Business News

Sirit Reports Third Quarter 2008 Financial Results

Wednesday 12. November 2008 - 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.”