Wireless Matrix Corporation

Wireless Matrix Corporation

March 14, 2005 09:00 ET

Wireless Matrix Reports Third Quarter Fiscal 2005 Results


NEWS RELEASE TRANSMITTED BY CCNMatthews

FOR: WIRELESS MATRIX CORPORATION

TSX SYMBOL: WRX

MARCH 14, 2005 - 09:00 ET

Wireless Matrix Reports Third Quarter Fiscal 2005
Results

RESTON, VIRGINIA--(CCNMatthews - March 14, 2005) - Wireless Matrix
Corporation (TSX:WRX), a leader in wireless data solutions is pleased to
provide the results for its third quarter ended January 31, 2005.

The following should be read in conjunction with the Management
Discussion and Analysis included in Wireless Matrix's April 30, 2004
Annual Report and Financial statements and Notes thereto. The financial
information for the quarters ended January 31, 2005 and 2004 are
unaudited and have not been reviewed or opined on by our auditors.

All currency expressed in U.S. dollars, all amounts expressed in
thousands except per share amounts, number of shares or unless otherwise
indicated.

Highlights and Major Events of the Quarter

The third quarter represents a turning point for Wireless Matrix as the
Corporation began to experience tangible payoffs from the new sales
strategy implemented in the beginning of fiscal year 2005. The new
strategy entailed significant investments in sales and marketing
including growing the frontline sales team, under which additional
expenses in 2005 were expected to be incurred prior to the ensuing
increase in sales revenues. This sales strategy has resulted in new
client contracts, renewals and extensions of existing client contracts
and a significant increase in the number, size and quality of the sales
pipeline. We ended this quarter with 410 new subscribers plus 1,415
units in backlog. In addition, we have 1,757 units that have been
shipped but not yet activated, for a total of 3,172 units anticipated to
be activated and turned into subscribers over the next 2 quarters.

In the rail vertical, WRX shipped several hundred units during the
quarter to Union Pacific, a leading operator in the rail industry and a
long-term Wireless Matrix customer currently utilizing several thousand
units. Additionally, WRX was awarded a contract for wireless devices and
airtime for a several hundred-unit pilot from CSX, one of the leading
railroad operators in the United States, to be shipped in the 4th
quarter of fiscal year 2005. Management believes that this deployment
could mature to a several thousand-unit opportunity over the next two
years. These sales are the primary result of WRX's new ruggedized mobile
base station, which incorporates all the features of the recently
launched MBS2, with a new form factor designed specifically for the rail
vertical.

In the fixed site vertical, WRX extended its channel partner agreement
with Stratos Global Corporation for hardware and services covering fixed
site hardware modems and usage for a contract value of approximately $3
million, with a minimum commitment of $1.26 million for airtime over the
term, which runs until the end of July 2007. As part of the agreement,
Stratos will have exclusive rights to market WRX's hardware and services
to data users with fixed site unit needs. Under this agreement, WRX
received a 600-unit order in the fourth quarter to provide hardware and
services for Global Signal, the third largest firm in the
telecommunications tower industry, which will ship by April 30, 2005.
Management believes that this opportunity will mature into thousands of
units over the next two fiscal years.

In the utility vertical, subsequent to quarter ending, WRX signed a $1.2
million contract extension through 2007 with a leading US gas utility
company that entails 100 additional units to be shipped this fiscal year.

The Mobile Business Unit achieved revenues of $5.7M for the quarter,
which represents a 7% growth from the same quarter last year. The
Corporation reported a loss before other charges of $266 during the
quarter due in part to the planned increased ramp of sales and marketing
expenses previously communicated to shareholders. Loss before other
charges includes gross margin less general and administrative costs and
research, product and market development and does not include stock
compensation and corporate reorganization costs, amortization of
property and equipment, interest income and expense and loss from
discontinued operations. Loss from discontinued operations during the
quarter, which includes Telemetry and Remote Telecom were $187.

The quarter also marked significant progress in building the foundation
for future profitability through the completion of a strategic review of
operations. A key result of the review is the pending divestiture by the
end of this fiscal year of Wireless Matrix's two smaller business units,
Telemetry and Remote Telecom, which together represent less than 15% of
total revenues. The Corporation also identified further opportunities
for consolidation and improvement in operational efficiencies, which
will result in Wireless Matrix closing its Calgary office effective
April 30, 2005, and further consolidating its finance team in Reston,
VA, as well as executing a reduction in force in both our Burnaby, BC
and Reston, VA facilities. These collective strategic activities will
result in an entity highly focused on driving results in the core Mobile
Business Unit, which represents the best avenue for growth.

Results from Operations

The Mobile Business Unit ("MBU") provides wireless data solutions that
enable field service workers to communicate over all of North America
with 100% real-time wireless communications coverage using both
satellite and terrestrial networks. MBU provides enterprise-class
wireless data services for business-critical operations involving mobile
workforces and remote assets that are deployed in major corporate
industrial markets including oil and gas, utilities, transportation and
field service. This service is enabled by Wireless Matrix's Mobile Base
Station hardware platform that provides data connectivity via cellular,
satellite, and 802.11 (wi-fi) networks to enterprise back-office systems
enabling field work force mobility and productivity improvement.

Operating results for the Mobile Business Unit for the quarters ended
January 31, 2005 and 2004 are summarized in the following table:



January 31, 2005 January 31, 2004 % Growth (Decline)

Service Revenue $3,195 $2,960 8%
Hardware Revenue 2,576 2,410 7%
----------------- ---------------- ------------------
Total Revenue $5,771 $5,370 7%
----------------- ---------------- ------------------
----------------- ---------------- ------------------

Gross Margin $ $2,276 $2,072 10%
Gross Margin % 39% 39%

Operating
Expenses 2,542 2,626 (3%)
----------------- ---------------- ------------------
Loss before
other charges $(266) $(554) (52%)
----------------- ---------------- ------------------
----------------- ---------------- ------------------


Revenues of $5,771 increased by 7% when compared to the previous year's
revenue as a result of increased subscriber usage driving an increase in
average monthly revenue per unit (ARPU) of $1.11 to $41.59 from $40.48.
MBU total revenue has grown approximately 16% for the first nine months
of fiscal year 2005 over the same period in fiscal year 2004 while MBU
service growth has increased 20% for the same period due to higher usage
from existing clients as clients realize significant returns on their
investment by deploying the Corporation's solutions.

Gross margin increased by 10% for this current quarter to $2,276 when
compared with last year's quarter. Gross margin on service revenues
decreased slightly in the third quarter 2005 to 61% versus 60% the same
period last year as a result of higher communication costs. Hardware
gross margins increased to 13% from 12% in the third quarter 2004 as a
result of a recovery of obsolete inventory in the third quarter of 2005.

Operating expenses decreased by 3% over the same period in the prior
year as a result of research and development expenses decreasing from
fiscal 2004. This was due to lower headcount in the engineering team as
well as capitalization of salaries related to the build of an internal
billing system and deferred cost of sales related to the creation of a
MBS for the railroad industry. These reductions in costs were offset by
higher sales and marketing costs which have been previously communicated
to shareholders.

Wireless Matrix also incurred other charges of:



January 31, 2005 January 31, 2004

Loss before other charges $(266) $ (554)

Stock compensation 177 --

Corporate reorganization costs 134 535

Amortization of property
and equipment 179 198

Interest expense/ (income), net of
foreign exchange loss/ (gain) (33) (13)
------------------ ----------------

Loss from continuing operations $(723) $(1,274)
------------------ ----------------
------------------ ----------------


Stock based compensation is a result of adopting the CICA's "Stock-based
Compensation and Other Stock-based Payments" at the beginning of fiscal
year 2005.

Corporate reorganization charges relate to the costs associated with
transitioning the finance team from Calgary, Alberta to Reston, Virginia
as well as other personnel charges related to driving operational
efficiencies. The strategic restructurings impacted a total of 14
employees or 16% of Wireless Matrix's total non-discontinued operations
workforce. Total restructuring costs related to all personnel changes
are estimated to be approximately $206. As of January 31, 2005, $134 of
these charges were recognized with substantially all the remaining
restructuring charges to occur in the fourth quarter of fiscal 2005.
These restructuring efforts result in over $544 in annualized personnel
cost reductions plus additional operating and related efficiencies
savings.

Units/Subscribers and ARPU

The following table summarizes subscriber and outstanding unit base on
January 31, 2005 for the Mobile Business Unit:



Active Units/Subscribers, October 31, 2004 24,404
Adds 410
Churn 273
--------
Net Adds 137
--------
Active Units/Subscribers, January 31, 2005 24,541
Units shipped but not activated 1,757
Units ordered but not shipped 1,415
Total Units/Subscribers, January 31, 2005 27,713
--------
--------

ARPU, January 31, 2005 $41.59
ARPU, January 31, 2004 $40.48


The Mobile Business Unit subscriber base increased by 137 units during
the quarter or approximately .6% over the previous quarter. However, as
a result of the sales activity there are 1,415 units to be shipped in
the fourth quarter, and a total of 3,172 units, which are anticipated to
be activated and become subscribers within the next two quarters.

ARPU increased to $41.59 from $40.48 from the comparable quarter last
year, a 2.7% improvement from the previous year. This increase was from
higher usage from existing clients including Sears. Sears has deployed
their second-generation application with added functionality to take
advantage of 100% availability provided by Wireless Matrix's solution to
approximately 50% of the Sears's fleet. Sears' second-generation
application will continue to be rolled out over the course of fiscal
year 2005, which should result in higher ARPUs. ARPU declined from the
second quarter 2005 due primarily to seasonality, related to the
November and December holiday season as many enterprises' field workers
were less active due during this time.

Management continues to believe ARPU increases and positive net
subscriber additions later in the year will improve mobile service
revenues in fiscal year 2005 by approximately 15% over the previous year.

The management team understands customer acquisition and retention are
primary drivers to improved financial performance and increasing
shareholder value. To that end, management has completed its initial
implementation of its aggressive sales and marketing plan that included
increasing the number of frontline sales people, sales support
personnel, a Vice President of Marketing, and directing more marketing
expenditures toward partners and vertical markets where the Corporation
is experiencing success. The focus on sales and marketing has delivered
positive results in the building of the sales and prospect pipeline,
which was relatively modest at the beginning of the fiscal year as well
as generating a higher number of request for proposals (RFP). The
Corporation has also experienced increased sales activity as evidenced
with sales to CSX, Union Pacific, and others in the rail industry and
other major players in core verticals such as in the previously
mentioned telecommunications and utility industries.

Wireless Matrix's solutions are typically integrated with other vendor's
applications, middleware, and devices to create an end-to-end solution
for enterprise clients. Clients' decision process on some or all parts
for their complete solution as well as any problems with any part of the
end-to-end solution during the sales cycle drives our sales cycle to be
on average a minimum of one year and can be at times as long as several
years. Wireless Matrix's sales strategy has resulted in higher number of
qualified prospects as well as tighter integration with partners, which
will assist in reducing sales cycle. However, these initiatives have
increased Wireless Matrix's operating expenses by approximately $1.5
million annually which will be incurred ahead of the expected sales
generation which is expected in fiscal year 2006 and beyond.

Discontinued Operations

In January 2005, Wireless Matrix announced it has completed a strategic
review of both its Telemetry and Remote Telecom business units. The
review has concluded that the best value to our shareholders is to
divest these business units no later than April 30, 2005.

The financial results for discontinued operations for the quarters ended
January 31, 2005 and 2004 are summarized in the following table:



Business Unit January 31, 2005 January 31, 2004 % Growth (Decline)

Telemetry
Business Unit
Revenue $621 $1,176 (47%)
----------------- ----------------
Gross Margin 440 1,004 (56%)
Operating
Expenses 673 440 53%
----------------- ----------------
Net Loss $(233) $564 (141%)
----------------- ----------------
----------------- ----------------

Remote Telecom
Revenue $380 $946 (60%)
----------------- ----------------
----------------- ----------------
Gross Margin 159 226 (30%)
Operating
Expenses 113 79 45%
----------------- ----------------
Net Loss $46 $147 (67%)
----------------- ----------------
----------------- ----------------

Discontinued
Operations
Revenue $1,001 $2,122 (53%)
----------------- ----------------
Gross Margin 599 1,230 (51%)
Operating
Expenses 786 519 52%
----------------- ----------------
Net Loss $(187) $711 (125%)
----------------- ----------------
----------------- ----------------


Telemetry revenues declined by $555 and gross margins declined $564 as
well from the previous year due to a lower contractual commitment from
Schlumberger on the licensing and development contract. Schlumberger's
commitment to the Corporation for these services drops this fiscal year
to $1,000 from $2,250 in the prior fiscal year. The business unit has
also experienced a lower number of direct subscribers in the oil and gas
industry. Wireless Matrix has an exclusivity arrangement with
Schlumberger through April 2005 for that company to market to the oil
and gas segment. The Corporation is currently in negotiations with
Schlumberger on contract changes to its existing licensing and service
agreement that runs through April 2007. However, the technology
development phase and exclusivity period ends with this fiscal year's
contract.

Operating expenses increased for Telemetry by $233, as a result of
bonuses and severances provided to key employees to remain with the
Corporation through the end of the fiscal year and for delivering key
milestones to Schlumberger.

Remote Telecom revenues and gross margins for the quarter have also
declined over the previous year by $566 and $67, respectively as a
result of a large one-time sale in fiscal year 2004 and a slight
reduction in the number of subscribers as a result of no longer having a
sales team associated with this business unit.

Operating expenses for Remote Telecom increased by $34 as a result of
adding a customer care personnel in fiscal year 2005 offset by the
reduction of sales personnel.

Liquidity and Capital Resources

Wireless Matrix continues to have a strong balance sheet with working
capital of $13,792 and no long-term or short-term debt. Management
believes that the working capital will provide ample resources to fund
the Corporation's growth strategy.

Current assets at quarter end excluding deferred product costs and
assets of discontinued operations were $16,302 versus current
liabilities, excluding deferred revenues and liabilities of discontinued
operations, of $3,503. Accounts receivable at quarter end amounted to
$3,668 and inventories were $935.

Cash provided by operating activities in the third quarter of fiscal
2005 was $310 versus cash used of $2,528 in the prior third quarter
related to primarily to increased cash collections as accounts
receivable days outstanding decreased from approximately 75 days to 54
days.

Cash used in discontinued operations was $404 against the cash provided
in the prior year period of $36. This increase in cash usage is
primarily a result of lower revenues from both the Telemetry and Remote
Telecom units.

Cash used in financing activities was $4 versus cash used of $19 in the
prior year's comparable quarter due to share issuance costs incurred in
fiscal year 2004 that were not incurred in the current quarter.

Cash used in investing activities was $74 versus $235 in 2004 for the
purchases of operating computers and equipment. In the third quarter of
fiscal 2004, Wireless Matrix was acquiring additional hardware and
software to complete the build-out of its redundant site. At the end of
the quarter, the Corporation had no material outstanding commitments
with regard to future capital expenditures.

The foreign exchange effect on cash and cash equivalents during the
quarter decreased to $120 due to the slight strengthening of the US
dollar in comparison to the Canadian dollar. Accordingly, the net
decrease in cash in the quarter was $292, resulting in a net change in
cash position from $10,287 at October 31, 2004 to $9,995 at January 31,
2005. The Corporation had no need to access its $15 million Cdn credit
facility during the quarter.

The weighted average number of shares outstanding was 67,365,546 during
the quarter ended January 31, 2005. At quarter end, there were
67,374,301 common shares outstanding, 27,618 warrants outstanding
(Silicon Valley Bank warrants which were assumed on the Norcom
acquisition) and 5,865,902 options outstanding, for a diluted total
number of shares of 73,267,821.

Contractual Obligations



------------------------------------------------------------------------
As of January 31, 2005 Payments Due By Period
------------------------------------------------------------------------
Contractual Obligations Total Less than 1 year 1-3 years
------------------------------------------------------------------------
Capital leases $40 $15 $25
------------------------------------------------------------------------


Off- Balance Sheet Arrangements

All commitments and indemnities have been disclosed in the Corporation's
Consolidated Annual Financial Statements for April 30, 2004 in Note 8.

Changes in Accounting Policies including Initial Adoption

Stock Based Compensation

Effective May 1, 2004, the Corporation retroactively adopted the amended
Canadian Institute of Chartered Accountants ("CICA") standard for "Stock
based Compensation and Other Stock-based Payments." The Corporation
previously accounted for all stock-based payments to non-employees,
direct awards of stock and awards that call for settlement in cash or
other assets using the fair value method. Stock options granted to
employees that could only be settled by issuing shares were accounted
for using the intrinsic value based method with pro forma disclosure of
the effects of applying the fair value method for employee options
granted after May 1, 2002. All options issued during this time were
issued at market price therefore no compensation expense was recorded.

The amended section adopted May 1, 2004 requires all employee stock
options to be accounted for using the fair value method. In accordance
with the section, the Corporation has retroactively applied the fair
value method to all employee stock options granted on or after May 1,
2002. An amount of $276,000 was recorded as an adjustment to the opening
deficit as at May 1, 2005 and an equal amount recorded as contributed
surplus on the restatement. Options will be expensed over the vesting
period based on fair value at the date of the grant.

Disposal of Long-Lived Assets and Discontinued Operations

Long-lived assets are classified as held for sale when specific criteria
are met, in accordance with CICA Handbook Section 3475, "Disposal of
Long-Lived Assets and Discontinued Operations". Assets held for sale are
measured at the lower of their carrying amounts and fair values less
costs to dispose and are no longer amortized. Assets and liabilities
classified as held for sale are reported separately on the balance
sheet. A component of the Corporation that is held for sale is reported
as a discontinued operation if the operations and cash flows from the
component will be eliminated from ongoing operations as a result of the
disposal transaction and the Corporation will not have significant
continuing involvement in the operations of the component after the
disposal transaction.

Exit and Restructuring Activities

Exit activities including the costs incurred with a restructuring are
accounted for in accordance with EIC-135 "Accounting for Costs
Associated with Exit and Disposal Activities (including Costs Incurred
in a Restructuring)" and EIC - 134 "Accounting for Severance and
Termination Benefits". Liabilities for the costs related to the exit
activity are recognized and measured at their fair value in the period
in which the liability is incurred generally when the goods or services
associated with the activity are received.

Research, product and market development costs

Research, product and market development costs, associated with
researching new products, enhancing existing products and developing
markets for the Corporation's products are expensed as incurred. Product
development costs that are incremental in nature, are associated with
obtaining a new contract with a customer and are recoverable from
related revenues are included in deferred costs and recognized ratably
over the customer's service contract period in accordance with EIC- 141
"Revenue Recognition".

Property and Equipment

Property and equipment are recorded at cost less investment tax credits.
Amortization is provided on basis and at rates designed to amortize the
costs of the assets over their estimated useful lives. The cost of
activities directly attributable to the development, betterment, or
acquisition of computer software for internal use are recorded in
accordance with EIC-86 "Accounting for the Costs of a Business Process
Reengineering Project" and are capitalized and amortized over the
computer software's useful life.

Supplemental Measures

In addition to providing measures in accordance with Canadian GAAP,
Wireless Matrix presents certain supplemental measures. These are gross
margins, earnings/losses before other charges and current assets or
current liabilities before deferred product costs or deferred product
revenues.

Earnings/losses before other charges is defined as earnings before
settlement costs, stock compensation expenses, reorganization costs,
interest, amortization and income taxes and other income and expenses is
reflected in the Consolidated Statements of Operations and Deficit as
the subtotal after total expenses. Settlement costs on a share issue are
defined on page 16, in note 6(b)(v) of our April 30, 2004 Annual Report.
The definition of reorganization costs is defined on page 22, in note 13
of our 2004 Annual Report. The definition of settlement costs is defined
on page 23, note 14 of our 2004 Annual Report. With these calculations,
Management is able to assess a comparable, recurring performance
measurement.

Gross margins are presented on the Consolidated Statements of Operations
and Deficit and are calculated by subtracting our cost of sales from
sales. References to cost of sales and sales should be made to page 13,
note 2 in our 2004 Annual report with respect to inventory costing and
page 14, in note 2 with respect to revenue recognition.

Current assets less deferred product costs are determined from the
Consolidated Balance Sheet by subtracting the deferred product costs
line from total current assets. Current liabilities less deferred
product revenues represent total current liabilities less deferred
product revenues as reflected in the Consolidated Balance sheet. Further
detail on deferred amounts is explained on page 14 of the 2004 Annual
report under 'Revenue recognition'. Removing the deferral amounts
presents a better indication of liquidity in our ongoing operations.

These measures do not have any standardized meaning prescribed by GAAP
and are therefore unlikely to be comparable to similar measures
presented by other companies.

Forward Looking Statements

General information regarding the Company set forth in this document,
including management's assessment of the Company's future plans and
operations contains forward looking statements that involve substantial
known and unknown risks and uncertainties. These forward looking
statements are subject to numerous risks and uncertainties, some of
which are beyond the Company's and management's control, including but
not limited to, the impact of general economic conditions, industry
conditions, fluctuation of commodity prices, fluctuation of foreign
exchange rates, imperfection of reserve estimates, environmental risks,
industry competition, availability of qualified personnel and
management, stock market volatility, timely and cost effective access to
sufficient capital from internal and external sources. The Company's
actual results, performance or achievement could differ materially from
those expressed in or implied by, these forward looking statements and
accordingly, no assurance can be given that any of the events
anticipated to occur or transpire from the forward looking statements
will provide what, if any benefits to the Company. All data presented
herein should be read in conjunction with the Corporation's regulatory
filings, with the appropriate Securities Commission and SEDAR. These
filings, including the Corporation's Annual Information Form ("AIF''),
are located at www.sedar.com.



Wireless Matrix Corporation
Consolidated Balance Sheets
(unaudited)

Expressed in thousand of US Dollars January 31, 2005 April 30, 2004
---------------- ---------------
Restated Note 1
ASSETS
Cash and cash equivalents $ 9,995 $ 9,755
Accounts receivable, net of allowance 3,668 2,564
Inventories 935 735
Deferred product costs 7,022 8,104
Prepaid expenses and other assets 1,704 944
Assets of discontinued operations
(note 5) 2,903 4,245
---------------- ---------------
26,227 26,347
Property and equipment,
net of amortization 3,098 3,335
Prepaid expenses and other assets 104 859
Deferred product costs 1,582 4,014
Assets of discontinued operations
(note 5) 1,021 1,029
Goodwill, net of amortization 32,553 32,553
---------------- ---------------
$ 64,585 $ 68,137
---------------- ---------------
---------------- ---------------

LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Accounts payable $ 1,807 $ 1,162
Accrued liabilities 1,681 2,057
Deferred product revenue 7,926 8,838
Capital lease obligations 15 14
Liabilities of discontinued operations
(note 5) 1,006 945
---------------- ---------------
12,435 13,016
Deferred product revenue 2,096 4,384
Capital lease obligations 25 36
Liabilities of discontinued operations
(note 5) 533 486
---------------- ---------------
$ 15,089 $ 17,922
---------------- ---------------

SHAREHOLDERS' EQUITY:
Share capital (note 3) $115,548 $115,423
Contributed surplus (note 1) 437 276
Cumulative translation adjustment 233 (525)
Deficit (66,722) (64,959)
---------------- ---------------
$ 49,496 $ 50,215
---------------- ---------------
$ 64,585 $ 68,137
---------------- ---------------
---------------- ---------------

See accompanying notes.


Wireless Matrix Corporation
Consolidated Statements of Operations and Deficits
(unaudited)

Expressed in thousand
of US Dollars, except
per share amounts and THREE MONTHS ENDED, NINE MONTHS ENDED,
number of shares JANUARY 31, JANUARY 31,
2005 2004 2005 2004
---------- ---------- ---------- -----------
Sales $ 5,771 $ 5,370 18,447 15,965
Cost of sales 3,495 3,298 10,976 9,500
---------- ---------- ---------- -----------
Gross margin 2,276 2,072 7,471 6,465

General and
administrative costs 1,543 1,269 4,582 3,690
Research, product and
market development 999 1,357 3,312 4,238
---------- ---------- ---------- -----------
Loss before other
charges (266) (554) (423) (1,463)

Settlement costs -- -- -- 1,467
Stock compensation 177 -- 189 --
Corporate reorganization
costs (note 6) 134 535 134 535
Amortization of property
and equipment 179 198 576 552
Interest expense/
(income),net of foreign
exchange loss/ (gain) (33) (13) 398 283
---------- ---------- ---------- -----------
Loss from continuing
operations (723) (1,274) (1,720) (4,300)

Income (loss) from
discontinued operations
(note 5) (187) 711 (43) 1,306
---------- ---------- ---------- -----------

Net loss for the period $ (910) $(563) $ (1,763) $ (2,994)

Deficit, beginning of
period $(65,813) $(62,290) $(64,683) $(59,859)
Stock based compensation
to reflect change in
accounting policy
(note 1) -- -- (276) --
Deficit, end of year $(66,723) $(62,853) $(66,722) $(62,853)
---------- ---------- ---------- -----------
---------- ---------- ---------- -----------

Loss from continuing
operations for the
period-basic and
diluted loss per share $ (0.01) $ (0.01) $ (0.03) $ (0.05)
---------- ---------- ---------- -----------
---------- ---------- ---------- -----------

Income/(loss) from
discontinued operations
for the period-basic
and diluted loss per
share $(0.003) $0.011 $(0.001) $0.002
---------- ---------- ---------- -----------
---------- ---------- ---------- -----------

Weighted average number
of common shares
outstanding 67,365,546 67,219,801 67,374,301 63,324,400
---------- ---------- ---------- -----------
---------- ---------- ---------- -----------

See accompanying notes.

Wireless Matrix Corporation
Consolidated Statements of Cash Flows
(unaudited)

Expressed in thousand
of US Dollars THREE MONTHS ENDED, NINE MONTHS ENDED,
JANUARY 31, JANUARY 31,
2005 2004 2005 2004
---------- ---------- ---------- -----------
Operating Activities
Net loss for the period $ (910) $ (563) $(1,763) $(2,994)
Non cash items:
Amortization of
property and equipment 179 198 576 552
Stock-based
compensation 177 -- 189 --
Foreign exchange loss
on cash and cash
equivalents 18 33 474 --
Change in:
Accounts receivable 675 (1,649) (1,104) 2,565
Inventories (413) 473 (198) (297)
Deferred product costs 1,699 1,692 3,514 5,352
Prepaid and other
assets (142) (801) (5) (1,672)
Accounts payable and
accrued liabilities 833 11 269 (1,148)
Deferred product
revenues (1,806) (1,922) (3,201) (6,032)
---------- ---------- ---------- -----------
Cash flows provided by
(used in) continuing
operations 310 (2,528) (1,249) (3,674)
---------- ---------- ---------- -----------
Cash flows provided by
(used in) discontinued
operations (404) 36 1,458 443
---------- ---------- ---------- -----------

Financing Activities
Issue of equity, net of
share issue costs -- (15) 94 13,801
Payments of capital
lease financing (4) (4) (9) (10)
Payments on bank debt -- -- -- (7,379)
-----------
Cash flows provided by
(used in) financing
activities (4) (19) 84 6,412
---------- ---------- ---------- -----------
Investing Activities
Purchases of property
and equipment (74) (235) (317) (1,261)
---------- ---------- ---------- -----------
Cash flows provided by
(used in) investing
activities (74) (235) (317) (1,261)
---------- ---------- ---------- -----------
Foreign exchange effect
on cash and cash
equivalents (120) (145) 264 203
---------- ---------- ---------- -----------
Net increase in cash and
cash equivalents (292) (2,891) 240 2,123
Cash and cash
equivalents, beginning
of period $10,287 $12,886 $ 9,755 $ 7,872
---------- ---------- ---------- -----------
Cash and cash
equivalents, end of
period $ 9,995 $ 9,995 $9,995 $9,995
---------- ---------- ---------- -----------
---------- ---------- ---------- -----------

See accompanying notes.

Wireless Matrix Corporation
Notes to Consolidated Financial Statements (unaudited)
January 31, 2005
(amounts in thousands of US dollars, except per share amounts and number
of shares)


1. Basis of presentation and accounting policies.

The consolidated financial statements of Wireless Matrix Corporation
(Wireless Matrix or the "Corporation") have been prepared by management
in accordance with Canadian generally accepted accounting principles for
interim financial statements. The notes presented in these interim
financial statements include only significant events and transactions
occurring since the Corporation's last fiscal year and are not fully
inclusive of all matters normally disclosed in the Corporation's annual
audited consolidated financial statements. The financial information
included herein is unaudited. These interim financial statements follow
the same accounting policies and methods of application as the most
recent annual financial statements, except where noted below. These
interim financial statements should be read in conjunction with the
Corporation's April 30, 2004 audited annual financial statements.
Certain prior year amounts have been reclassified to conform to the
current period presentation.

Stock-based compensation

On May 1, 2004, the Corporation retroactively adopted the amended
Canadian Institute of Chartered Accountants (CICA) standard for
"Stock-based Compensation and Other Stock-based Payments". The
Corporation previously accounted for all stock-based payments to
non-employees, direct awards of stock and awards that call for
settlement of cash or other assets using the fair value method. Stock
options granted to employees that could only be settled by issuing
shares were accounted for using the intrinsic value based method with
pro forma disclosure of the effects of applying the fair value method
for employee options granted after May 1, 2002. All options issued
during this time were issued at market price therefore no compensation
expense was recorded.

The amended section adopted May 1, 2004 requires all employee stock
options to be accounted for using the fair value method. In accordance
with the section, the Corporation has retroactively applied the fair
value method without restatement to all employee stock options granted
on or after May 1, 2002. An amount of $276 has been recorded as an
adjustment to the opening deficit at May 1, 2004 and an equal amount
recorded as contributed surplus on the restatement. Subsequent to
adoption, options are expensed over the vesting period based on fair
value at the date of grant.

Disposal of Long-Lived Assets and Discontinued Operations

Long-lived assets are classified as held for sale when specific criteria
are met, in accordance with CICA Handbook Section 3475, "Disposal of
Long-Lived Assets and Discontinued Operations". Assets held for sale are
measured at the lower of their carrying amounts and fair values less
costs to dispose and are no longer amortized. Assets and liabilities
classified as held for sale are reported separately on the balance
sheet. A component of the Corporation that is held for sale is reported
as a discontinued operation if the operations and cash flows from the
component will be eliminated from ongoing operations as a result of the
disposal transaction and the Corporation will not have significant
continuing involvement in the operations of the component after the
disposal transaction.

Exit and Restructuring Activities

Exit activities including the costs incurred with a restructuring are
accounted for in accordance with EIC-135 "Accounting for Costs
Associated with Exit and Disposal Activities (including Costs Incurred
in a Restructuring)" and EIC - 134 "Accounting for Severance and
Termination Benefits". Liabilities for the costs related to the exit
activity are recognized and measured at their fair value in the period
in which the liability is incurred generally when the goods or services
associated with the activity are received.

Research, product and market development costs

Research, product and market development costs associated with
researching new products, enhancing existing products and developing
markets for the Corporation's products are expensed as incurred. Product
development costs that are incremental in nature, are associated with
obtaining a new contract with a customer and are recoverable from
related revenues are included in deferred costs and recognized ratably
over the customer's service contract period in accordance with EIC- 141
"Revenue Recognition".

Property and Equipment

Property and equipment are recorded at cost less investment tax credits.
Amortization is provided on basis and at rates designed to amortize the
costs of the assets over their estimated useful lives. The cost of
activities directly attributable to the development, betterment, or
acquisition of computer software for internal use are recorded in
accordance with EIC-86 "Accounting for the Costs of a Business Process
Reengineering Project" and are capitalized and amortized over the
computer software's useful life.

2. Stock based compensation

Common stock option activity during the three-month periods ended
January 31, 2005 and 2004 was as follows:



Expressed in thousand of US Dollars,
except number of shares 2005 2004
Common share options outstanding,
beginning of period 6,692,455 7,035,294
Common share options issued -- --
Common share options expired (826,553) --
----------- -----------
Common share options outstanding,
end of period 5,865,902 7,035,294
----------- -----------
----------- -----------

Fair value of common share options granted $ -- $ --
Stock based compensation expense recorded $ 177 $ --


Wireless Matrix had 27,618 common share warrants outstanding as of
January 31, 2005 and 2004.

The fair value of common stock options granted is estimated at the grant
date using the Black-Scholes option-pricing model. The assumptions used
under the Black-Scholes model are as follows:



2005 2004
Dividend yield 0% 0%
Risk free interest rate 3.24% 2.61%
Expected life 3 years 3 years
Expected volatility 78.18% 94.0%


3. Share Capital

The Corporation's authorized share capital includes an unlimited number
of voting common shares with no par value and unlimited number of
non-voting preferred shares with no par value. No preferred shares were
outstanding as of January 31, 2005 and 2004. Common shares outstanding
as of January 31, 2005 were as follows:



Number $
Common shares outstanding, April 30, 2004 67,219,801 $115,423
Common shares issued 154,500 125
---------- ----------
Common shares outstanding, January 31, 2005 67,374,301 $115,548
---------- ----------
---------- ----------


Wireless Matrix's basic and fully diluted common shares outstanding as
of January 31, 2005 and March 10, 2005 were:




January 31, 2005 March 10, 2005
Common shares outstanding 67,374,301 67,374,301
Common share options and
warrants outstanding 5,893,520 5,893,520
---------------- ---------------
Common shares outstanding 73,267,821 73,267,821
---------------- ---------------
---------------- ---------------


4. Supplemental Cash Flow Information

Additional disclosures with respect to the consolidated statements of
cash flow are as follows:



THREE MONTHS ENDED, NINE MONTHS ENDED,
Expressed in thousand JANUARY 31, JANUARY 31,
of US Dollars 2005 2004 2005 2004
----- ----- ----- ------
Interest paid $ 2 $ 1 $ 83 $174
Interest received $ 32 $ 32 $ 8 $ 84


5. Discontinued Operations

In January 2005, Wireless Matrix announced the conclusion of its
strategic review of both the Telemetry and Remote Telecom business
units, which provide machine-to-machine wireless data applications and
rental of satellite telephones and satellite airtime, respectively. The
review has resulted in the intention to divest these business units no
later than April 30, 2005. Several potential acquirers have been
identified for these two business units and discussions are ongoing for
the divesture of both business units.

The results of Telemetry and Remote Telecom for all periods presented
have been excluded from continuing operations in the consolidated
statements of operations; net cash flows are classified as operating,
investing and financing activities from discontinued operations in the
consolidated statements of cash flows and the assets and liabilities
have been classified in the consolidated balance sheets as assets and
liabilities of discontinued operations. The consolidated balance sheet
at April 30, 2004, the consolidated statements of operations and the
consolidated statements of cash flows as of the three and nine months
ended January 31, 2004 have been restated for the purposes of
comparability.

Prior to classification as discontinued operations, the results of these
business units were reported as separate business segments. Without
these business units, Wireless Matrix operates in only one business
segment in North America. No gain or loss on this discontinuation of
these operations has been recorded and any operating income or losses
associated with operations to the date of sale will be recorded as
incurred.

The following is a summary of the results of discontinued operations
related to Telemetry:



Expressed in thousand THREE MONTHS ENDED, NINE MONTHS ENDED,
of US Dollars, JANUARY 31, JANUARY 31,

except per share amounts 2005 2004 2005 2004
------- ------ ------ -------
Revenues $ 621 $1,176 $ 1,883 $3,056
Cost of sales 181 172 558 668
------- ------ ------ -------
Gross margin 440 1,004 1,325 2,388
Operating expenses 673 440 1,510 1,464
------- ------ ------ -------
Income (loss) from operations $ (233) $ 564 $ (185) $ 924
------- ------ ------ -------
------- ------ ------ -------

Net income (loss) per
share-basic and diluted $(0.003) $0.008 $(0.003) $0.015
------- ------ ------ -------
------- ------ ------ -------


The carrying value of the net assets related to Telemetry are as follows:




JANUARY 31, 2005 JANUARY 31, 2004
Assets
Accounts receivable, net $ 1,530 $ 668
Inventories 419 1,126
Deferred product costs 550 529
Prepaids and other assets 94 12
---------------- -----------------
2,593 2,335
Property and equipment, net 246 276
Deferred product costs 428 374
---------------- -----------------
Total assets 3,267 2,985
---------------- -----------------
---------------- -----------------

Liabilities
Accounts payable 137 101
Accrued liabilities 31 25
Deferred revenues 698 665
---------------- -----------------
866 791
Deferred revenues 533 465
---------------- -----------------
Total liabilities 1,399 1,255
---------------- -----------------
Net Assets $ 1,868 $ 1,729
---------------- -----------------
---------------- -----------------


The following is a summary of the results of discontinued operations
related to Remote Telecom:



Expressed in thousand THREE MONTHS ENDED, NINE MONTHS ENDED,
of US Dollars, except JANUARY 31, JANUARY 31,
per share amounts
2005 2004 2005 2004
Revenues $ 380 $ 946 $1,301 $2,025
Costs of sales 221 720 848 1,388
---------- ---------- ---------- -----------
Gross margin 159 226 453 637
Operating expenses 113 79 311 255
---------- ---------- ---------- -----------
Income from operations $ 46 $ 147 $ 142 $ 382
---------- ---------- ---------- -----------
---------- ---------- ---------- -----------

Net income per share
-basic and diluted $ 0.00 $0.002 $0.002 $0.006
---------- ---------- ---------- -----------
---------- ---------- ---------- -----------

The carrying value of the net assets related to Remote Telecom are as
follows:

JANUARY 31, 2005 JANUARY 31, 2004

Assets
Accounts receivable, net $ 266 $ 224
Inventories 30 100
Prepaids and other assets 14 138
---------------- -----------------
310 462
Property and equipment, net 347 411
---------------- -----------------
Total assets 657 873
---------------- -----------------

Liabilities
Accounts payable 138 158
Accrued liabilities 2 63
---------------- -----------------
Total liabilities 140 221
---------------- -----------------
Net Assets $ 517 $ 652
---------------- -----------------
---------------- -----------------


6. Corporate Reorganization Costs

During the fourth quarter of fiscal 2005, Wireless Matrix announced
concurrent with the divestiture analysis (see Note 5), that we had also
completed a review of operations, which will result in Wireless Matrix
closing its Calgary office effective April 30, 2005, and further
consolidating its finance team to Reston, VA. Further opportunities for
consolidation and improvement in operational efficiencies were also
identified in the Burnaby, BC and Reston, VA operations that resulted in
a reduction in our workforce.

The strategic restructurings impacted a total of 14 employees or 16% of
Wireless Matrix's total non-discontinued operations workforce. Total
restructuring costs related to all personnel changes are estimated to be
approximately $206. As of January 31, 2005, $134 of these charges were
recognized with substantially all the remaining restructuring charges to
occur in the fourth quarter of fiscal 2005. These restructuring efforts
result in over $544 in annualized personnel cost reductions plus
additional operating and related efficiencies savings.

During the three month period ended January 31, 2004, the Corporation
completed a corporate restructuring that resulted in a 10% reduction in
the Corporation's workforce. The net impact of the reduction in annual
operating expenses was approximately $1,000. As a result of the
restructuring, the Corporation recognized a restructuring charge during
the quarter of $535 with approximately 42% of the charge associated with
the separation of the former President and CEO.



Corporate Information

Board of Directors
Mr. Per Olav Fosse
Director, Vice President
Telenor Mobile Communications

Mr. Arve Johansen
Director, CEO
Telenor Mobile Communications

Mr. Neil MacKenzie
Director, Vice President
Newpark Drilling Fluids

Mr. David Magus, P. Eng
Director, Chairman, President
Magus Engineering Ltd.

Mr. Jeff Lawson
Director, Partner
Burnet, Duckworth & Palmer, LLP

Dr. Gary Burchill, PhD, MBA
Director, President
2Is Incorporated

Officers
Mr. J. Richard Carlson, MBA
President and Chief Executive Officer

Ms. Maria Izurieta
Chief Financial Officer

Mr. Al Milligan
Executive Vice President, Business Operations

Auditors
Ernst & Young LLP

Bankers
Bank of Montreal
Calgary, Alberta

Legal Counsel
Burnet, Duckworth & Palmer LLP
Calgary, Alberta

Cooley Godward LLP
Reston, Virginia

Registrar and Transfer Agent
CIBC Mellon Trust Company
Calgary, Alberta


-30-

Contact Information

  • FOR FURTHER INFORMATION PLEASE CONTACT:
    Wireless Matrix Corporation
    Maria Izurieta
    Chief Financial Officer
    (703) 262-4020
    EMail: maria.izurieta@wrx-us.com
    Website:www.wirelessmatrixcorp.com
    or
    Wireless Matrix Corporation
    Sunrise Technology Park
    12369-B Sunrise Valley Drive
    Reston, VA 20191
    The Toronto Stock Exchange has not reviewed and does not accept
    responsibility for the adequacy or accuracy of this release.