Sirit Reports Second Quarter 2009 Financial Results



    TORONTO, Aug. 11 /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, 2009. All amounts are
stated in Canadian Dollars unless otherwise noted.

    Q2 2009 Financial Results

    Sirit continues to withstand the current weak economic environment
achieving consistent revenue levels for the third consecutive quarter in
comparison to prior year quarterly results. For the second quarter of 2009,
the Company achieved revenue of $5.2 million (US$4.5 million) representing a
9% increase compared to $4.8 million (US$4.7 million) reported for Q2 2008.
    Year-to-date, revenue has reached $10.8 million compared to $9.1 million
in the first half of 2008, an improvement of almost 19%. Revenue growth has
been distributed across all application areas when compared to the prior year.
In particular, Sirit has experienced strong initial demand from the new Golden
Ears Bridge in Vancouver, Canada which opened during 2009 as well as continued
sales into Brazil.
    Ongoing efforts to manage cash spend are a top priority at Sirit. To
date, these efforts have been effective as the Company has utilized just over
$0.2 million of cash to fund operations during Q2 2009. For the first half of
2009, Sirit has managed its cash spending to approximately $0.4 million
compared to $4.1 million in the first half of 2008 which included the
acquisition of RSI ID Technologies, Inc.
    Automatic Vehicle identification ("AVI") related applications contributed
$3.8 million or 73% of Q2 2009 revenue with the remaining $1.4 million
attributable to Radio Frequency Solutions ("RFS") related applications. This
is compared to revenue of $3.3 million and $1.5 million for AVI and RFS
respectively in Q2 2008, with AVI representing 70% of total quarterly revenue.
While RFS applications revenue has remained consistent with prior year, the
growth in AVI during the second quarter relates to the new customers noted
above. Timing of future revenue growth in either RFS or AVI will depend on new
and large customer orders which have been delayed due to continued weak global
economic conditions.
    "As a technology company, it remains important for Sirit to ensure its
future success through current development activities. This investment in the
future continues to be possible as Sirit has effectively managed its cash
resources," commented Anastasia Chodarcewicz, Chief Financial Officer, Sirit.
"While net losses have been reported, these losses are primarily attributable
to non-cash items such as amortization and stock compensation expenses. Even
in this tough economic environment, Sirit is operating at a sustainable level
and will continue to do so as we pursue growth from new opportunities," added
Ms. Chodarcewicz.
    Gross profit for the second quarter of 2009 is reported at 33.5% compared
to 30.0% reported in the second quarter of 2008. For the first half of 2009,
gross profit is 34.2% up from the 32.9% in the first half of 2008. The
improvement in margin experienced to date results from efficiencies achieved
in operations as well as efforts to improve the manufacturing costs of key
products.
    Cash operating expenses, consisting of selling, general and
administrative as well as development costs amounted to $2.1 million in Q2
2009 compared to $2.9 million in Q2 2008. The reduction in expenses has
enabled almost cash neutral levels on a quarterly basis. The remaining
expenses including stock compensation, amortization and foreign exchange are
all non-cash items, amounting to $0.5 million during Q2 2009 and $0.7 million
in Q2 2008. The Company intends to maintain lower operating expense levels
until operations are cash flow positive.
    Net loss reported in the second quarter of 2009 was $0.9 million compared
to $2.2 million in the second quarter of 2008 and consistent with the first
quarter of 2009. Net loss for the first half of 2009 is reported at $1.9
million compared to $3.5 million in the first half of 2008.
    The Company's cash balance at June 30, 2009 was $2.9 million compared to
$3.3 million at the beginning of 2009.

    Q2 2009 Corporate Highlights

    The following highlights some of Sirit's activities during the second
quarter of 2009:

    
    -   As a result of ongoing development activities, Sirit announced the
        expansion of its RFID reader and tag offerings. The new IDentity 4100
        fixed position reader and the IDentity 3100 desktop reader expand
        form factors and introduce price differentiation to the Sirit reader
        line. In addition, new HF and UHF inlays enhance the Company's
        portfolio of specialized tag designs.

    -   Sirit announced its partnership with eriginate Corporation, a
        subsidiary of HerdStar(TM), LLC and a global integrator of track,
        trace and monitoring solutions to the livestock food industry.
        eriginate will utilize Sirit's UHF RFID tag and reader technology to
        support comprehensive solutions for the livestock food market which
        traditionally has utilized low frequency technology.

    -   In early June, Sirit replaced and increased its existing borrowing
        facilities by moving its line of credit facility to Silicon Valley
        Bank, a specialist technology bank in the US. The Company now has a
        maximum borrowing facility of US$2.5 million, up from $1.5 million,
        supported by accounts receivable and inventory balances.

    -   Also in June, Sirit along with its partner, Axiompass, a leading
        integrator and supplier of tolling equipment and RFID systems across
        Mexico, and Caminos y Puentes Federales de Ingresos y Servicios
        Conexos ("CAPUFE"), Mexico's Federal Tolling Authority, announced
        they had successfully tested Sirit's IDentity 5100 for
        interoperability between legacy and new tolling systems. This success
        was immediately followed by the implementation of the first
        electronic vehicle registration ("EVR") monitoring system in Mexico
        utilizing Sirit's stationary automatic vehicle identification ("AVI")
        monitoring technology. The new EVR system tracks vehicles as they
        pass through the Alpuyeca toll plaza with mobile AVI monitoring
        technology utilized in Cuernavaca, both in the State of Morelos. The
        system was inaugurated by Mexican President Felipe Calderón.
    

    "As the global economy stabilizes, Sirit has maintained its position
enabling the Company to capitalize on future market momentum," said Norbert
Dawalibi, President and CEO, Sirit. "We are able to fund our development and
regular operations at a sustainable level, despite some of the economic
weaknesses we have been experiencing in our traditional markets. At the same
time, we have worked diligently and seen growth with new customers. Progress
has been achieved in places such as Brazil and Mexico and we are working at
converting these opportunities into new revenue channels," added Mr. Dawalibi.

    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; Sirit's inability to expand sales both within and outside its
traditional markets; 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 13,
2009 and in Sirit's management's discussion and analysis found in its 2008
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. Unless
otherwise required by law, 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
                                                          2009       31 2008
                                                        ---------   ---------

    Assets
      Current Assets
        Cash and cash equivalents                       $  2,945    $  3,325
        Accounts receivable                                3,435       4,303
        Inventory                                          3,184       3,470
        Prepaids and deposits                                394         287
                                                        ---------   ---------
                                                           9,958      11,385

      Property and equipment                               2,146       2,599
      Intangible assets                                    6,653       7,514
      Goodwill                                             3,905       3,905
                                                        ---------   ---------

                                                        $ 22,662    $ 25,403
                                                        ---------   ---------
                                                        ---------   ---------

    Liabilities
      Current Liabilities
        Bank indebtedness                               $  1,467    $  1,321
        Accounts payable and accrued liabilities           4,058       4,716
        Deferred revenue                                     212         339
        Warranty obligations                                  83         108
        Capital lease obligations                            430         454
                                                        ---------   ---------
                                                           6,250       6,938

      Long-term deferred revenue                             357         442
      Long-term warranty obligations                         202         150
      Long-term capital lease obligations                    627         934
      Related party debt                                   1,041       1,100
                                                        ---------   ---------
                                                           8,477       9,564
                                                        ---------   ---------

    Shareholders' Equity
      Share capital                                       51,252      51,252
      Contributed surplus                                  3,330       3,109
      Deficit                                            (40,397)    (38,522)
                                                        ---------   ---------
                                                          14,185      15,839
                                                        ---------   ---------

                                                        $ 22,662    $ 25,403
                                                        ---------   ---------
                                                        ---------   ---------



    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
                                  2009        2008        2009        2008
                                ---------   ---------   ---------   ---------

    Revenue                     $  5,205    $  4,752    $ 10,763    $  9,058
    Cost of sales                  3,463       3,328       7,078       6,077
                                ---------   ---------   ---------   ---------
    Gross profit                   1,742       1,424       3,685       2,981
                                ---------   ---------   ---------   ---------

    Expenses
      Selling, general and
       administrative              1,606       2,122       3,420       4,074
      Stock-based compensation       118         112         221         229
      Development                    502         754       1,033       1,677
      Amortization                   530         541       1,077         713
      Foreign exchange
       (gain)/loss                  (185)         84        (312)       (165)
                                ---------   ---------   ---------   ---------
                                   2,571       3,613       5,439       6,528
                                ---------   ---------   ---------   ---------
    Operating loss                  (829)     (2,189)     (1,754)     (3,547)

      Interest (expense)/income,
       net                           (60)        (17)       (121)         55
                                ---------   ---------   ---------   ---------
    Net loss and comprehensive
     loss for the period        $   (889)   $ (2,206)   $ (1,875)   $ (3,492)

      Deficit, beginning of
       period                    (39,508)    (36,479)    (38,522)    (35,193)
                                ---------   ---------   ---------   ---------

    Deficit, end of period      $(40,397)   $(38,685)   $(40,397)   $(38,685)
                                ---------   ---------   ---------   ---------
                                ---------   ---------   ---------   ---------
    Basic and diluted loss
     per share                  $      -    $  (0.01)   $  (0.01)   $  (0.02)
                                ---------   ---------   ---------   ---------
                                ---------   ---------   ---------   ---------

    Basic and diluted weighted
     average number of common
     shares ('000s)              161,137     155,731     161,137     150,689



    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
                                  2009        2008        2009        2008
                                ---------   ---------   ---------   ---------
    Cash provided by/(used in):
    Operating Activities
      Net loss for the period   $   (889)   $ (2,206)   $ (1,875)   $ (3,492)
      Items not involving cash
       and cash equivalents          800         740       1,570       1,029
      Foreign exchange
       (gain)/loss                  (185)         84        (312)       (165)
                                ---------   ---------   ---------   ---------
                                    (274)     (1,382)       (617)     (2,628)

      Net change in non-cash
       working capital items         107      (1,747)        114      (2,835)
                                ---------   ---------   ---------   ---------
                                    (167)     (3,129)       (503)     (5,463)
                                ---------   ---------   ---------   ---------
    Investing Activities
      Additions to property
       and equipment                 (25)       (134)        (38)       (162)
      Acquisition of RSI ID
       Technologies, Inc., net         -        (205)          -        (205)
                                ---------   ---------   ---------   ---------
                                     (25)       (339)        (38)       (367)
                                ---------   ---------   ---------   ---------
    Financing Activities
      Increase in bank
       indebtedness                  158       1,441         146       1,441
      Issuance of common shares
       upon exercise of stock
        options                        -          15           -          15
      Decrease in related party
       debt                          (95)          -         (59)          -
      (Decrease)/increase in
       capital lease obligations    (264)         11        (332)         11
                                ---------   ---------   ---------   ---------
                                    (201)      1,467        (245)      1,467
                                ---------   ---------   ---------   ---------

    Exchange rate impact on
     cash and cash equivalents       156         (89)        406         243
                                ---------   ---------   ---------   ---------

    Decrease in cash and cash
     equivalents                    (237)     (2,090)       (380)     (4,120)
      Cash and cash equivalents,
       beginning of period         3,182       6,825       3,325       8,855
                                ---------   ---------   ---------   ---------
    Cash and cash equivalents,
     end of period              $  2,945    $  4,735    $  2,945    $  4,735
                                ---------   ---------   ---------   ---------
                                ---------   ---------   ---------   ---------

    Cash and cash equivalents
     consist of:
      Cash                      $  1,768    $    777    $  1,768    $    777
      Short-term commercial
       paper                       1,177       3,958       1,177       3,958
                                ---------   ---------   ---------   ---------

                                $  2,945    $  4,735    $  2,945    $  4,735
                                ---------   ---------   ---------   ---------
                                ---------   ---------   ---------   ---------
    





For further information:

For further information: Anastasia Chodarcewicz, Sirit Inc., (416)
367-1897 x227, achodarcewicz@sirit.com

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