Intrinsyc Software International, Inc.
TSX : ICS

Intrinsyc Software International, Inc.

June 28, 2005 03:01 ET

Intrinsyc Software Reports Third Quarter 2005 Financial Results; Company Continues its Quarterly Revenue Growth

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - June 28, 2005) - Intrinsyc Software International, Inc. (TSX:ICS), today announced its financial results for the third quarter of its 2005 fiscal year. The Company's fiscal 2005 third quarter revenue was $4.3 million, which is a 3% increase compared to revenue of $4.2 in the second quarter of fiscal 2005, and a 7% increase compared to revenues of $4.0 million in the third quarter of fiscal 2004. The improvement in sales is mainly due to strength in both the sales of mobility engineering services and J-Integra software licensing. Gross margins for the quarter decreased to 46% compared to 50% in the second quarter of fiscal 2005 and 49% in the third quarter of fiscal 2004. The margin decrease was due to the costs associated with ramping up new staff required to support the growth in the mobility engineering services business in both the third and fourth quarters of fiscal 2005.

The loss for the quarter was $1.3 million or $0.02 per share compared to a loss of $763,000 or 0.01 per share in the second quarter of fiscal 2005 and a loss of $369,000 or $0.01 per share in the third quarter of fiscal 2004. The loss includes stock based compensation expense of $221,000 in the quarter. Research and development expenditure on mobile software products increased by $348,000 in the quarter compared to the second quarter of fiscal 2005, and by $880,000 compared to the third quarter of fiscal 2004. The cash used for operations amounted to $728,000.

The Company recorded a foreign exchange gain in the third quarter of fiscal 2005 of $128,000 compared to a foreign exchange gain of $174,000 in the second quarter of fiscal 2005 and $119,000 in the third quarter of fiscal 2004. The Company has a foreign exchange hedging program that effectively hedges approximately 50% of its net monthly US dollar receipts.

"We are continuing to improve the results of our core business while we drive forward on the development of our mobility software products," said Vince Schiralli, President and Chief Operating Officer. "We are on track for further growth in the core business and we are on target to continue to hit our development milestones."

"We are very pleased with both the strength and continued growth in our core business as well as the exciting progress we are making in the development of our mobile software products," said Derek Spratt, Chief Executive Officer. "The industry feedback to date has been very positive and our go-to-market plan is progressing well."

Third Quarter Highlights:

- The Company announced the promotion of Randy Kath to Vice President of Mobile Software Products. The Mobile Software Products team is responsible for leveraging the popular Microsoft Windows CE operating system to create software that will allow mobile phone manufacturers to design more cost-effective and feature-laden handsets. Mr. Kath is located in the Company's Bellevue, Washington, USA offices.

- 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 Company announced that its Mobile Solutions Team has been contracted to create and deliver Nokia Series 60 and Series 80 messaging software 'plug-ins' which will allow users to access email on a range of phones including Nokia 6620, Nokia 9300 and Nokia 9500 phones powered by the Symbian operating system.

- Intrinsyc Software announced its beta program for J-Integra Espresso, a new set of development tools and high-performance run-time components that bridge Java, CORBA and Microsoft .NET technologies. This software product is an important new offering for the Company's Enterprise Interoperability Software business which is expected to improve results of Intrinsyc Software's core business.

Condensed financial statements are attached and a conference call to discuss these results will be held Tuesday, June 28, 2005 at 10:00 a.m. PST. Analysts, investment professionals, shareholders, members of the media and other interested parties wishing to participate may call 1.888.343.2180 (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 unable to participate, a replay of the conference call will be available from 12:00 p.m. PST on June 28, 2005 to 12:00 a.m. PST on July 2, 2005. The replay number is 1.800.633.8625 and the pass code for callers is 21249939. The call will also be archived at www.intrinsyc.com/investors/pres_and_conf_calls.asp.

About Intrinsyc

Intrinsyc provides unique products and services that help companies create next generation internet based devices, and provides software solutions that enable the integration and bridging of these device platforms with enterprise applications and databases, creating end-to-end solutions that address the business needs of real-time enterprise computing. By leveraging Intrinsyc's products, engineering design services and systems integration expertise, customers make better decisions, improve productivity, and reduce time-to-market. Intrinsyc is an industry leading, public company with global customers such as Microsoft, IBM, Intel, Philips, Siemens, General Electric, and Ford. 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 our services and products, statements about future market conditions, supply and demand conditions, and other expectations, intentions and plans contained in this press release that are not historical fact. Our expectations regarding future revenues depend upon our ability to develop and supply products, which we do not produce today and that meet defined specifications. When used in this press release, the words "plan", "expect", "believe", and similar expressions generally identify forward-looking statements. These statements reflect our current expectations. They are subject to a number of risks and uncertainties, including, but not limited to, changes in technology and changes in the pervasive computing market. In light of the many risks and uncertainties surrounding the pervasive computing market, you should understand that we couldn't assure you that the forward-looking statements contained in this press release will be realized. The Company 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)


May 31, August 31,
2005 2004
$ $
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ASSETS
Current
Cash and cash equivalents 2,590,532 4,600,460
Short term investment 5,000,000 --
Accounts receivable 4,347,737 3,381,271
Other receivable -- 947,374
Inventory 172,698 277,840
Prepaid expenses 143,974 334,780
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Total current assets 12,254,941 9,541,725
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Capital assets 946,012 838,268
Goodwill 14,189,478 14,189,478
Intangible assets 1,131,489 1,442,848
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Total assets 28,521,920 26,012,319
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued
liabilities 2,108,963 2,031,780
Taxes payable 29,395 --
Deferred revenue 866,091 645,820
Future income taxes 94,600 94,600
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Total current liabilities 3,099,049 2,772,200
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Future income taxes 190,477 261,433
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Total liabilities 3,289,526 3,033,633
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Contingencies and commitments

Shareholders' equity
Share capital 57,452,141 52,328,077
Share purchase warrants 163,500 163,500
Contributed surplus 1,655,066 1,080,546
Cumulative translation adjustment (27,792) (27,792)
Deficit (34,010,521) (30,565,645)
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Total shareholders' equity 25,232,394 22,978,686
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Total liabilities and
shareholders' equity 28,521,920 26,012,319
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Intrinsyc Software International, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
(Unaudited)

Three months ended Nine months ended
May 31 May 31

2005 2004 2005 2004
$ $ $ $
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Revenues 4,275,715 3,990,698 12,126,517 11,340,280
Cost of sales 2,320,743 2,039,846 6,419,645 6,522,540
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1,954,972 1,950,852 5,706,872 4,817,740
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Expenses
Marketing and sales 757,428 802,961 2,270,764 2,195,236
Research and
development 1,084,815 451,573 2,458,051 1,347,170
Administration 1,110,831 817,169 3,179,359 2,248,299
Amortization 213,350 222,709 628,259 879,631
Stock-based
compensation 221,012 171,612 574,520 477,895
Restructuring -- -- -- 300,000
Less: Technology
Partnerships
Canada Funding
Investment 27,341 (85,000) (10,348) (603,074)
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3,414,777 2,381,024 9,100,605 6,845,157
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Loss before other
expense (income)
and income taxes 1,459,805 430,172 3,393,733 2,027,417
Other expense
(income)
Foreign exchange
loss (gain) (128,398) (119,245) 193,899 (378,381)
Interest (income)
expense (38,248) 75,435 (90,188) 4,937
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(166,646) (43,810) 103,711 (373,444)
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Loss before income
taxes 1,293,159 386,362 3,497,444 1,653,973
Income tax expense
(recovery)
Current 18,388 6,330 18,388 8,379
Future (23,652) (23,650) (70,956) (120,950)
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(5,264) (17,320) (52,568) (112,571)
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Loss for the period 1,287,895 369,042 3,444,876 1,541,402

Deficit, beginning
of period 32,722,626 28,646,422 30,565,645 27,474,062
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Deficit, end of
period 34,010,521 29,015,464 34,010,521 29,015,464
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Loss per share
(basic and
diluted) 0.023 0.009 0.064 0.038
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Weighted average
number of shares
outstanding 56,233,718 40,880,705 53,885,497 40,864,460
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Intrinsyc Software International, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

Three months ended Nine months ended
May 31 May 31

2005 2004 2005 2004
$ $ $ $
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OPERATING ACTIVITIES
Loss for the
period (1,287,895) (369,042) (3,444,876) (1,541,402)
Items not
involving cash
Amortization 213,350 222,709 628,259 879,631
Unrealized
foreign
exchange loss
on contingent
consideration -- (57,736) -- 120,175
Future income
taxes (23,652) (23,650) (70,956) (120,950)
Stock-based
compensation 221,012 171,612 574,520 477,895
Changes in
non-cash
operating
working capital
Funds held in
trust (current) -- -- -- 461,438
Accounts
receivable (513,513) 944,034 (966,466) 132,637
Other
receivable -- (85,000) 947,374 197,155
Inventory 22,492 82,120 105,142 247,164
Prepaid
expenses 53,919 (17,821) 190,806 2,483
Accounts
payable and
accrued
liabilities 401,492 149,496 64,931 (660,672)
Income taxes
payable 53,958 45,605 41,645 35,944
Deferred revenue 130,510 18,994 220,271 369,191
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Cash provided
by (used in)
operating
activities (728,327) 1,081,321 (1,709,350) 600,689
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INVESTING ACTIVITIES
Purchase of
short term
investments -- -- (5,000,000) --
Purchase of
capital assets (134,373) (42,752) (424,642) (139,269)
Acquisition
costs related
to additional
goodwill -- -- -- (118,375)
Acquisition of
intangible
assets -- -- -- (274,080)
Loan note -- (862,950) -- (862,950)
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Cash used in
investing
activities (134,373) (905,702) (5,424,642) (1,394,674)
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FINANCING ACTIVITIES
Issuance of
common shares -- 23,500 5,632,671 23,500
Share issuance
costs -- -- (508,607) --
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Cash provided
by financing
activities -- 23,500 5,124,064 23,500
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Increase
(decrease) in
cash and cash
equivalents (862,700) 199,119 (2,009,928) (770,485)
Cash and cash
equivalents,
beginning of
period 3,453,232 5,951,181 4,600,460 6,920,785
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Cash and cash
equivalents,
end of period 2,590,532 6,150,300 2,590,532 6,150,300
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Supplementary information
Interest paid 6,504 90,529 12,980 90,684
Interest received 44,752 41,149 101,170 90,522
Income taxes paid
(recovered) (11,007) (1,039) (11,007) 5,525
Non-cash investing
Additional
consideration
payable in
relation to the
acquisition of IEL -- 442,713 -- 2,392,334
Additional
consideration
related to the
acquisition of
Linar Ltd. -- -- -- 7,271
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