective
We remain confident about the growth opportunities for Sirit across all application areas. We are seeing, especially in AVI, some of the biggest opportunities we have faced in our history for applications such as Electronic Vehicle Registration and Electronic Tolling from emerging countries. We are however, now forecasting a continued slowdown in Q3 from our largest toll customer which will delay our return to a position of growth until the fourth quarter. In light of this delay, the Company has accelerated the streamlining and consolidation of the RSI acquisition and has reduced spending with the goal to return to a near cash neutral position by the end of 2008.
"Even with the delays experienced in our traditional tolling market, we are excited about the very large opportunities Sirit is pursuing. As an example, we have been working very closely with 3M on new toll and electronic vehicle registration opportunities worldwide as we recently announced with the deployment of our toll technology with 3M in Brazil. We have also recognized the need to more closely align our spending with revenue levels and have taken actions to control expenses until revenue growth returns," added Norbert Dawalibi, President and CEO, Sirit Inc. "Overall, I continue to be confident about the future for Sirit and I look forward to high growth and achieving profitability in 2009 as we expect to see new application areas become a reality for Sirit."
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 14 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 dated March 14, 2008 and in Sirit's management's discussion and analysis found in its 2007 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. 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
2008 31 2007
--------- ---------
Assets
Current Assets
Cash and cash equivalents $ 4,735 $ 8,855
Accounts receivable 3,546 2,951
Inventory 3,071 2,450
Prepaids, deposits and other 472 233
--------- ---------
11,824 14,489
Property and equipment 3,025 1,070
Intangible assets 7,452 1,205
Goodwill 3,905 3,905
--------- ---------
$ 26,206 $ 20,669
--------- ---------
--------- ---------
Liabilities
Current Liabilities
Bank indebtedness $ 2,451 $ -
Accounts payable and accrued liabilities 4,464 4,178
Deferred revenue 194 306
Warranty obligations 60 134
Related party debt 509 -
Capital lease obligations 379 -
--------- ---------
8,057 4,618
Long-term deferred revenue 519 569
Long-term warranty obligations 206 124
Long-term capital lease obligations 971 -
Contingent liability 1,743 -
--------- ---------
11,496 5,311
--------- ---------
Shareholders' Equity
Share capital 50,474 47,852
Contributed surplus 2,921 2,699
Deficit (38,685) (35,193)
--------- ---------
14,710 15,358
--------- ---------
$ 26,206 $ 20,669
--------- ---------
--------- ---------
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
2008 2007 2008 2007
--------- --------- --------- ---------
Revenue $ 4,752 $ 6,964 $ 9,058 $ 13,463
Cost of sales 3,328 4,465 6,077 8,701
--------- --------- --------- ---------
Gross profit 1,424 2,499 2,981 4,762
--------- --------- --------- ---------
Expenses
Selling, general and
administrative 2,122 2,118 4,074 4,307
Stock-based compensation 112 195 229 367
Development 754 568 1,677 1,172
Amortization 541 232 713 455
Foreign exchange loss/(gain) 84 867 (165) 976
--------- --------- --------- ---------
3,613 3,980 6,528 7,277
--------- --------- --------- ---------
Operating loss (2,189) (1,481) (3,547) (2,515)
Gain on sale of long-term
investment - - - 1,401
Interest (expense)/income,
net (17) 89 55 185
--------- --------- --------- ---------
Net loss and comprehensive
loss for the period $ (2,206) $ (1,392) $ (3,492) $ (929)
Deficit, beginning of period (36,479) (31,212) (35,193) (31,675)
--------- --------- --------- ---------
Deficit, end of period $(38,685) $(32,604) $(38,685) $(32,604)
--------- --------- --------- ---------
--------- --------- --------- ---------
Basic and diluted loss per
share $ (0.01) $ (0.01) $ (0.02) $ (0.01)
--------- --------- --------- ---------
--------- --------- --------- ---------
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
2008 2007 2008 2007
--------- --------- --------- ---------
Cash provided by/(used in):
Operating Activities
Net loss for the period $ (2,206) $ (1,392) $ (3,492) $ (929)
Items not involving cash and
cash equivalents 740 427 1,029 (579)
Foreign exchange loss/(gain) 84 740 (165) 740
--------- --------- --------- ---------
(1,382) (225) (2,628) (768)
Net change in non-cash
working capital items (1,747) 791 (2,835) (152)
--------- --------- --------- ---------
(3,129) 566 (5,463) (920)
--------- --------- --------- ---------
Investing Activities
Additions to property and
equipment (134) (17) (162) (210)
Acquisition of RSI ID
Technologies, Inc., net (205) - (205) -
Proceeds on sale of
long-term investment - - - 2,140
--------- --------- --------- ---------
(339) (17) (367) 1,930
--------- --------- --------- ---------
Financing Activities
Increase in bank
indebtedness 1,441 - 1,441 -
Issuance of common shares
upon exercise of stock
options 15 8 15 22
Capital lease obligations,
net 11 - 11 -
--------- --------- --------- ---------
1,467 8 1,467 22
--------- --------- --------- ---------
Exchange rate impact on cash
and cash equivalents (89) (740) 243 (740)
--------- --------- --------- ---------
(Decrease)/increase in cash
and cash equivalents (2,090) (183) (4,120) 292
Cash and cash equivalents,
beginning of period 6,825 9,872 8,855 9,397
--------- --------- --------- ---------
Cash and cash equivalents,
end of period $ 4,735 $ 9,689 $ 4,735 $ 9,689
--------- --------- --------- ---------
--------- --------- --------- ---------
Cash and cash equivalents
consist of:
Cash $ 777 $ 2,455 $ 777 $ 2,455
Short-term commercial paper 3,958 7,234 3,958 7,234
--------- --------- --------- ---------
$ 4,735 $ 9,689 $ 4,735 $ 9,689
--------- --------- --------- ---------
--------- --------- --------- ---------