Sirit Reports Financial Results for the Third Quarter Ended September 30, 2005
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TORONTO, Nov. 10 /CNW/ - Sirit Inc. (TSX: SI), a leading provider of
radio frequency identification (RFID) technology, today reported its financial
results for the third quarter ended September 30, 2005. All amounts are stated
in Canadian Dollars unless otherwise noted.
Third Quarter 2005 Financial Highlights
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- Total revenue of $3.1 million in Q3 2005 compared to $5.2 million
in Q3 2004.
- For the third quarter, sales of modules supporting RF Solutions (RFS)
applications contributed $0.5 million or 16% of revenue. Fluctuations
in quarterly results continue to be reflective of early stage market
adoption within supply chain management.
- Sales of products for Automatic Vehicle Identification applications
(AVI) contributed $2.6 million or 84% of quarterly revenue. Company
wins $4.0 million toll tag supplier contract in early October with
deliveries commencing in the fourth quarter.
- Net loss for Q3 2005 of $2.8 million, including the write-down of a
non-core investment of $0.9 million, compared to a net loss of
$2.6 million in Q2 2005.
- Cash utilization of $0.9 million during third quarter 2005 compared to
$1.5 million in the second quarter 2005.
Three and Nine Months Ended September 30, 2005
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Revenue for the nine months ended September 30, 2005 totaled
$12.2 million, a 21.8% or $3.4 million decrease from $15.6 million in the
first nine months of 2004. The year-to-date decline is due to foreign exchange
fluctuations of approximately $1.0 million, a decline in AVI revenue resulting
from customers building inventory levels in the prior year which did not recur
in the current year and the consolidation of three toll agency customers.
Revenue from sales of RFS related products was $0.5 million during the
quarter compared to $1.0 million in the 2004 third quarter. Sales of RFS
products remain unpredictable and are expected to fluctuate on a quarterly
basis as customers continue to roll out pilots and tests which vary in timing,
size and value.
Revenue from sales of AVI related products was $2.6 million for the third
quarter and $9.3 million year-to-date. Sirit maintains strong supplier
relationships with all of its AVI customers evidenced by the recent
$4.0 million win with the Bay Area Transportation Authority ("BATA"). Revenue
from all applications is expected to be within guidance provided during the
third quarter for the remainder of 2005.
Gross margin for the third quarter of 2005 was 33.4% compared to 43.3% in
the third quarter of 2004. Gross margin declined both on a quarterly and
yearly comparative basis due to the portion of overhead costs which represent
a larger percentage of the lower sales base for the periods. On a year-over-
year comparison, gross margin in 2005 was 34.7%, a decline of 7.3 basis points
from the same period in 2004.
Total operating expenses during the third quarter were $2.9 million
compared to $4.2 million in the second quarter. The decrease is attributable
to management's decision during the third quarter to reduce 2005 year end
bonuses whereas the second quarter included a one-time retirement charge of
$0.8 million. R&D expenditures remain consistent with the second quarter of
2005.
"Sirit is focused on maintaining a strong financial position as evidenced
in the reduction in our cash utilization as well as the cost cutting efforts
undertaken during the third quarter," commented Anastasia Chodarcewicz, Vice
President Finance and CFO. "We are committed to controlling discretionary
spending while we continue to invest in marketing and product development
efforts to broaden the reach of our offerings."
The Company utilized $0.9 million to fund ongoing operations and
development efforts ending the quarter with $7.0 million in cash compared to
$7.9 million at the beginning of the quarter. The working capital balance at
September 30, 2005 remains solid at $11.6 million with the change from June
30, 2005 attributable to the reclassification of investments to short-term and
use of cash to fund operations during the quarter. The Company has undertaken
activities to divest of its interest in its non-core assets and will utilize
any cash generated from the disposition of these investments to support its
RFID operations. The Company believes that it has sufficient resources to fund
operations through the balance of 2006.
"We have taken decisive actions to streamline our teams and to focus on
all application areas in which Sirit has had historical successes and
demonstrated technical expertise," said Norbert Dawalibi, President and CEO,
Sirit Inc. "Combined with the recently announced supplier contract win with
our long standing customer, BATA, and as other AVI customers return to normal
ordering patterns, we remain confident that our business is solid and will
experience growth in 2006."
Conference Call
Sirit will host a conference call to discuss the quarterly results on
Thursday, November 10, 2005 at 10:00 a.m. EDT. The conference call will be
accessible at www.sirit.com.
About Sirit Inc.
Sirit Inc. (TSX: SI) is a leading provider of Radio Frequency
Identification (RFID) reader technology to OEMs and solution providers
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 Initial
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.
Sirit Inc.
Interim Consolidated Balance Sheets
(expressed in thousands of Canadian dollars)
Unaudited
As at As at
September 30 December 31
2005 2004
------------- ------------
Assets
Current Assets
Cash and cash equivalents $ 7,014 $ 10,021
Accounts receivable 1,932 3,319
Inventory 1,617 1,296
Investments 4,291 -
Prepaids and deposits 244 716
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15,098 15,352
Long-term investments - 5,191
Property, plant and equipment, net 856 896
Intangible asset, net 421 573
Deferred development costs, net 75 123
Goodwill 2,829 2,829
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$ 19,279 $ 24,964
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Liabilities
Current Liabilities
Accounts payable and accrued liabilities $ 2,454 $ 2,596
Deferred revenue 778 913
Warranty obligations 225 310
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3,457 3,819
Shareholders' equity
Share capital 35,137 34,763
Contributed surplus 1,122 400
Deficit (20,437) (14,018)
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15,822 21,145
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$ 19,279 $24,964
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Sirit Inc.
Interim Consolidated Statements of Operations
(expressed in thousands of Canadian dollars except per share amounts)
Unaudited
Three Months Ended Nine Months Ended
September 30 September 30
2005 2004 2005 2004
------------------- -------------------
Revenue $ 3,107 $ 5,162 $ 12,165 $ 15,623
Cost of Sales 2,070 2,925 7,949 9,067
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Gross profit 1,037 2,237 4,216 6,556
Expenses
Selling, general
and administrative 1,718 1,762 6,835 5,009
Development 899 591 2,481 1,389
Amortization 157 129 457 388
Foreign exchange 149 437 65 351
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2,923 2,919 9,838 7,137
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Operating (loss) (1,886) (682) (5,622) (581)
Gain on sale of investment - - - 2,019
Write-down of investment (900) - (900) -
Other income - - - 294
Interest income, net 27 40 103 105
------------------- -------------------
Net (loss)/income
for the period $ (2,759) $ (642) $ (6,419) $ 1,837
------------------- -------------------
------------------- -------------------
Deficit, beginning
of period (17,678) (12,463) (14,018) (14,942)
------------------- -------------------
Deficit, end
of period $(20,437) $(13,105) $(20,437) $(13,105)
------------------- -------------------
------------------- -------------------
Basic and diluted (loss)/
income per share $ (0.03) $ (0.01) $ (0.07) $ 0.02
------------------- -------------------
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Sirit Inc.
Interim Consolidated Statements of Cash Flows
(expressed in thousands of Canadian dollars except per share amounts)
Unaudited
Three Months Ended Nine Months Ended
September 30 September 30
2005 2004 2005 2004
------------------- -------------------
Cash provided by/(used in):
Operating Activities
(Loss)/income from
continuing operations $ (2,759) $ (642) $ (6,419) $ 1,837
Items not involving cash
and cash equivalents 1,260 201 2,143 (1,446)
------------------- -------------------
(1,499) (441) (4,276) 391
Net change in non-cash
working capital items 626 (812) 1,176 (810)
------------------- -------------------
(873) (1,253) (3,100) (419)
------------------- -------------------
Investing Activities
Additions to property,
plant and equipment (73) (119) (238) (294)
Proceeds on sale of investment - - - 3,036
Investment in Horizon Wimba, Inc. - - - (36)
------------------- -------------------
(73) (119) (238) 2,706
------------------- -------------------
Financing Activities
Issuance of common shares,
net of associated expenses 29 357 310 5,373
------------------- -------------------
29 357 310 5,373
------------------- -------------------
Exchange rate impact on cash
and cash equivalents 7 - 21 3
------------------- -------------------
(Decrease)/increase in cash
and cash equivalents (910) (1,015) (3,007) 7,663
Cash and cash equivalents,
beginning of period 7,924 11,282 10,021 2,604
------------------- -------------------
Cash and cash equivalents,
end of period $ 7,014 $ 10,267 $ 7,014 $ 10,267
------------------- -------------------
------------------- -------------------
Cash and cash equivalents
consist of:
Cash and deposit accounts
with banks $ 692 $ 2,354 $ 692 $ 2,354
Short-term commercial paper 6,322 7,913 6,322 7,913
------------------- -------------------
$ 7,014 $ 10,267 $ 7,014 $ 10,267
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For further information: Lorelei L. Luchkiw, Sirit Inc., (416) 367-1897
x249, lluchkiw@sirit.com
