InkSure Technologies Inc. (OTC Bulletin Board: INKS), a leading provider of covert machine-readable security solutions for the prevention of counterfeiting, fraud and diversion, today reported its operating results for the second quarter and first half of 2006.
For the three months ended June 30, 2006, revenues increased 53% to approximately $439,000, when compared with revenues of $287,000 in the second quarter of 2005. The Company's gross profits increased 115% to $215,000 in the most recent quarter, versus $100,000 in the prior-year quarter.
The Company reported a net loss of ($1,025,000), or ($0.07) per share, in the second quarter of 2006, compared with a net loss of ($591,000), or ($0.04) per share, in the quarter ended June 30, 2005. Approximately 90% ($391,000) of the increase in net loss was attributable to non-cash expense of $137,000 as a result of the implementation of SFAS No. 123(R) and non-cash expense of $189,000 related to an outstanding convertible note, along with a one-time cash charge of $65,000 resulting from the settlement of a lawsuit arising out of a lease executed six years ago when the Company was a subsidiary of another corporation with which the Company is no longer affiliated.
For the six months ended June 30, 2006, revenues increased 25% to approximately $977,000, when compared with revenues of $781,000 in the first half of 2005. The Company's gross profits increased 90% to $556,000 in the first half of 2006, versus $292,000 in the prior-year period.
The Company reported a net loss of ($1,630,000), or ($0.11) per share, in the six months ended June 30, 2006, compared with a net loss of ($1,045,000), or ($0.07) per share, in the year-earlier period. Approximately 93% ($545,000) of the increase in net loss was attributable to non-cash expense of $457,000 as a result of the implementation of SFAS No. 123(R) and non-cash expense of $23,000 related to an outstanding convertible note, along with the one-time cash charge of $65,000 resulting from the lawsuit settlement agreement.
"Sales to existing customers in the United States during the most recent quarter increased 24.7% -- evidencing outstanding customer satisfaction with our covert security solutions -- and overall U.S. sales increased 26% from prior-year levels," stated Elie Housman, Chief Executive Officer of InkSure Technologies Inc. "Our second quarter international sales more than tripled from the corresponding period of 2005, despite the fact that we are still awaiting the shipment of equipment for a project that involves the authentication of tax stamps/marks on hundreds of millions of consumer product containers. The 115% year-over-year rise in gross profits illustrates the scalable nature of our business model as sales of SmartInk and other consumables increase."
"Our pipeline of prospective new business continues to expand, although we must remind investors that the long sales cycles involving major corporations and governments -- our primary customers -- continue to be a source of frustration. Among others, we are in discussions with leading manufacturers and converters for more pharmaceutical and biopharmaceutical authentication projects than ever before, and we are hopeful that commercial production for our first brand protection project in the automotive industry will be underway by the end of the summer. Internationally, we are discussing additional tax stamp and other projects with governments in multiple countries."
"We are also in the process of launching two exciting new products -- Triple Play(TM) and PocketSure(TM)," continued Housman. "As previously announced, Triple Play combines overt and covert security features by utilizing a customized graphic that appears or disappears depending on the viewing angle, a color-changing feature, and InkSure's covert machine-readable authentication technology. These three features in combination provide multi-layered authentication solutions that are effective in combating the growing tenacity and expertise of counterfeiters. The formal introduction of PocketSure -- our new ultra-small, lightweight reader -- is scheduled for September, and we will expand upon its characteristics and market potential in an upcoming news release. We believe both of these new products can begin contributing to InkSure's sales growth before the end of 2006."
"We continue to be pleased with our progress on a new "chipless" label technology for low-cost Radio Frequency Identification applications, which will target an RFID market that is projected to exceed $26 billion annually within the next ten years. It remains our goal to have 'chipless' RFID tags available for field testing of commercial applications in the first half of 2007. We are currently negotiating test agreements with several major companies that contacted us as a result of our March 2006 proof-of-concept demonstrations in Boston and New York. We expect to conclude these negotiations within the next 60 days, with initial printing of InkSure RF codes onto sample customer products to commence shortly thereafter. Growing interest in our RFID initiative is illustrated by the fact that InkSure has been invited to present at three major conferences this fall -- the RFID Smart Label Conference in London (September 19-20), the PISEC 2006 Conference in Barcelona (October 3-4, 2006), and the Pack Expo Conference in Chicago (October 29-31, 2006)," concluded Housman.
The Company will host a conference call today, Thursday, August 3, 2006 at 12:00 p.m. (noon) Eastern Time to discuss second quarter operating results and the outlook for the balance of 2006. Shareholders and other interested parties may participate in the conference call by dialing 877-258-8842 (international/local participants dial 973-582-2839) and referencing the ID code 7678954, a few minutes before 12:00 p.m. EDT on August 3, 2006. A replay of the conference call will be available two hours after the completion of the conference call from August 3, 2006 until August 10, 2006 by dialing 877-519-4471 (international/local participants dial 973-341-3080) and entering the conference ID 7678954.
About InkSure Technologies Inc.
InkSure Technologies Inc., with its corporate headquarters in Ft. Lauderdale, Florida and an R&D center in Science Park, Rehovot, Israel, specializes in comprehensive, covert security solutions designed to protect high profile brands and documents of value from counterfeiting, fraud and diversion. The Company's sales and marketing activities target a number of market opportunities, including financial, pharmaceutical, branded products, transportation, and government/institutional, on a global scale. The Company's R&D activities include the development of chipless RFID technology for affordable item-level secure logistics and track-and-trace applications. The Company's common stock is listed on the OTC Bulletin Board under the symbol "INKS". Additional information on the Company is available on its website at http://www.inksure.com.
This press release contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Act of 1934, as amended, which are intended to be covered by the safe harbors created thereby. Investors are cautioned that all forward-looking statements involve risks and uncertainty. Although InkSure (the "Company") believes that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore, there can be no assurance that the forward-looking statements included in this press release will prove to be accurate. Important factors that could cause actual results to differ materially from the forward- looking statements include the Company's need to obtain substantial additional capital (through financings or otherwise) to fund its operations, the progress of development, government and regulatory approvals and licensing/commercialization of the Company's technologies, and other factors noted in the Company's periodic report filings with the Securities and Exchange Commission. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the objectives and plans of the Company will be achieved. By making these forward-looking statements, the Company undertakes no obligation to update these statements for revisions or changes after the date of this release.
For Further Information Contact
InkSure Technologies Inc.:
James Assaf, CEO, U.S. Operations at +1-954-772-8507 or via e-mail at
jassaf@inksure.com
or RJ Falkner & Company, Inc., Investor Relations Counsel at +1-800-377-9893 or
via
e-mail at info@rjfalkner.com
INKSURE TECHNOLOGIES INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(U.S. dollars in thousands)
June 30, December 31,
2006 2005
Unaudited Audited
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $862 $732
Short-term deposit 3,079 4,357
Trade receivables 316 359
Other accounts receivable and
prepaid expenses 166 131
Inventories 634 595
Total current assets 5,057 6,174
PROPERTY AND EQUIPMENT, NET 356 337
DEFERRED CHARGES 600 661
GOODWILL 271 271
Total assets $6,284 $7,443
INKSURE TECHNOLOGIES INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(U.S. dollars in thousands, except share data)
June 30, December 31,
2006 2005
Unaudited Audited
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade payables 363 494
Employees and payroll accruals 111 105
Deferred income 206 206
Accrued expenses 198 213
Total current liabilities 878 1,018
ACCRUED SEVERANCE PAY 18 17
Convertible notes, net 5,820 5,681
Warrants to purchase Convertible notes 108 296
Total amount related to Convertible notes 5,928 5,977
STOCKHOLDERS' EQUITY:
Share capital:
Preferred stock of $ 0.01 par value:
Authorized: 10,000,000 stocks at
June 30, 2006; Issued and outstanding:
0 stocks at June 30, 2006 and at
December 31,2005
Common Stock of $ 0.01 par value -
Authorized: 35,000,000 stocks at
June 30, 2006; Issued and
outstanding: 15,589,296 stocks
at June 30, 2006 and 15,234,854 at
December 31,2005 152 156
Additional paid-in capital 12,803 12,148
Accumulated other comprehensive income 118 118
Accumulated deficit (13,617) (11,987)
Total stockholders' equity (540) 431
Total liabilities and
stockholders' equity 6,284 7,443
INKSURE TECHNOLOGIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(U.S. dollars in thousands, except share and per share data)
Six months ended Three months ended
June 30, June 30,
2006 2005 2006 2005
Unaudited Unaudited
Revenues $977 $781 $439 $287
Cost of revenues 421 489 224 187
Gross profit 556 292 215 100
Operating expenses:
Research and
development 553 370 322 188
Selling and marketing 933 700 417 350
General and
administrative 639 284 268 159
Total operating
expenses 2,125 1354 1,007 697
Operating loss (1,569) (1062) (792) (597)
Financial income
(expenses) (38) 17 (44) 6
Non cash financial
expenses related to
convertible notes, net (23) -- (189) --
Financial income
(expenses), net (61) 17 (233) 6
Net loss $(1,630) $(1,045) $(1,025) $(591)
Basic and diluted
net loss per share $(0.11) $(0.07) $(0.07) $(0.04)
Weighted average
number of
Common Stock used
in computing basic
and diluted net
loss per share 15,308,704 15,011,579 15,381,742 15,011,579
INKSURE TECHNOLOGIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands
Six months ended Three months ended
June 30, June 30,
2006 2005 2006 2005
Unaudited Unaudited
Cash flows from operating
activities:
Net loss $(1,630) $(1,045) $(1,025) $(591)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Depreciation and amortization 513 47 159 22
Accrued severance pay, net (1) -- (2) --
Decrease (increase) in trade
receivables 44 35 104 (10)
Non cash financial (income)
expenses related to convertible
notes, net (49) -- 153 --
Increase in other accounts
receivable and
prepaid expenses 26 (15) 53 34
Decrease (increase) in
inventories (39) 39 31 (45)
Increase (decrease) in trade
payables (131) (109) (32) (132)
Increase (decrease) in
employees and
payroll accruals 7 (8) (3) (7)
Increase (decrease) in other
payables (15) 277 7 253
Net cash used in operating
activities (1,275) (779) (555) (476)
Cash flows from investing
activities:
Purchase of property and
equipment (63) (11) (15) (7)
Proceeds from short-term bank
deposits 1,278 -- 826 --
Net cash provided by (used
in) investing
Activities 1,215 (11) 811 (7)
Cash flows from financing
activities:
Exercise of options 190 -- 190 --
Issuance of common stock, net -- 18 -- 18
Net cash provided by (used
in) financing
Activities 190 18 190 18
Increase (decrease) in cash
and cash
Equivalents 130 (772) 446 (465)
Cash and cash equivalents at
the beginning of the period 732 1,648 416 1,341
Cash and cash equivalents at
the end of the period $862 $876 $862 $876