Intrinsyc Software International, Inc.
TSX : ICS

Intrinsyc Software International, Inc.

November 08, 2006 08:00 ET

Intrinsyc Software Reports 2006 Full Year and Fourth Quarter Financial Results

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Nov. 8, 2006) - Intrinsyc Software International, Inc. (TSX:ICS) today announced its financial results for the full year and fourth quarter ended August 31, 2006, reported in Canadian dollars and in accordance with Canadian GAAP.

Revenue was $4.9 million in the fourth quarter of 2006, an increase of 12 percent compared with $4.4 million in the third quarter of 2006 and a decrease of 9 percent from $5.4 million in the same period in the prior year. The year-over-year decrease in quarterly revenue was due to several large J-Integra software and legacy product sales recorded in the prior year that did not repeat in the current year. For the full year of 2006, the Company reported record revenue of $18.7 million, up 6 percent from $17.5 million in 2005.

"Intrinsyc's annual revenue growth of 6 percent reflects solid progress in our North American engineering services business more than offsetting a decline in European revenues," said Glenda Dorchak, Chairman and CEO of Intrinsyc. "We anticipate US customer revenue will continue to experience strong growth and are looking to improve revenues in the European market as well as expand our business to Asia over the coming year."

"In fiscal 2006, the Company continued its investment in the Soleus™ software product based on Microsoft® Windows® CE for the development of consumer feature phones. Soleus™ was announced for commercial availability and demonstrated at the 3GSM World Congress in February 2006. Intrinsyc remains on schedule to complete Soleus™ version 1.0 final release by the end the calendar year," concluded Ms. Dorchak.

For 2006, the EBITDA loss of $13.2 million compared to the EBITDA loss of $3.5 million in 2005. Research and development expenditures for Soleus™ were $10.6 million in 2006 compared to $3.1 million in 2005. For the fourth quarter of 2006, the EBITDA loss was $3.8 million and compared to the EBITDA loss of $1.1 million in the same quarter of 2005. Expenditures for Soleus™ research and development were $3.6 million in the fourth quarter of 2006 compared to $1.4 million in fourth quarter of 2005. The calculation of EBITDA excludes stock-based compensation expense. See further discussion on EBITDA under the heading supplemental information later in this press release.

For 2006, the loss of $16.4 million or $0.24 per share compares to the loss of $5.0 million or $0.09 per share in 2005. The loss of $4.4 million or $0.05 per share in the fourth quarter of 2006 compares to the loss of $1.5 million or $0.03 per share in the same quarter of 2005.

As result of higher spending on research and development, cash used in operations increased to $12.8 million in 2006 compared to cash used in operations of $1.7 million in 2005. Cash used in operations increased to $3.8 million in the fourth quarter of 2006 compared to cash provided by operations of $40,227 in the fourth quarter of 2005.

Cash on hand at quarter end was $22.5 million compared to $7.3 million at the same quarter end last year. The increase reflects the net proceeds from the previously announced debenture and equity financings less the funds used by the Company's operations.

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, November 8, 2006.

Questions can 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 ten minutes before the start time. A telephone playback will 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 287707.

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 mobile software products, engineering design services and systems integration expertise help 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, Symbian, General Electric, Hand Held Products, Texas Instruments and Ford.

Named a Microsoft Gold Partner, Intrinsyc has extensive experience with the intricacies of designing, developing and supporting voice and data-enabled handsets built on Microsoft's Windows® CE operating system. Intrinsyc is also the creator and licensor of Soleus™, the world's first feature phone software platform based on Windows® CE. Soleus™ offers a new way to build mobile phones, providing pre-integration with leading hardware platforms, all the telephony essentials and pre-integration of the most popular data applications.

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

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 Years ended
August 31 August 31
2006 2005 2006 2005
(unaudited) (unaudited) (unaudited) (unaudited)
-------------------------------------------------------------------------
$ $ $ $
-------------------------------------------------------------------------

Revenue 4,923,932 5,412,588 18,657,717 17,539,105
Cost of sales 2,625,080 2,661,353 11,318,054 9,080,999
-------------------------------------------------------------------------
2,298,852 2,751,235 7,339,663 8,458,106

Administration 1,446,636 1,005,849 5,407,944 4,185,208
Marketing and sales 865,986 737,677 3,456,723 3,008,441
Research and
development 3,676,425 1,584,729 10,969,692 4,042,779
Technology Partnerships
Canada Funding
Investment 136,767 225,000 260,905 214,652
Foreign exchange loss
(gain) (22,528) 288,758 428,220 482,657

EBITDA loss 3,804,434 1,090,778 13,183,821 3,475,631
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Amortization 192,207 196,891 1,061,174 825,150
Stock-based
compensation 158,054 241,694 915,115 816,214
Loss on disposal of
equipment 671 - 671 -
Interest income (234,313) (29,642) (551,785) (119,830)
Accretion and
amortization -
long-term debt 205,547 - 744,098 -
Interest expense -
long-term debt 252,056 - 909,590 -
Income tax expense
(recovery)
Current 65,265 59,036 202,929 77,424
Future (14,306) (23,652) (72,279) (94,608)
-------------------------------------------------------------------------

Loss under Canadian
GAAP 4,429,615 1,535,105 16,393,334 4,979,981
-------------------------------------------------------------------------
-------------------------------------------------------------------------


Intrinsyc Software International, Inc.
CONSOLIDATED BALANCE SHEETS
(in Canadian dollars, Canadian GAAP)

2006 2005
(unaudited) (unaudited)
As at August 31 $ $
------------------------------------------------------------------------

ASSETS
Current
Cash and cash equivalents 22,487,076 7,318,210
Accounts receivable 3,789,743 3,909,596
Inventory 110,996 134,318
Prepaid expenses - current 385,816 306,089
------------------------------------------------------------------------
Total current assets 26,773,631 11,668,213
------------------------------------------------------------------------
Prepaid expenses 61,769 39,673
Equipment 1,360,832 980,580
Goodwill 14,189,478 14,189,478
Intangible assets 556,120 1,212,577
Deferred financing costs 516,599 -
------------------------------------------------------------------------
Total assets 43,458,429 28,090,521
------------------------------------------------------------------------
------------------------------------------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued
liabilities 4,010,542 2,790,071
Taxes payable 218,912 263,382
Deferred revenue 542,515 836,660
------------------------------------------------------------------------
Total current liabilities 4,771,969 3,890,113
------------------------------------------------------------------------
Debentures 7,617,946 -
Future income taxes 229,655 261,425
------------------------------------------------------------------------
Total liabilities 12,619,570 4,151,538
------------------------------------------------------------------------


Shareholders' equity
Share capital 74,623,739 57,452,141
Warrants and underwriters' options 5,229,997 163,500
Contributed surplus 2,951,875 1,896,760
Cumulative translation adjustment (27,792) (27,792)
Deficit (51,938,960) (35,545,626)
------------------------------------------------------------------------
Total shareholders' equity 30,838,859 23,938,983
------------------------------------------------------------------------
Total liabilities and
shareholders' equity 43,458,429 28,090,521
------------------------------------------------------------------------
------------------------------------------------------------------------


Intrinsyc Software International, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
(in Canadian dollars, Canadian GAAP)

Three months ended Years ended
August 31 August 31
2006 2005 2006 2005
(unaudited) (unaudited) (unaudited) (unaudited)
$ $ $ $
-------------------------------------------------------------------------

Revenues 4,923,932 5,412,588 18,657,717 17,539,105
Cost of sales 2,625,080 2,661,353 11,318,054 9,080,999
-------------------------------------------------------------------------
2,298,852 2,751,235 7,339,663 8,458,106
-------------------------------------------------------------------------

Expenses
Administration 1,446,636 1,005,849 5,407,944 4,185,208
Marketing and sales 865,986 737,677 3,456,723 3,008,441
Research and
development 3,676,425 1,584,729 10,969,692 4,042,779
Amortization 192,207 196,891 1,061,174 825,150
Stock-based
compensation 158,054 241,694 915,115 816,214
Technology Partnerships
Canada Funding
Investment 136,767 225,000 260,905 214,652
-------------------------------------------------------------------------
6,476,075 3,991,840 22,071,553 13,092,444
-------------------------------------------------------------------------

Loss before other
expense (income)
and income taxes 4,177,223 1,240,605 14,731,890 4,634,338

Other expense (income)
Foreign exchange loss
(gain) (22,528) 288,758 428,220 482,657
Loss on disposal of
equipment 671 - 671 -
Interest income (234,313) (29,642) (551,785) (119,830)
Accretion and
amortization - long
term debt 205,547 - 744,098 -
Interest expense - long
term debt 252,056 - 909,590 -
-------------------------------------------------------------------------
201,433 259,116 1,530,794 362,827
-------------------------------------------------------------------------

Loss before income
taxes 4,378,656 1,499,721 16,262,684 4,997,165
Income tax expense
(recovery)
Current 65,265 59,036 202,929 77,424
Future (14,306) (23,652) (72,279) (94,608)
-------------------------------------------------------------------------
50,959 35,384 130,650 (17,184)
-------------------------------------------------------------------------

Loss for the period 4,429,615 1,535,105 16,393,334 4,979,981

Deficit, beginning of
period 47,509,345 34,010,521 35,545,626 30,565,645
-------------------------------------------------------------------------
Deficit, end of period 51,938,960 35,545,626 51,938,960 35,545,626
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Loss per share (basic
and diluted) 0.05 0.03 0.24 0.09
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Weighted average number
of shares outstanding 83,041,249 56,233,718 67,618,153 54,477,377
-------------------------------------------------------------------------
-------------------------------------------------------------------------


Intrinsyc Software International, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in Canadian dollars, Canadian GAAP)

Three months ended Years ended
August 31 August 31
2006 2005 2006 2005
(unaudited) (unaudited) (unaudited) (unaudited)
$ $ $ $
-------------------------------------------------------------------------

OPERATING ACTIVITIES
Loss for the period (4,429,615) (1,535,105) (16,393,334) (4,979,981)
Items not involving
cash:
Amortization 192,207 196,891 1,061,174 825,150
Future income taxes (14,122) (23,652) (31,770) (94,608)
Stock-based
compensation 158,054 241,694 915,115 816,214
Accretion and
amortization - long
term debt 205,547 - 744,098 -
Changes in non-cash
operating working
capital:
Income taxes payable 112,680 91,995 (44,470) 133,640
Accounts receivable (203,624) 438,141 119,853 (528,325)
Other receivable - - - 947,374
Inventory 23,936 38,380 23,322 143,522
Prepaid expenses (197,872) (201,788) (101,823) (10,982)
Accounts payable and
accrued liabilities 390,951 823,102 1,220,468 888,033
Deferred revenue (61,857) (29,431) (294,145) 190,840
-------------------------------------------------------------------------
Cash provided by (used
in) operating
activities (3,823,715) 40,227 (12,781,512) (1,669,123)
-------------------------------------------------------------------------

INVESTING ACTIVITIES
Purchase of short term
investments - 5,000,000 - -
Acquisition of
intangible assets - (184,875) - (184,875)
Purchase of equipment (106,587) (127,674) (784,969) (552,316)
-------------------------------------------------------------------------
Cash provided by (used
in) investing
activities (106,587) 4,687,451 (784,969) (737,191)
-------------------------------------------------------------------------

FINANCING ACTIVITIES
Issuance of common
shares and warrants 4,125 - 24,123,936 5,632,671
Share issuance costs (23,251) - (2,344,984) (508,607)
Debentures - - 8,000,000 -
Debentures issuance
costs - - (1,043,605) -
-------------------------------------------------------------------------
Cash provided by (used
in) financing
activities (19,126) - 28,735,347 5,124,064
-------------------------------------------------------------------------

Increase (decrease) in
cash and cash
equivalents (3,949,428) 4,727,678 15,168,866 2,717,750
Cash and cash
equivalents, beginning
of period 26,436,504 2,590,532 7,318,210 4,600,460
-------------------------------------------------------------------------
Cash and cash
equivalents, end of
period 22,487,076 7,318,210 22,487,076 7,318,210
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Supplementary
information
Interest paid 237,599 1,223 903,749 14,203
Interest received 235,422 30,865 503,329 132,035
Income taxes paid
(recovered) 11,937 - 117,630 (11,007)
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