Tranzeo Wireless Technologies Inc.
TSX : TZT

Tranzeo Wireless Technologies Inc.

April 06, 2011 03:56 ET

Tranzeo Provides Fourth Quarter and 2010 Year End Results

PITT MEADOWS, BRITISH COLUMBIA--(Marketwire - April 6, 2011) - Tranzeo Wireless Technologies, Inc. (TSX:TZT), a leading producer of high-speed wireless broadband communication systems, today announced its financial results for the fourth quarter and year ended December 31, 2010.

Financial Results:

  • Revenue was $11.1 million for 2010 compared to $11.6 million for 2009. Revenue for the fourth quarter was $1.2 million for 2010 compared with $1.7 million for 2009. In the fourth quarter there were two one time adjustments that decreased sales, one being a large distributor stock rotation order that was not reordered in 2010 the amount of $0.9 million, the other being a sales adjustment that occurred on the Aperto acquisition cut over in April 16 2010 of $0.6 million. Both these decreased sales. The gross Q4 2011 sales before these adjustments would have been $2.7 million.
      
  • Gross profit was $2.8 million for 2010 and $3.2 million for 2009 with gross profit margins at 25% and 27% respectively. Gross profit for the quarter was $0.4 million compared with $0.2 million year over year, with gross profit margins at 38% and 10% respectively.
      
  • Goodwill acquired on the Aperto acquisition of $5.0 million was fully expensed in the fourth quarter, which will eliminate future ongoing amortization charges applied against income.
     
  • EBITDA (excluding stock based compensation) was a loss of $7.7 million for 2010, compared to a loss of $1.3 million for 2009. The majority increase in the loss was the result of merging the operations of Aperto with Tranzeo and expensing all research and development costs in 2010 versus capitalizing those costs as deferred costs in 2009. The amount capitalized in 2009 was $2.9 million. Expenses for Aperto are down 50% from the time of the merger so management expects lower overall expenses for 2011.
      
  • The earn out shares for the Aperto Acquisition as of March 23 2011 are 1,050,702 shares with the final adjustment to be completed April 16 2011.

Q4 revenue was lower than expected primarily due to the longer sales cycle and qualification requirements associated with international telecommunications service providers compared to Tranzeo's historical customer base of local wireless internet service providers. We are seeing signs of global economic recovery in our targeted international markets as evidenced by the multiple contracts Tranzeo has secured in the fourth quarter of 2010 and the first quarter of 2011.

Tranzeo completed the integration of Aperto Networks in Q4 of 2010, resulting in significantly lower operating expenses that will be fully realised in 2011. The Aperto products are now shipping through Tranzeo's sales channels resulting in new sales in Indonesia, Spain, the Middle East, China and South America. 

Tranzeo announced contracts with two tier 1 nationwide service providers in India. Both customers have completed their extensive qualification phase and are now in the deployment phase with Tranzeo's WiMAX and WiFi products. Tranzeo is supplying broadband equipment for a nationwide deployment covering over 200 cities enabling broadband services for enterprise customers running mission critical applications. Tranzeo equipment is also being deployed to provide communications infrastructure for the Ministry of Power and also a nationwide rollout of commercial services initially in 38 cities.

Tranzeo and Aperto secured purchase orders from its partner in Spain, Nostracom, to continue to expand existing broadband services in Spain. We are engaged in several substantial opportunities in Western Europe. We have also seen growth in the Middle East with expansion to existing networks in addition to new opportunities.

Tranzeo and its Indonesian system integration partner, PT. Teknologi Riset Global (TRG), continue to support ongoing qualifications with leading telecommunications providers in Indonesia. The Indonesia market has been slow to deploy due to the economic recession and confusion in the market even though Tranzeo's equipment is one of only two certified suppliers of licensed broadband equipment. We expect the news of Tranzeo's success in India will provide a catalyst to the Indonesia service providers to expand current and initiate new deployments.

Tranzeo's recent equity raise supports the cash flow required to fund our growing sales pipeline in India.

Tranzeo is leveraging its existing production and test facilities by offering contract manufacturing and test services to third parties. This activity has resulted in $2.5M in booked business which began in Q1 of 2011. We expect this business to continue to expand which will result in additional revenue growth and better operational efficiencies.

Tranzeo and the Tranzeo logo are registered trademarks of Tranzeo Wireless Technologies Inc.

About Tranzeo Wireless Technologies Inc:

Tranzeo Wireless Technologies Inc. (TSX:TZT) leads the wireless broadband industry as a premier manufacturer of high-performance wireless network equipment that allows communities and businesses to communicate without boundaries. Tranzeo's full spectrum of point-to-point and point-to-multipoint radios, WiMAX equipment, and mesh network solutions are designed for wireless internet service providers, governments, campuses, military, carriers, enterprise customers, and systems integrators around the globe. Headquartered in British Columbia, Canada, Tranzeo also has offices in San Diego, California, San Jose, California, and Indonesia. Visit http://www.tranzeo.com or phone 1.866.872.6936 for more information.

Forward-Looking Statements

This press release contains forward-looking statements that involve risks and uncertainties. We use words such as "anticipate", "plan", "expect", "believe", "intend" and similar expressions to identify forward-looking statements that relate to our business, management, operating results and financial condition and the planned acquisition of Aperto. These statements are not historical facts, but reflect our current expectations regarding future results or events. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from current expectations, including the matters discussed under "Risk Factors" in our Annual Information Form and Management's Discussion and Analysis which may be found on SEDAR at www.sedar.com.

TRANZEO WIRELESS TECHNOLOGIES INC.

CONSOLIDATED FINANCIAL STATEMENTS

QUARTER ENDED DECEMBER 31, 2010

(Unaudited)

(IN CANADIAN DOLLARS)

CONSOLIDATED BALANCE SHEETS

CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT

CONSOLIDATED STATEMENTS OF CASH FLOWS

TRANZEO WIRELESS TECHNOLOGIES INC.  
Consolidated Balance Sheets       
             
    December 31,     December 31,  
    2010     2009  
             
Assets            
Current assets:            
  Cash $ 72,066   $ 1,837,832  
  Accounts receivable   1,000,754     3,383,960  
  Prepaid expenses   388,936     331,805  
  Inventory   4,754,634     4,581,481  
    6,216,390     10,135,078  
Property and equipment   9,812,338     10,912,869  
  $ 16,028,728   $ 21,047,947  
             
Liabilities and Shareholders' Equity            
Current liabilities:            
  Accounts payable and accrued liabilities $ 7,768,160   $ 3,941,790  
  Due to related party   1,179,214     251,318  
  Current portion of equipment loan   -     18,879  
  Current portion of capital lease obligation   51,310     579,644  
  Short term debt   764,500     100,000  
    9,763,184     4,891,631  
Equipment loan   -     47,201  
Capital lease obligation   84,972     24,456  
    9,848,156     4,963,288  
             
Shareholders' equity:            
  Share capital   31,779,583     28,407,690  
  Shares issuable   1,699,787     -  
  Contributed surplus   2,937,089     2,104,729  
  Deficit   (30,235,887 )   (14,427,760 )
    6,180,572     16,084,659  
  $ 16,028,728   $ 21,047,947  
             
 
TRANZEO WIRELESS TECHNOLOGIES INC.   
Consolidated Statements of Operations, Comprehensive Loss and Deficit
(Unaudited)
     
  Three Months Ended     Twelve Months Ended   
   December 31     December 31   
   2010   2009   2010    2009
Sales $  1,157,918   $ 1,673,318   $ 11,107,103   $ 11,628,234  
Cost of goods sold   720,081     1,513,352     8,294,103     8,462,926  
Gross profit   437,837     159,966     2,813,000     3,165,308  
                         
                         
Expenses                        
   Sales and marketing   681,609     598,091     2,758,311     1,693,875  
   Research and development   1,059,406     359,605     3,251,062     1,313,727  
   General and administrative   1,190,712     774,979     4,222,877     2,841,390  
   Stock based compensation   141,279     223,728     1,234,452     393,027  
   Amortization   472,289     315,612     1,447,362     1,264,950  
    3,545,295     2,272,015     12,914,064     7,506,969  
                         
Loss before other items   (3,107,458 )   (2,112,049 )   (10,101,064 )   (4,341,661 )
                         
Other expenses (income)                        
   Acquisition costs   -     -     514,623     -  
   Interest expense   199,373     133,831     374,758     615,836  
   Other income   (158,504 )   -     (158,504 )   -  
   Foreign exchange loss (gain)   (176,376 )   17,146     (95,989 )   28,890  
   Investment tax credits written off   -     858,855     -     858,855  
   Impairment of goodwill   4,881,673     -     5,072,175     -  
   Impairment of deferred development costs   -     9,262,990     -     9,262,990  
    4,746,166     10,272,822     5,707,063     10,766,571  
                         
Net loss before income tax   (7,853,624 )   (12,384,871 )   (15,808,127 )   (15,108,232 )
                         
Future income taxes (recovery)   -     671,010     -     (95,209 )
                         
Net and comprehensive loss   (7,853,624 )   (13,055,881 )   (15,808,127 )   (15,013,023 )
                         
Retained earnings (deficit), beginning   (22,382,263 )   (1,371,879 )   (14,427,760 )   585,263  
                         
Deficit, ending   (30,235,887 )   (14,427,760 )   (30,235,887 )   (14,427,760 )
                         
                         
Loss per share for the period                        
   Basic and diluted $ (0.16 ) $ (0.34 ) $ (0.32 ) $ (0.47 )
                         
Weighted average number of shares outstanding for the year – basic and diluted   49,288,082     31,724,897     49,288,082     31,724,897  
                         
 
TRANZEO WIRELESS TECHNOLOGIES INC.
Consolidated Statements of Cash Flow
 
    Three Months Ended  Twelve Months Ended
    December 31   December 31
             2010            2009             2010             2009
         
Cash flows from operating activities:                        
Loss for the period $ (7,853,624 ) $ (13,055,881 ) $ (15,808,127 ) $ (15,013,023 )
Adjustments to reconcile net earnings to net cash from operating activities:                        
  Amortization   472,290     315,612     1,447,362     1,264,950  
  Amortization of deferred development costs   -     359,605     -     1,313,727  
  Gain on settlement of debt   -     -     (158,504 )   -  
  Impairment of technology rights   4,881,673     -     5,072,175     -  
  Technology acquisition   431,889     -     -     -  
  Future income taxes (recovery)   -     671,008     -     (95,209 )
  Investment tax credit write off   -     858,855     -     858,855  
  Impairment of deferred development costs   -     9,262,990     -     9,262,990  
  Stock based compensation   141,279     223,728     1,234,452     393,027  
    (1,926,493 )   (1,364,083 )   (8,212,642 )   (2,014,683 )
Changes in working capital assets and liabilities:                        
  Prepaid expenses   452,312     256,736     (57,131 )   437,017  
  Accounts receivable   224,033     428,601     2,383,206     (94,953 )
  Accounts payable and accrued liabilities   (97,683 )   (2,049,531 )   939,353     (3,248,016 )
  Inventories   461,811     2,045,050     296,847     4,518,711  
Net cash flows used in operating activities   (886,020 )   (683,227 )   (4,650,367 )   (401,924 )
                         
Cash flows from investing activities:                        
  Acquisition of Aperto   -     -     (250,063 )   -  
  Additions to property and equipment   (44,196 )   (271,473 )   (226,671 )   (444,072 )
  Deferred development expenses   -     (821,433 )   -     (2,924,863 )
  Sale of technology asset   50,445     -     606,500     -  
                         
Net cash flows used in investing activities   6,249     (1,092,906 )   129,766     (3,368,935 )
                         
Cash flows from financing activities:                        
  Bank indebtedness   -     (2,923,847 )   -     (3,116,276 )
  Repayment of capital lease obligation   (85,011 )   (233,611 )   (569,181 )   (1,038,928 )
  Repayment of equipment loan   -     (4,720 )   (66,080 )   (18,880 )
  Proceeds from (repayment of) short term debt   -     (123,421 )   1,089,440     (1,900,000 )
  Proceeds from related party loan   580,000     251,318     927,896     251,318  
  Shares issuable for cash   270,832     -     270,832     -  
  Issuance of common shares, net   34,070     6,648,246     1,101,928     11,431,455  
Net cash flows from financing activities   799,891     3,613,965     2,754,835     5,608,691  
                         
Net increase (decrease) in cash   (79,880 )   1,837,832     (1,765,766 )   1,837,832  
                         
Cash, beginning of period   151,946     -     1,837,832     -  
                         
Cash, end of period   72,066     1,837,832     72,066     1,837,832  
                         
Supplementary cash information                        
  Cash paid for interest $ 199,233   $ 134,729   $ 317,970   $ 616,165  
  Cash paid for income taxes $ -   $ -   $ -   $ -  
                         

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