Axcess International Announces Third Quarter 2005 Results
DALLAS, TX, November 10, 2005 — AXCESS International Inc. (OTC Bulletin Board: AXSI.OB), a leading provider of active Radio Frequency Identification (RFID) solutions with applications in security, physical asset management, and supply chain transportation today reported results for the third quarter ended September 30, 2005.
Third Quarter Highlights Include:
· Customer growth came in Asset Management, Personnel Tracking and Vehicle Access Control applications
· Gross margin remained within the Company’s target range of 40-50 percent
· AXCESS joined the Sun Partner Advantage Program, providing active RFID solutions that complement Sun’s current passive supply chain products
· Two new patents were awarded in RFID and digital network video
· Next generation tag development program continued
“In the third quarter, AXCESS increased customer wins in targeted vertical markets where our goal has been to replicate strategic applications and grow the systems installed in existing accounts,” commented Allan Griebenow, president and CEO of AXCESS. “We continue to transform our sales strategy to support these replication and growth goals. We also saw a healthy increase in the number of inquires for our active RFID solutions, which we believe is an indicator of good things to come. We strengthened our intellectual property with two new patents, reinforcing what we believe is the best overall system architecture for enterprise RFID tagging.”
Total revenue for the third quarter of 2005 was $204,711 compared to $301,889 in the third quarter of 2004. RFID revenue for the third quarter 2005 was $174,899, compared to $251,788 in the year ago period. Gross margin was 46 percent for the third quarter 2005, in-line with the Company’s stated target range of 40 percent to 50 percent. The year-ago gross margin was 53 percent. Operating expenses were $761,993 for the third quarter 2005, flat with the $751,168 for the third quarter 2004. Net loss was $785,720 for the third quarter of 2005 compared to a loss of $738,260 for third quarter of 2004.
Preferred Stock dividend requirements were $81,735 for the third quarter 2005, identical to the prior year period. Net loss applicable to common stock was $867,455 or $(0.03) per basic and diluted share for the third quarter 2005, compared to $819,995, or $(0.03) per basic and diluted share for the third quarter of 2004.
Key Developments During the Quarter
During the third quarter, AXCESS grew its strategic partner base by joining the Sun Microsystems’ Partner Advantage Program. The agreement gives AXCESS a path to embedding Java into its receiver design, supporting Sun’s desire to extend their solutions beyond passive RFID logistics-supply chain applications and provide active RFID solutions on Sun equipment. As a result, Sun will offer its customers a more diverse range of solutions that augment and complement their current passive RFID offerings.
AXCESS continued to see traction in physical asset management, personnel tracking, and vehicle access control that are key targeted applications -- all of which share a common ActiveTagTM system design. The Company grew systems currently installed in the casino sector consistent with its strategy.
Inquires during the quarter jumped from two per day to over a dozen, reflecting the increased awareness of RFID in general, and of the benefits of active RFID in particular. That interest was supported by an industry study released by IDTechEx from their RFID Knowledgebase. The study cited that the 121 previously documented active RFID applications have now risen to 210. The findings in this study estimate that by 2006, the active RFID market will grow to almost 4.5 times its current size and that these figures have the potential to be even higher if more companies adopt and implement active RFID technologies in line with present initiatives.
Two new patents were awarded in RFID and streaming digital video. In video, the patent describes how cameras will respond by changing the composition of the video stream based upon the type of alarm situation or the type of activity it is programmed to capture. Video is integrated into the AXCESS RFID software for investigation and evidence surrounding asset loss. The RFID patent describes how individual RFID tags can “talk” to other individual RFID tags, enabling groups of items to be tagged more economically. These patents strengthen AXCESS’ intellectual property portfolio and its product architecture superiority.
Based on this superior architectural design, the Company this week introduced a comprehensive physical asset management solution that combines both active (i.e. beaconing) and semi-active (i.e. “wake-up on-demand”) RFID tags. The new Asset Activator™ solution provides automatic inventory counts, location, tracking and protection of enterprise assets on the existing corporate network. This enables corporations to successfully protect intellectual property and customer privacy data noted under Sarbanes Oxley, as well as avoid penalties outlined in various state laws. Traction was evident in the third quarter with Axcess receiving orders for its IT asset management solution within this market.
To ensure that AXCESS continues as a leader in the Active RFID space, the Company continued development of its new, cutting edge RFID tag and has moved to the next phase of development. The new tag is initially designed to be embedded inside all types of industrial assets across a myriad of sectors.
Earnings Conference Call
In conjunction with the second quarter earnings release, AXCESS invites you to listen to its conference call via its webcast over the Internet at 11:00 a.m. (Eastern), on November 10th. The Webcast may be accessed at www.axcessinc.com. To participate in the conference call, domestic callers can dial (800) 322-0079 and international callers can dial (973) 409-9258.
For those who cannot access the live broadcast, a replay will be available by dialing (877) 519-4471 for domestic callers and (973) 341-3080 for international callers and entering “6684733” from two hours after the end of the call until 11:59 p.m. (Eastern) on November 17, 2005. A replay of the conference call will also be available on the company’s website approximately two hours after the end of the call for thirty days.
About Axcess International Inc.
Axcess International Inc. (OTCBB: AXSI) delivers wireless intelligence through real-time business activity monitoring solutions that improve productivity, security and revenue growth. The systems derive wireless intelligence from automatic advanced workforce management, workflow management, asset monitoring and distributed sensing. As the smallest, most powerful battery powered wireless computer, Dot, a patented micro-wireless technology platform, combines RFID, RTLS and wireless sensing for better decision-making and control throughout the enterprise. Dot adds transmission flexibility by interfacing with multiple enterprise legacy systems including the popular Electronic Product Code (EPC) standard system now used by RFID tags in the retail supply chain. Dot has set an industry low price point for multi-frequency, micro-wireless tagging at $7.95 MSRP with asset tags starting at $8.95. Axcess is a portfolio company of Amphion Innovations plc (AIM: AMP). For more information on Axcess, visit www.axcessinc.com.
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This release contains forward-looking statements as defined in Section 21E of the Securities Exchange Act of 1934, including statements about future business operations, financial performance and market conditions. Such forward looking statements involve risks and uncertainties inherent in business forecasts. |
AXCESS INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited) September 30, 2005 |
December 31, 2004 |
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ASSETS |
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| Current assets: | ||
| Cash and cash equivalents | 81,419 | 461,101 |
| Accounts receivable - trade, net of allowance for doubtful accounts of $19,192 in 2005 and $8,859 in 2004 | 96,211 | 79,965 |
| Inventory, net | 204,381 | 144,714 |
| Prepaid expenses and other | 113,425 | 97,164 |
| Total current assets | 495,436 | 782,944 |
| Property, plant and equipment, net | 34,301 | 49,395 |
| Intellectual property, net | — | 133 |
| Deferred debt issuance costs | 380,167 | 506,889 |
| Other assets | 2,691 | 3,906 |
| Total assets | 912,595 | 1,343,267 |
LIABILITIES AND STOCKHOLDERS’ DEFICIT |
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| Current liabilities: | ||
| Accounts payable | 294,425 | 490,100 |
| Accrued liabilities | 932,830 | 789,589 |
| Notes payable: | ||
| Convertible notes payable (includes $80,000 and $66,667 with related party in 2005 and 2004, respectively) | 430,000 | 483,333 |
| Discounts on convertible debt | (15,296) | (289,482) |
| Dividends payable | 127,045 | 316,062 |
| Total current liabilities | 1,769,004 | 1,789,602 |
| Notes payable to stockholders | 3,709,070 | 3,932,092 |
| Convertible notes payable (includes $13,333 with related party in 2004) | — | 236,667 |
| Discount on convertible debt | — | (34,084) |
| Total liabilities | 5,478,074 | 5,924,277 |
| Commitments and contingencies | ||
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Stockholders’ deficit: Convertible preferred stock, 7,000,000 shares authorized, $0.01 par value, 2,415,000 shares issued and outstanding in 2005 and 2004. |
24,150 | 24,150 |
| Common stock, $.01 par value, 50,000,000 shares authorized in 2005 and 2004; 27,402,744 shares issued and outstanding in 2005 and 24,720,939 shares issued and outstanding in 2004 | 274,028 | 247,209 |
| Shares of common stock to be issued, 5,333 shares in 2005 | 53 | — |
| Additional paid-in capital | 152,599,246 | 149,898,600 |
| Accumulated deficit | (157,462,956) | (154,750,969) |
| Total stockholders’ deficit | (4,565,479) | (4,581,010) |
| Total liabilities and stockholders’ deficit | 912,595 | 1,343,267 |
AXCESS INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF OPERATION
(Unaudited)
Three Months Ended
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Nine Months Ended
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2005 |
2004 |
2005 |
2004 |
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| Sales | 204,711 | 301,889 | 652,687 | 733,695 |
| Cost of sales | 109,797 | 141,313 | 357,689 | 364,986 |
| Gross profit | 94,914 | 160,576 | 294,998 | 368,709 |
| Expenses: | ||||
| Research and development | 177,221 | 176,791 | 569,141 | 528,683 |
| General and administrative | 341,286 | 324,970 | 1,032,269 | 1,191,049 |
| Selling and marketing | 237,752 | 238,278 | 782,867 | 585,022 |
| Depreciation and amortization | 5,734 | 11,129 | 22,718 | 193,195 |
| Operating expenses | 761,993 | 751,168 | 2,406,995 | 2,497,949 |
| Loss from operations | (667,079) | (590,592) | (2,111,997) | (2,129,240) |
| Other income (expense): | ||||
| Interest expense | (193,785) | (157,012) | (605,522) | (814,565) |
| Gain in vendor settlements | 75,144 | 9,304 | 248,960 | 162,056 |
| Other | — | 40 | — | 6,549 |
| Other expense, net | (118,641) | (147,668) | (356,562) | (645,960) |
| Net loss | (785,720) | (738,260) | (2,468,559) | (2,775,200) |
| Preferred stock dividend requirements: | ||||
| Recurring | (81,735) | (81,735) | (243,428) | (217,746) |
| Warrant inducement | — | — | (2,060,397) | — |
| Preferred stock dividend requirements | (81,735) | (81,735) | (2,303,825) | (217,746) |
| Net loss applicable to common stock | (867,455) | (819,995) | (4,772,384) | (2,992,946) |
| Basic and diluted net loss per share | (0.03) | (0.03) | (0.18) | (0.13) |
| Weighted average shares of common stock outstanding | 27,288,181 | 24,691,500 | 26,654,901 | 23,535,807 |
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