Tranzeo Wireless Technologies Inc.
TSX : TZT

Tranzeo Wireless Technologies Inc.

November 15, 2010 16:06 ET

Tranzeo Wireless Provides Third Quarter 2010 Results

PITT MEADOWS, BRITISH COLUMBIA--(Marketwire - Nov. 15, 2010) - Tranzeo Wireless Technologies Inc. (TSX:TZT), a leading producer of high-speed wireless broadband communication systems, today announced its financial results for the third quarter 2010.

Financial Highlights:

  • Revenue was $2.1 million compared with $3.5 million year over year.
  • Gross profit was $0.6 million compared with $1.0 million year over year
  • EBITDA (excluding stock based compensation) was a loss of $2.2 million for 2010, compared to a loss of $0.1 million for 2009. The 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 Q3 2009 was $0.5 million.

Revenue in Q3 was lower than expected due to a number of factors, most significantly the delay of the draw down of our purchase order back log for Indonesia. There have been shipments to Indonesia in Q4 however we believe that the significant draw downs will occur in 2011 beginning in Q1. The operators in Indonesia have deployed slower than expected but with the Government regulators now demanding deployment we believe shipments will increase significantly. To increase our presence in this market and to gain better visibility, we opened our marketing office in Jakarta in October. We believe this office will increase opportunities to sell our full wireless product offering to Indonesia.

In addition India has taken longer than expected in the transition from trials, technical specifications and commercial negotiations to the fulfillment of orders and shipment. We began shipments in Q4 to our first Tier 1 operator. This is a significant development for us as the scope of deployments and opportunities is large. We are now fully engaged with our second Tier 1 operator and expect to have shipments start in Q4. We expect India to play a key role in our growth.

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 optimum cost effectiveness, premium quality and responsive support have attracted a growing and devoted worldwide following of more than 2,465 dealers and 12 distributors. 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 Jose and San Diego, California and Shannon, Ireland. Visit http://www.tranzeo.com or phone 1.866.872.6936.

Forward-Looking Statements

Certain statements in this Press Release, including the expectations of revenue for Q4 and for the 2010 fiscal year provided above, constitute forward-looking statements or forward-looking information within the meaning of applicable securities laws. These statements are subject to certain assumptions, risks and uncertainties. Material factors and assumptions used to develop such estimates include:

  • Tranzeo's expectations regarding the timing and amount of existing and future purchase orders;
  • Tranzeo's expectations regarding integration of Aperto and Aperto's line of products;
  • Tranzeo's ability to provide integrated complete WiMAX solutions for major telecommunications providers; and
  • Tranzeo's manufacturing capacity to fulfill demand for increased product orders.

Readers are cautioned not to place undue reliance on such statements.

These statements are provided to enable external stakeholders to understand Tranzeo's expectations as of the date of this release and may not be appropriate for other purposes.

Actual results, performance, achievements or developments of Tranzeo may differ materially from the results, performance, achievements or developments expressed or implied by such statements. Risk factors that may cause the actual results, performance, achievements or developments of Tranzeo to differ materially from the results, performance, achievements or developments expressed or implied by such statements can be found in the public documents filed by Tranzeo with Canadian securities regulatory authorities, which are available at www.sedar.com, and include the following:

  • Tranzeo's growth is contingent upon its ability to fulfill existing purchase orders and secure future purchase orders for WiMAX and WiFi products;
  • Tranzeo may encounter unforeseen difficulties in integrating the business of Aperto, which could result in increased costs and lower than expected revenues;
  • Tranzeo's growth is dependent upon the development and growth of the market for WiMAX products;
  • The continued effects of the global economic downturn could impede global demand for WiMAX products and the growth of Tranzeo's business;
  • Tranzeo is still dependent on existing WiFi business;
  • Tranzeo's success depends on its ability to develop new products and enhance existing products;
  • Tranzeo's quarterly and annual revenues and operating results are difficult to predict and can fluctuate substantially;
  • Tranzeo's ability to grow is contingent upon it having adequate capital, either from existing operations or from future financings; and
  • There is no assurance that Tranzeo will be able to secure additional debt or equity financing to expand its operations.

Tranzeo assumes no obligation to update or revise any forward-looking statements or forward-looking information, whether as a result of new information, future events or otherwise, except as expressly required by law.

TRANZEO WIRELESS TECHNOLOGIES INC.
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
 
QUARTER ENDED SEPTEMBER 30, 2010
(Unaudited)
(IN CANADIAN DOLLARS)
 
Consolidated Balance Sheets
    September 30, 2010     December 31, 2009  
    (Unaudited)        
Assets            
Current assets:            
  Cash $ 151,946   $ 1,837,832  
  Accounts receivable   1,224,787     3,383,960  
  Prepaid expenses   874,061     331,805  
  Inventory   5,783,730     4,581,481  
    8,034,524     10,135,078  
Property and equipment   10,620,710     10,912,869  
Technology rights   8,803,321     -  
  $ 27,458,555   $ 21,047,947  
             
Liabilities and Shareholders' Equity            
Current liabilities:            
  Accounts payable and accrued liabilities $ 8,151,636   $ 3,941,790  
  Due to related party   313,421     251,318  
  Current portion of equipment loan   -     18,879  
  Current portion of capital lease obligation   129,274     579,644  
  Short term debt   764,500     100,000  
    9,358,831     4,891,631  
Equipment loan   -     47,201  
Capital lease obligation   92,019     24,456  
    9,450,850     4,963,288  
             
Shareholders' equity:            
  Share capital   32,500,201     28,407,690  
  Shares issuable   4,691,862     -  
  Contributed surplus   3,197,905     2,104,729  
  Retained deficit   (22,382,263 )   (14,427,760 )
    18,007,705     16,084,659  
  $ 27,458,555   $ 21,047,947  
   
Consolidated Statements of Operations and Deficit  
(Unaudited)  
    Three Months Ended     Nine Months Ended  
    September 30     September 30  
    2010     2009     2010     2009  
Sales $ 2,135,231   $ 3,454,507   $ 10,580,185   $ 9,954,917  
Cost of goods sold   1,538,273     2,427,303     7,574,020     6,949,575  
Gross Profit   596,958     1,027,204     3,006,164     3,005,342  
                         
                         
Expenses                        
  Sales and marketing   861,712     407,071     2,076,702     1,095,782  
  Research and development   792,891     359,618     2,191,656     954,122  
  General and administrative   1,176,770     682,426     3,144,478     2,066,410  
  Share based compensation   226,723     129,073     1,093,176     169,299  
  Amortization of technology rights   -     -     821,502     -  
  Amortization   326,217     316,566     975,073     949,338  
    3,384,313     1,894,754     10,302.586     5,234,951  
                         
Loss from operations   (2,787,355 )   (867,550 )   (7,296,422 )   (2,229,609 )
                         
Other expenses                        
  Acquisition costs   -     -     402,309     -  
  Interest expense   85,347     92,046     175,385     482,006  
  Foreign exchange (gain) loss   (68,433 )   13,195     80,387     11,744  
    16,914     105,241     658,081     493,750  
                         
Loss before income taxes   (2,804,269 )   (972,791 )   (7,954,503 )   (2,723,359 )
                         
Future income (recovery)   -     (253,115 )   -     (766,216 )
                         
Net loss   (2,804,269 )   (719,676 )   (7,954,503 )   (1,957,143 )
                         
Retained earnings (deficit), beginning of period   (19,577,994 )   (652,204 )   (14,427,760 )   585,263  
                         
Retained deficit, end of period $ (22,382,263 ) $ (1,371,880 ) $ (22,382,263 ) $ (1,371,880 )
                         
                         
Loss per share for the period                        
  Basic $ (0.06 ) $ (0.02 ) $ (0.16 ) $ (0.07 )
  Diluted $ (0.06 ) $ (0.02 ) $ (0.16 ) $ (0.07 )
                         
Weighted average number of shares - basic   49,286,817     34,005,433     48,411,678     29,256,393  
                         
Consolidated Statements of Cash Flows  
(Unaudited)  
    Three Months Ended     Nine Months Ended  
    September 30     September 30  
    2010     2009     2010     2009  
Cash flows from operating activities:                        
Net loss for the period $ (2,804,269 ) $ (719,676 ) $ (7,954,503 ) $ (1,957,143 )
Adjustments to reconcile net earnings to net cash from operating activities:                        
  Amortization   326,217     316,566     975,073     949,338  
  Amortization of deferred development costs   -     359,618     -     954,122  
  Amortization of technology rights   -     -     821,502     -  
  Interest on capital leases   35,742     28,113     58,739     69,788  
  Future income taxes (recovery)   -     (253,115 )   -     (766,216 )
  Stock based compensation   226,723     129,073     1,093,176     169,299  
    (2,215,587 )   (139,421 )   (5,006,015 )   (580,812 )
Changes in working capital assets and liabilities:                        
  Prepaid expenses   (215,087 )   108,154     (542,256 )   180,281  
  Accounts receivable   1,846,005     (372,248 )   2,159,173     (523,556 )
  Accounts payable and accrued liabilities   415,768     (3,883,877 )   2,109,410     (3,443,934 )
  Inventories   (208,353 )   3,090,924     898,186     4,719,111  
Net cash flows from (used in) operating activities   (377,254 )   (1,196,468 )   (381,502 )   351,090  
                         
Cash flows from investing activities                        
  Additions to property, plant and equipment   (50,784 )   (58,408 )   (585,227 )   (172,598 )
  Technology rights   9,996,384     -     (9,624,822 )   -  
  Deferred development expenses   -     (510,639 )   -     (2,103,430 )
Net cash flows used in investing activities   9,945,600     (569,047 )   (10,210,049 )   (2,276,028 )
                         
Cash flows from financing activities:                        
  Bank indebtedness   -     (565,059 )   -     (192,429 )
  Proceeds from short term note payable   500,000     -     664,500     -  
  Repayment of short term note payable   -     -     -     (2,000,000 )
  Repayment of capital leases obligations   (181,153 )   (274,223 )   (539,231 )   (875,103 )
  Repayment of equipment loan   (56,640 )   (4,720 )   (66,080 )   (14,160 )
  Proceeds from related party   240,000     223,421     240,000     223,421  
  Repayment of related party   (27,897 )   -     (177,897 )   -  
  Shares issuable   (10,000,000 )   -     4,691,862     -  
  Share options exercised   15,750     184,250     15,750     184,250  
  Issuance of common shares   -     2,201,846     4,076,761     4,598,959  
Net cash flows from financing activities   (9,509,940 )   1,765,515     8,905,665     1,924,938  
                         
Net increase (decrease) in cash   58,406     -     (1,685,886 )   -  
                         
Cash, beginning of period   93,540     -     1,837,832     -  
                         
Cash, end of period   151,946     -     151,946     -  

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