Intrinsyc Software International, Inc.
TSX : ICS

Intrinsyc Software International, Inc.

January 11, 2007 08:00 ET

Intrinsyc Reports 2007 First Quarter Financial Results

Achieves Highest First Quarter Revenue in Company's History

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Jan. 11, 2007) - Intrinsyc Software International, Inc. (TSX:ICS) today announced its financial results for the first quarter ended November 30, 2006, reported in Canadian dollars and in accordance with Canadian GAAP.

For the first quarter of 2007, the Company reported record first quarter revenue of $5.0 million, an increase of 10 percent from $4.6 million in the same quarter in the prior year. The year-over-year increase in revenue was due to strength in the Company's engineering services business and in particular from a new engagement contracted during the quarter with a leading global mobile phone manufacturer.

"This quarter's results demonstrate the strength of our core engineering services business with record first quarter revenues and a new engagement with a top-tier handset manufacturer," said Glenda Dorchak, Chairman and CEO of Intrinsyc. "We also achieved an important milestone last month with the on-schedule production release of Soleus™ version 1.0, our turnkey software platform for consumer handheld convergence devices and feature phones based on the Microsoft Windows® Embedded CE platform."

"These results reflect the value of our deep technical expertise developed over the past 10 years in handheld technology and platform engineering. Our handheld engineering expertise combined with the production availability of the Soleus™ software platform provide a strong foundation for Intrinsyc's continued growth," concluded Ms. Dorchak.

For the first quarter of 2007, the EBITDA loss was $2.9 million as compared to the EBITDA loss of $2.1 million in the same quarter of 2006. Expenditures for Soleus™ research and development were $3.0 million in the first quarter of 2007 compared to $1.5 million in first quarter of 2006. The calculation of EBITDA excludes stock-based compensation expense. See further discussion on EBITDA under the heading supplemental information later in this press release.

As a result of higher spending on research and development and an increased investment in working capital due to the significant contract noted above, cash used in operations increased to $5.9 million in the first quarter of 2007 compared to cash used in operations of $3.1 million in the first quarter of 2006. The Company expects to reduce its working capital investment in relation to this contract in subsequent quarters.

Cash on hand at quarter end was $9.2 million compared to $22.5 million at the year ended August 31. The decrease in cash reflects the repayment of the $8.0 million debentures and the funds used by the Company's operations for the development of the Soleus™ software platform.

Supplemental Information

In addition to results in accordance with generally accepted accounting principles (GAAP), Intrinsyc discloses a non-GAAP measure of EBITDA as a method to evaluate the Company's operating performance. This non-GAAP measure should not be considered a substitute for measurements required by accounting principles generally accepted in Canada such as loss and loss per share. Management believes that this non-GAAP metric provides additional information allowing comparability regarding the Company's ongoing operating performance and the items excluded are considered to be non-operational and/or non-recurring. EBITDA is defined as earnings before interest, tax, depreciation and amortization. This non-GAAP measure is not necessarily comparable to non-GAAP information provided by other issuers. A reconciliation of the Company's EBITDA loss to the loss under Canadian GAAP is provided in the table attached.

Conference call

Consolidated unaudited financial statements are attached and a conference call to discuss these results will be held at 1:00 p.m. Eastern Time (10:00 a.m. Pacific Time), today, January 11, 2007.

Questions may be submitted to invest@intrinsyc.com prior to the call.

The conference call may be accessed on the Company's investor site at: http://www.intrinsyc.com/investors/pres_and_conf_calls.asp.

To listen to the conference call live by telephone, dial +1-866-400-2280 toll free for participants in North America and +1-416-850-9143 for Toronto area and international participants approximately 10 minutes before the start time. A telephone playback will be available via telephone for three business days, beginning approximately two hours after the call. To listen to the telephone replay please dial +1-866-245-6755 toll free and for international callers, dial +1-416-915-1035. Enter access code 800883.

The Audit Committee and Board of Directors of the Company have reviewed the contents of this news release.

About Intrinsyc Software International, Inc.

Intrinsyc is a mobility software and services company that has strategically positioned its offerings to capitalize on an increasing trend towards "digital convergence" in mobility technology. The Company's mobile software products and engineering services expertise help service providers and equipment manufacturers deliver better products with faster time-to-market and improved development cost. Intrinsyc is the creator and licensor of Soleus™, the world's first software platform based on Windows® Embedded CE for consumer handset development. The Company's vision is to become the leading enabler of next generation handheld products.

Intrinsyc is publicly traded on the Toronto Stock Exchange (symbol: ICS or ICS.TO) and is headquartered in Vancouver, Canada with regional offices in the United Kingdom, the United States, Singapore and Barbados.

Forward-Looking Statements

This press release contains statements which, to the extent that they are not recitations of historical fact may constitute forward-looking information. Such forward-looking statements may include financial and other projections as well as statements regarding the Company's future plans, objectives, performance, revenues, growth, profits, operating expenses or the Company's underlying assumptions. The words "may", "would", "could", "will", "likely", "expect", "anticipate", "intend", "estimate", "intend", "plan", "forecast", "project", "estimate" and "believe" or other similar words and phrases are intended to identify forward-looking statements. Persons reading this press release are cautioned that such statements are only predictions, and that the Company's actual future results or performance may be materially different.

Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual results to differ materially from those expressed or implied by such forward-looking statements. These risks and uncertainties include the risk factors set out in the Company's Annual Information Form.

The Company disclaims any intention or obligation to update or revise forward-looking information, whether as a result of new information, future events or otherwise.

Intrinsyc is a registered trademark of Intrinsyc Software International, Inc. All other trademarks are registered trademarks of the respective owners, and are hereby acknowledged.



CONDENSED OPERATING STATEMENTS AND GAAP LOSS RECONCILIATION
(in Canadian dollars, Canadian GAAP)

Three months ended
November 30

2006 2005
(unaudited) (unaudited)
$ $
--------------------------------------------------------------------------

Revenue 5,021,087 4,552,688
Cost of sales 2,704,873 2,668,686
--------------------------------------------------------------------------
2,316,214 1,884,002

Administration 1,123,937 1,388,747
Marketing and sales 1,332,658 807,399
Research and development 2,976,270 1,648,381
Technology Partnerships Canada Funding Investment - 1,173
Foreign exchange loss (gain) (249,785) 107,423
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EBITDA loss 2,866,866 2,069,121
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Amortization 178,760 222,473
Stock-based compensation 199,613 204,460
Interest income (185,307) (49,918)
Accretion and amortization - long-term debt 927,778 126,374
Interest expense - long-term debt 213,699 158,904
Income tax expense (recovery)
Current 86,449 21,988
Future (28,992) (23,652)
--------------------------------------------------------------------------

Loss under Canadian GAAP 4,258,866 2,729,750
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Intrinsyc Software International, Inc.
CONSOLIDATED BALANCE SHEETS
(in Canadian dollars, Canadian GAAP)

November 30 August 31
2006 2006
(unaudited) (unaudited)
$ $
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ASSETS
Current
Cash and cash equivalents 9,169,415 22,487,076
Accounts receivable 4,979,237 3,789,743
Inventory 150,084 110,996
Prepaid expenses - current 398,232 385,816
--------------------------------------------------------------------------
Total current assets 14,696,968 26,773,631
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Prepaid expenses 185,228 61,769
Equipment 1,339,215 1,360,832
Goodwill 14,189,478 14,189,478
Intangible assets 477,288 556,120
Deferred financing costs - 516,599
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Total assets 30,888,177 43,458,429
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities 3,094,368 4,010,542
Taxes payable 162,190 218,912
Deferred revenue 649,252 542,515
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Total current liabilities 3,905,810 4,771,969
--------------------------------------------------------------------------
Debentures - 7,617,946
Future income taxes 202,761 229,655
--------------------------------------------------------------------------
Total liabilities 4,108,571 12,619,570
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Contingencies and commitments

Shareholders' equity
Share capital 74,623,739 74,623,739
Warrants and underwriters options 5,229,997 5,229,997
Contributed surplus 3,151,488 2,951,875
Cumulative translation adjustment (27,792) (27,792)
Deficit (56,197,826) (51,938,960)
--------------------------------------------------------------------------
Total shareholders' equity 26,779,606 30,838,859
--------------------------------------------------------------------------
Total liabilities and shareholders' equity 30,888,177 43,458,429
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Intrinsyc Software International, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
(in Canadian dollars, Canadian GAAP)

Three months ended
November 30

2006 2005
(unaudited) (unaudited)
$ $
--------------------------------------------------------------------------

Revenues 5,021,087 4,552,688
Cost of sales 2,704,873 2,668,686
--------------------------------------------------------------------------
2,316,214 1,884,002
--------------------------------------------------------------------------

Expenses
Administration 1,123,937 1,388,747
Marketing and sales 1,332,658 807,399
Research and development 2,976,270 1,648,381
Amortization 178,760 222,473
Stock-based compensation 199,613 204,460
Technology Partnerships Canada Funding Investment - 1,173
--------------------------------------------------------------------------
5,811,238 4,272,633
--------------------------------------------------------------------------

Loss before other expense
(income) and income taxes 3,495,024 2,388,631
Other expense (income)
Foreign exchange loss (gain) (249,785) 107,423
Interest income (185,307) (49,918)
Accretion and amortization - long-term debt 927,778 126,374
Interest expense - long-term debt 213,699 158,904
--------------------------------------------------------------------------
706,385 342,783
--------------------------------------------------------------------------

Loss before income taxes 4,201,409 2,731,414
Income tax expense (recovery)
Current 86,449 21,988
Future (28,992) (23,652)
--------------------------------------------------------------------------
57,457 (1,664)
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Loss for the period 4,258,866 2,729,750

Deficit, beginning of period 51,938,960 35,545,626
--------------------------------------------------------------------------
Deficit, end of period 56,197,826 38,275,376
--------------------------------------------------------------------------
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Loss per share (basic and diluted) 0.05 0.05
--------------------------------------------------------------------------
--------------------------------------------------------------------------

Weighted average number of shares outstanding 83,043,369 56,234,336
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Intrinsyc Software International, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in Canadian dollars, Canadian GAAP)

Three months ended
November 30

2006 2005
(unaudited) (unaudited)
$ $
--------------------------------------------------------------------------

OPERATING ACTIVITIES
Loss for the period (4,258,866) (2,729,750)
Items not involving cash
Amortization 178,760 222,473
Future income taxes (26,894) (23,652)
Stock-based compensation 199,613 204,460
Accretion and amortization - long-term debt 222,322 126,374
Changes in non-cash operating working capital
Accounts receivable (1,189,494) (480,969)
Inventory (39,088) 2,499
Prepaid expenses (135,875) (28,849)
Accounts payable and accrued liabilities (916,174) (313,032)
Taxes payable (56,722) (11,063)
Deferred revenue 106,737 (88,124)
--------------------------------------------------------------------------
Cash used in operating activities (5,915,681) (3,119,633)
--------------------------------------------------------------------------

INVESTING ACTIVITIES
Purchase of equipment (78,311) (104,450)
--------------------------------------------------------------------------
Cash used in investing activities (78,311) (104,450)
--------------------------------------------------------------------------

FINANCING ACTIVITIES
Issuance of common shares - 1,950
Debentures (8,000,000) 8,000,000
Debentures issuance costs (29,125) (967,074)
Accretion and amortization realized
on early redemption of debentures 705,456 -
--------------------------------------------------------------------------
Cash (used in) provided by financing activities (7,323,669) 7,034,876
--------------------------------------------------------------------------

Increase (decrease) in cash
and cash equivalents (13,317,661) 3,810,793
Cash and cash equivalents, beginning of period 22,487,076 7,318,210
--------------------------------------------------------------------------
Cash and cash equivalents, end of period 9,169,415 11,129,003
--------------------------------------------------------------------------
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Supplementary information
Interest paid 213,699 160,888
Income taxes paid 211,076 16,236
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