Business News

Sirit Closes Fiscal 2008 with its Strongest Quarter

Wednesday 11. March 2009 - 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. CorporaciÔn 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.