TORONTO, Nov. 11 /CNW/ - Sirit Inc. ("Sirit") (TSX: SI), a leading provider of radio frequency identification ("RFID") technology, reports its financial results for the third quarter ended September 30, 2008. All amounts are stated in Canadian Dollars unless otherwise noted.
Q3 2008 Corporate Highlights The following highlights the Company's key activities during the quarter: - Sirit announced the signing of a strategic supply agreement with 3M's Brazilian subsidiary for Sirit's RFID reader and tag technology, based upon open architecture protocols, to support transportation-related projects in the Brazilian market. This agreement builds upon the Global Cooperative Marketing Agreement that was signed on March 25, 2008 between 3M's Traffic Safety Systems Division and Sirit. - Sirit and Reva Systems, a leading RFID network infrastructure provider, announced that Manor AG, the largest retail business in the Swiss market, is deploying Sirit's INfinity 510 RFID readers to enable RFID operations and Reva's Tag Acquisition Processor(TM) products at stores and distribution centers. Manor will initially leverage RFID to improve warehouse inventory processes, outbound shipping accuracy and inbound store receiving practices in Hochdorf and Mohlin, Switzerland and the department stores around the country serviced by the centers. - In late September 2008, the Company announced and completed a private placement issuing 5,360,670 common shares of Sirit at a price of $0.15 for total gross proceeds of $0.8 million to insiders of the Company. - Sirit confirmed that its INfinity 510 reader has been chosen by five of six system integrators selected as part of the contract awarded for the implementation of passive RFID solutions under a Blanket Purchasing Agreement by the US Government. The scope of the contract is designed to enhance systems utilizing RFID within the Department of Defense, United States Coast Guard, North Atlantic Treaty Organization and other foreign military sales. The entire contract spans an initial three year period with a three year renewal option, to provide indefinite delivery, indefinite quantity of passive RFID equipment and services. Initial projections included in the RFP indicated a potential requirement for up to 6,000 fixed readers over three years.
Q3 2008 Financial Results
For the third quarter of 2008, total revenue is reported at $3.8 million compared to $5.6 million reported for the third quarter of 2007. Total revenue for the first nine months of 2008 is $12.9 million compared to $19.1 million for the comparable period in 2007. The decline in revenue during the third quarter compared to the prior year is attributed to continued slower toll transponder sales to the Company's largest customer as well as annual seasonality experienced during the third quarter.
For the third quarter of 2008, Automatic Vehicle Identification ("AVI") applications contributed $2.7 million or 71% of the total revenue, down from $4.2 million or 75% in the third quarter of 2007. Radio Frequency Solutions ("RFS") applications revenue contributed $1.1 million compared to $1.4 million in the third quarter of 2007. Revenue from the operations of RSI acquired on April 1, 2008 is consolidated within either AVI or RFS based on the nature of the revenue generated.
"While the revenue level for the third quarter continues to be weaker than the prior year, the improvements in both margins and expenses demonstrate the ability to control costs and position the Company well for the foreseeable future. We believe that the lower revenue levels are behind us and that the fourth quarter of 2008 will bring the year to a close on an improving trend," noted Anastasia Chodarcewicz, CFO, Sirit Inc.
Gross profit for the third quarter of 2008 was 33% compared to 30% in the second quarter of 2008. The improvement in gross profit during the third quarter compared to the second quarter is significant considering the lower revenue levels. The improvement is attributed to cost reductions taken during the third quarter as well as customer mix and is expected to continue through the fourth quarter of 2008.
Operating expenses for the third quarter, excluding foreign exchange and amortization, were $2.6 million, a quarterly decrease of almost $0.4 million from the second quarter of 2008 and the third quarter of 2007. The Company is seeing the results of its efforts to reduce its expenses and expects this to continue through the fourth quarter of 2008.
Operating loss for the quarter has been reduced by $0.3 million to $1.9 million compared to $2.2 million from the second quarter of 2008 and in-line with the third quarter of 2007. Net loss for the quarter was $2.0 million compared to a $1.8 million loss in the third quarter of 2007.
During the quarter the Company completed a private placement for net proceeds of $0.8 million. This included the conversion of $0.5 million of related party debt into shares. At September 30, 2008 the Company has short-term debt of $1.4 million and utilized $1.3 million of cash during the quarter to fund operations. Cash at September 30, 2008 is $3.4 million compared to $4.7 million at the beginning of the quarter. Cash utilization is expected to continue to decline on a quarterly basis.
"We believe that the recent trend of lower quarterly revenues has come to an end. We are starting to see wins in new areas, such as our participation in the US Government award, as well as increasing opportunities in Latin America which we believe will start to convert to new revenue in 2009," noted Norbert Dawalibi, President and CEO, Sirit Inc. "We expect to see margin improvements resulting from recent development efforts come into place in 2009 and with continued focus on cost control and revenue growth, we anticipate improved performance in 2009."
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 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
September 30 December 31
2008 2007
------------- ------------
Assets
Current Assets
Cash and cash equivalents $ 3,398 $ 8,855
Accounts receivable 2,893 2,951
Inventory 3,348 2,450
Prepaids, deposits and other 420 233
------------- ------------
10,059 14,489
Property and equipment 2,808 1,070
Intangible assets 7,022 1,205
Goodwill 3,905 3,905
------------- ------------
$ 23,794 $ 20,669
------------- ------------
------------- ------------
Liabilities
Current Liabilities
Bank indebtedness $ 1,374 $ -
Accounts payable and accrued liabilities 3,710 4,178
Deferred revenue 170 306
Warranty obligations 148 134
Capital lease obligations 388 -
------------- ------------
5,790 4,618
Long-term deferred revenue 684 569
Long-term warranty obligations 120 124
Long-term capital lease obligations 898 -
Related party debt 940 -
Contingent liability 1,743 -
------------- ------------
10,175 5,311
------------- ------------
Shareholders' Equity
Share capital 51,253 47,852
Contributed surplus 3,011 2,699
Deficit (40,645) (35,193)
------------- ------------
13,619 15,358
------------- ------------
$ 23,794 $ 20,669
------------- ------------
------------- ------------
Interim Consolidated Statements of Operations, Comprehensive Loss and
Deficit
(expressed in thousands of Canadian dollars except per share amounts)
Unaudited
Three Months Ended Nine Months Ended
September 30 September 30
2008 2007 2008 2007
---------- ---------- ---------- ----------
Revenue $ 3,816 $ 5,635 $ 12,873 $ 19,098
Cost of sales 2,554 3,610 8,631 12,311
---------- ---------- ---------- ----------
Gross profit 1,262 2,025 4,242 6,787
---------- ---------- ---------- ----------
Expenses
Selling, general and
administrative 1,744 2,234 5,818 6,541
Stock-based compensation 90 106 319 473
Development 797 698 2,474 1,870
Amortization 551 234 1,264 689
Foreign exchange
loss/(gain) 4 597 (162) 1,573
---------- ---------- ---------- ----------
3,186 3,869 9,713 11,146
---------- ---------- ---------- ----------
Operating loss (1,924) (1,844) (5,471) (4,359)
Gain on sale of
long-term investment - - - 1,401
Interest
(expense)/income, net (36) 90 19 275
---------- ---------- ---------- ----------
Net loss and comprehensive
loss for the period $ (1,960) $ (1,754) $ (5,452) $ (2,683)
Deficit, beginning of
period (38,685) (32,604) (35,193) (31,675)
---------- ---------- ---------- ----------
Deficit, end of period $ (40,645) $ (34,358) $ (40,645) $ (34,358)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Basic and diluted loss
per share $ (0.01) $ (0.01) $ (0.03) $ (0.02)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Interim Consolidated Statements of Cash Flows
(expressed in thousands of Canadian dollars)
Unaudited
Three Months Ended Nine Months Ended
September 30 September 30
2008 2007 2008 2007
---------- ---------- ---------- ----------
Cash provided by/(used
in):
Operating Activities
Net loss for the period $ (1,960) $ (1,754) $ (5,452) $ (2,683)
Items not involving cash
and cash equivalents 810 340 1,839 1,162
Gain on sale of
long-term investment - - - (1,401)
Foreign exchange
loss/(gain) 4 597 (162) 1,573
---------- ---------- ---------- ----------
(1,146) (817) (3,775) (1,349)
Net change in non-cash
working capital items 58 595 (2,850) 564
---------- ---------- ---------- ----------
(1,088) (222) (6,625) (785)
---------- ---------- ---------- ----------
Investing Activities
Additions to property
and equipment (30) (61) (192) (271)
Acquisition of RSI ID
Technologies, Inc., net - - (205) -
Proceeds on sale of
long-term investment - - - 2,010
---------- ---------- ---------- ----------
(30) (61) (397) 1,739
---------- ---------- ---------- ----------
Financing Activities
(Decrease)/increase in
bank indebtedness (1,077) - 364 -
Issuance of common
shares upon exercise
of stock options - - 15 22
Issuance of shares in
private placement, net
of costs 779 - 779 -
Increase in related
party debt 431 - 504 -
Capital lease
obligations, net (64) - (53)
---------- ---------- ---------- ----------
69 - 1,609 22
---------- ---------- ---------- ----------
Exchange rate impact on
cash and cash equivalents (288) (560) (44) (1,527)
---------- ---------- ---------- ----------
Decrease in cash and cash
equivalents (1,337) (843) (5,457) (551)
Cash and cash
equivalents, beginning
of period 4,735 9,689 8,855 9,397
---------- ---------- ---------- ----------
Cash and cash equivalents,
end of period $ 3,398 $ 8,846 $ 3,398 $ 8,846
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Cash and cash equivalents
consist of:
Cash $ 491 1,960 $ 491 $ 1,960
Short-term commercial
paper 2,907 6,886 2,907 6,886
---------- ---------- ---------- ----------
$ 3,398 $ 8,846 $ 3,398 $ 8,846
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------