Intrinsyc Software International, Inc.
TSX : ICS

Intrinsyc Software International, Inc.

November 09, 2005 09:30 ET

Intrinsyc Software Reports 2005 Financial Results

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Nov. 9, 2005) -

Record Quarterly Revenues Up 41%

Intrinsyc Software International, Inc. (TSX:ICS) today announced its financial results for its 2005 fiscal year:

- Q4 2005 revenue hit a record high at $5.4 million, a 41% increase from the previous year (Q4 2004 - $3.8 million)

- Fiscal 2005 revenue was the highest in Intrinsyc's history at $17.5 million, a 16% increase from fiscal 2004

- Full year gross margins increased to 48% in fiscal 2005 (fiscal 2004 - 45%)

- Q4 2005 gross margin was 51%, consistent with 51% recorded in Q4 2004

Executive Commentary

Vince Schiralli, President and Chief Operating Officer, said:

"Fiscal 2005 is a breakthrough year for the Company. We have been able to consistently improve both revenue and margins in our core business while driving forward with our mobile software business development and R&D. Our record fourth quarter results have set the stage for further growth in our core business in fiscal 2006. We have also made excellent progress in establishing key partnerships and customers for our mobile software product offerings in fiscal 2006."

"As part of Intrinsyc's Mobile Software Products strategy, we are addressing the mobile industry's need for feature phones that are cheaper and faster to produce in order to target a global, mass-market base of mobile phone users. We are leveraging our established Windows CE skills in developing the world's only Windows CE-based operating system for feature phones and the recent investment from Wellington Financial LP is a strong vote of confidence in Intrinsyc's mobile expertise to deliver this product in 2006."

Derek Spratt, Chief Executive Officer, said:

"In addition to the outstanding performance of our core business both in the fourth quarter and throughout the year, the first milestone of our Windows CE-based feature phone development was completed on time and on budget. Intrinsyc's business development activity has also been very successful and we are making excellent progress toward establishing our critical partnership and initial customer relationships."

Financial and Operational Highlights

Recent Highlights

- In October 2005, the Company announced the completion of an $8.0 million debt financing with Wellington Financial Fund II to further fund and bring to commercialization its Windows CE based feature phone product in early 2006.

- In September 2005, the Company announced that its Mobile and Embedded Solutions group launched four new products that enable mobile device makers to start their development cycles earlier and take their products to market faster. These products take the form of Board Support Package (BSP) kits which provide the bridge between the embedded operating system and the target mobile hardware. Recent contracts awarded to Intrinsyc's MES group totaled $1.9 million in the smartphone and related mobile and embedded market segments highlight the growing need for these types of discrete solution offerings.

- In July 2005, the Company announced the appointment Mr. Michael Anderson, formerly of Nokia, to Director, MES Marketing, Mobile Embedded Solutions, in the Vancouver office and of Mr. Andrew Thomas, formerly of Orange, to the position of Business Development Manager in the UK, part of the Mobile Software Products - MSP business unit.

Other Annual Highlights:

- In October 2004, the Company announced successful completion of a $5.6 Million Rights Offering.

- In February 2005, the Company announced the formation of the Mobile Software Products (MSP) business unit. MSP's mandate is to produce new products and develop ongoing initiatives to focus on 'making mobility work' in the growing feature phone market. This includes a full software stack that will leverage Microsoft Windows CE to offer feature phone manufacturers greater flexibility and reduced development costs. This development work is being performed in the new Bellevue, Washington State facility.

- In February 2005, the Company announced that it had formed a dedicated global Mobility and Embedded Solutions Team (MES) to meet increasing demand for mobile device design.

- In May 2005, the Company announced the promotion of Randy Kath, formerly the General Manager of the Microsoft Mobility and Embedded Solutions group, to Vice President of Mobile Software Products. Mr. Kath is located in the Company's Bellevue, Washington, USA offices.

- In May 2005, the Company announced the iQuickStart 3G program to extend support for Windows Mobile software to 3G. The program leverages Intrinsyc Software's licensable Radio Interface Layer (RIL) telephony components for Windows Mobile 5.0-based device development.

The loss for the fourth quarter was $1.5 million or $0.03 per share compared to a loss of $1.6 million or $0.04 per share in the fourth quarter of fiscal 2004. The fourth quarter loss also includes research and development expenditures of $1.4 million on the mobile software products and stock based compensation expense of $242,000. The loss for the year was $4.98 million or $0.09 per share compared to $3.09 million or $0.07 per share in fiscal 2004. The annual loss includes research and development expenditures of $3.1 million on the Company's mobile software products initiative and stock based compensation expense of $816,000. The cash provided by operations amounted to $40,000 in the fourth quarter fiscal 2005 compared to $1.5 million cash used in the fourth quarter of fiscal 2004 as result of improved management of working capital. The cash used for operations amounted to $1.7 million in fiscal 2005 compared to $857,000 in fiscal 2004. The increase in cash used relates to spending on the development of mobile software products.

The Company recorded a foreign exchange loss in the fourth quarter of fiscal 2005 of $289,000 compared to a foreign exchange loss of $343,000 in the fourth quarter of fiscal 2004. The Company recorded a foreign exchange loss in fiscal 2005 of $483,000 compared to a foreign exchange gain of $36,000 in fiscal 2004. The Company has a foreign exchange hedging program that effectively hedges between 60% and 80% of its net monthly US dollar receipts. The Company also accrued royalties due under its Technology Partnerships Canada ("TPC") funding agreement of $225,000 in the fourth quarter of fiscal 2005. There were no material TPC royalties due in fiscal 2004.

Condensed financial statements are attached and a conference call to discuss these results will be held Wednesday, November 9, 2005 at 10:00 a.m. PST. Shareholders and interested parties wishing to listen to the conference call may dial 1 800 298 3006 (toll free) five minutes prior to the scheduled time. Alternatively, you may listen to a live audio Webcast of the conference call at www.intrinsyc.com/investors/pres_and_conf_calls.asp. For those who are unable to participate in the conference call but would like to ask a question they can submit their question to invest@intrinsyc.com prior to the call.

For those unable to participate, a replay of the conference call will be available from 12:00 p.m. PST on November 9, 2005 to 12:00 a.m. PST on November 14, 2005. The replay number is 1.800.633.8625 and the pass code for callers is 21265541. The call will also be archived at www.intrinsyc.com/investors/pres_and_conf_calls.asp.

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. Its technologies and services allow companies to identify and create innovative solutions that make mobile devices connect and work. Intrinsyc's unique knowledge enables companies to deliver winning mobile devices and solutions that build stronger and more successful businesses.

By leveraging Intrinsyc's mobile software products, engineering design services and systems integration expertise, customers make better decisions, improve productivity, and reduce time-to-market. Since 1996, Intrinsyc has built a strong customer base and has formed solid alliances with many leading technology companies including Microsoft, IBM, Intel, Philips, Siemens, General Electric, Hand Held Products, Texas Instruments and Ford.

The company's current strategic business initiative focuses on creating the world's leading alternative feature phone operating system based on Microsoft Windows CE. The purpose of this initiative is to deliver licensable software and tool extensions to help mobile phone manufacturers more efficiently design and deliver cost-effective handsets.

Intrinsyc is a publicly traded company, headquartered in Vancouver, Canada with additional regional development offices in Bellevue, Washington, Birmingham, UK and Barbados. To find out more about Intrinsyc, visit: www.Intrinsyc.com.

Forward-Looking Statements

This press release may contain forward-looking statements that involve risks and uncertainties. These forward-looking statements relate to, among other things, plans and timing for the introduction or enhancement of Intrinsyc's services and products, statements about future market conditions, supply and demand conditions, and other expectations, intentions and plans that may be contained in this press release but are not historical fact. Intrinsyc's expectations regarding future revenues depend upon its ability to develop and supply products, which Intrinsyc does not produce today and that meet defined specifications. When used in this press release, the words "may", "will", "should", "could", "expects", "plans", "intends", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of such terms and other comparable terminology generally identify forward-looking statements. These statements reflect Intrinsyc's current expectations. They are subject to a number of risks and uncertainties, including, but not limited to: history of losses, dependence on market acceptance of mobile devices and interoperability solutions, product development and technological change, length of sales cycle, major industry software vendor partners may become competitors, competition, additional financing, third party manufacturing, component suppliers, acquisitions, sales and marketing and strategic alliances, management of growth, dependence on management, potential fluctuations in quarterly results, research and development, international expansion of business operations, foreign exchange risk, intellectual property protection, product liability, stock price volatility, shareholders' rights plan, and ability to meet the obligations of outstanding debentures. In light of the many risks and uncertainties surrounding the pervasive computing market, you should understand that Intrinsyc couldn't assure you that the forward-looking statements contained in this press release will be realized. Intrinsyc disclaims any intent or obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or results 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.



Intrinsyc Software International, Inc.

CONSOLIDATED BALANCE SHEETS
(Unaudited)


2005 2004
$ $
--------------------------------------------------------------------
Restated
ASSETS
Current
Cash and cash equivalents 7,318,210 4,600,460
Accounts receivable 3,909,596 3,381,271
Other receivable - 947,374
Inventory 134,318 277,840
Prepaid expenses 345,762 334,780
--------------------------------------------------------------------
Total current assets 11,707,886 9,541,725
--------------------------------------------------------------------
Capital assets 980,580 838,268
Goodwill 14,189,478 14,189,478
Intangible assets 1,212,577 1,442,848
--------------------------------------------------------------------
Total assets 28,090,521 26,012,319
--------------------------------------------------------------------
--------------------------------------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities 2,790,071 1,902,038
Taxes payable 263,382 129,742
Deferred revenue 836,660 645,820
--------------------------------------------------------------------
Total current liabilities 3,890,113 2,677,600
--------------------------------------------------------------------
Future income taxes 261,425 356,033
--------------------------------------------------------------------
Total liabilities 4,151,538 3,033,633
--------------------------------------------------------------------


Shareholders' equity
Share capital 57,452,141 52,328,077
Share purchase warrants 163,500 163,500
Contributed surplus 1,896,760 1,080,546
Cumulative translation adjustment (27,792) (27,792)
Deficit (35,545,626) (30,565,645)
--------------------------------------------------------------------
Total shareholders' equity 23,938,983 22,978,686
--------------------------------------------------------------------
Total liabilities and shareholders' equity 28,090,521 26,012,319
--------------------------------------------------------------------
--------------------------------------------------------------------


Intrinsyc Software International, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
(Unaudited)

Three months ended Twelve months ended

2005 2004 2005 2004
$ $ $ $
--------------------------------------------------------------------
Restated

Revenues 5,412,588 3,835,648 17,539,105 15,175,928
Cost of sales 2,661,353 1,885,404 9,080,999 8,407,944
--------------------------------------------------------------------
2,751,235 1,950,244 8,458,106 6,767,984
--------------------------------------------------------------------

Expenses
Administration 1,005,849 929,936 4,185,208 3,178,235
Marketing and sales 737,677 849,863 3,008,441 3,045,099
Research and
development 1,584,729 333,833 4,042,779 1,681,003
Amortization 196,891 218,143 825,150 1,097,774
Stock-based
compensation 241,694 153,447 816,214 631,342
Restructuring and
other costs - 323,000 - 623,000
Technology
Partnerships Canada
Funding Investment 225,000 384,021 214,652 (219,053)
--------------------------------------------------------------------
3,991,840 3,192,243 13,092,444 10,037,400
--------------------------------------------------------------------

Loss before other
earnings (expense)
and income taxes 1,240,605 1,241,999 4,634,338 3,269,416
--------------------------------------------------------------------
Other expense
(earnings)
Foreign exchange
loss (gain) 288,758 342,790 482,657 (35,591)
Interest income (29,642) (12,908) (119,830) (7,971)
--------------------------------------------------------------------
259,116 329,882 362,827 (43,562)
Loss before income
taxes 1,499,721 1,571,881 4,997,165 3,225,854
--------------------------------------------------------------------
Income tax expense
(recovery) Current 59,036 1,950 77,424 10,329
Future (23,652) (23,650) (94,608) (144,600)
--------------------------------------------------------------------
35,384 (21,700) (17,184) (134,271)
--------------------------------------------------------------------
Loss for the period 1,535,105 1,550,181 4,979,981 3,091,583

Deficit, beginning
of period 34,010,521 29,015,464 30,565,645 27,474,062
--------------------------------------------------------------------
Deficit, end of
period 35,545,626 30,565,645 35,545,626 30,565,645
--------------------------------------------------------------------
--------------------------------------------------------------------

Loss per share
(basic and diluted) 0.03 0.04 0.09 0.07
--------------------------------------------------------------------
--------------------------------------------------------------------

Weighted average
number of shares
outstanding 56,233,718 43,335,759 54,477,377 41,631,629
--------------------------------------------------------------------
--------------------------------------------------------------------


Intrinsyc Software International, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

Three months ended Twelve months ended

2005 2004 2005 2004
$ $ $ $
--------------------------------------------------------------------
Restated
OPERATING
ACTIVITIES
Loss for the
period (1,535,105) (1,550,181) (4,979,981) (3,091,583)
Items not
involving cash
Amortization 196,891 218,143 825,150 1,097,774
Unrealized
foreign exchange
loss on
contingent
consideration - (433) - 119,742
Future income
taxes (23,652) (23,650) (94,608) (144,600)
Stock-based
compensation 241,694 153,447 816,214 631,342
Changes in non-cash
operating working
capital
Income taxes
payable 91,995 (89,243) 133,640 (53,299)
Funds held in trust - - - 461,438
Accounts receivable 438,141 (180,962) (528,325) (48,325)
Other receivable - (184,247) 947,374 12,908
Inventory 38,380 104,927 143,522 352,091
Prepaid expenses (201,788) (181,048) (10,982) (178,565)
Accounts payable
and accrued
liabilities 823,102 458,689 888,033 (201,983)
Deferred revenue (29,431) (183,174) 190,840 186,017
--------------------------------------------------------------------
Cash provided by
(used in) operating
activities 40,227 (1,457,732) (1,669,123) (857,043)
--------------------------------------------------------------------

INVESTING
ACTIVITIES
Purchase of short
term investments 5,000,000 - - -
IEL acquisition
costs - 16,229 - (102,146)
Loan note - - - (862,950)
Acquisition of
intangible assets (184,875) (81,804) (184,875) (355,884)
Purchase of capital
assets (127,674) (26,533) (552,316) (165,802)
--------------------------------------------------------------------
Cash (used) provided
by investing
activities 4,687,451 (92,108) (737,191) (1,486,782)
--------------------------------------------------------------------

FINANCING ACTIVITIES
Issuance of common
shares - - 5,632,671 23,500
Share issuance costs - - (508,607) -
--------------------------------------------------------------------
Cash provided by
financing
activities - - 5,124,064 23,500
--------------------------------------------------------------------

Increase (Decrease)
in cash and cash
equivalents 4,727,678 (1,549,840) 2,717,750 (2,320,325)
Cash and cash
equivalents,
beginning of
period 2,590,532 6,150,300 4,600,460 6,920,785
--------------------------------------------------------------------
Cash and cash
equivalents, end
of period 7,318,210 4,600,460 7,318,210 4,600,460
--------------------------------------------------------------------
--------------------------------------------------------------------

Supplementary
information
Interest paid 1,223 1,683 14,203 92,367
Interest received 30,865 (31,685) 132,035 58,837
Income taxes paid
(received) - 117,752 (11,007) 123,277
Non-cash investing
Additional
consideration paid
in relation to the
acquisition of IEL - - - 2,392,334
--------------------------------------------------------------------
--------------------------------------------------------------------



Contact Information