VUANCE Ltd. Announces First Quarter 2008 Operating Results

ROCKVILLE, Md. , June 3 /PRNewswire-FirstCall/ -- VUANCE Ltd. (Nasdaq and Euronext: VUNC), a leading provider of innovative Radio Frequency Verification Solutions, including active RFID, electronic access control, credentialing, accountability and critical situation management, today announced its operating results for the first quarter of 2008.

First Quarter 2008 Results

Revenues for the quarter ended March 31, 2008 increased 52% to $4.1 million compared with revenues of $2.7 million in the first quarter of 2007. Gross profit increased 81% to $2.5 million in the most recent quarter, versus $1.4 million in the first quarter of 2007. Gross profit margin for the first quarter of 2008 was 62.2% compared to gross profit margin of 52.1% for the first quarter last year.

Total operating expenses for the quarter were $4.5 million, reflecting the contribution of SHC, which was acquired in August of 2007, compared to total operating expenses of $2.3 million for the prior-year first quarter and $4.7 million for the previous quarter. The Company reported a loss from operations of $1.9 million compared to a loss from operations of $883,000 in the prior-year first quarter and $2.6 million in the previous quarter.

The Company reported a net loss of $4.0 million, or $0.77 per share, in the three months ended March 31, 2008 , compared with a net loss of $1.1 million, or $0.27 per share, in the first quarter of 2007.

On a non-GAAP basis (see reconciliation between GAAP and non-GAAP results at the end of this press release), excluding non-cash stock-based compensation, amortization of intangibles assets related to SHC acquisition and Beneficial Conversion Feature (hereinafter "BCF") of convertible bonds of $1 million during the first quarter of 2008, the Company reported a sequential quarterly narrowing of its operating loss. The non-GAAP operating loss in the first quarter of 2008 narrowed to $1.6 million from the non-GAAP operating loss of $2.1 in the fourth quarter of 2007. In the first quarter of 2008, the Company's non-GAAP net loss totaled $2.9 million, or $0.57 per share, versus a non-GAAP net loss of $864,000, or $0.22 per share, in the first quarter of 2007. Non-cash stock-based compensation of $217,000 was recorded in the first quarter of 2007.

Management Comments

"We are pleased to report that revenue and gross profits increased 52% and 81%, respectively, in the first quarter of 2008 when compared with the prior-year first quarter," stated Eyal Tuchman , Chief Executive Officer of VUANCE Ltd. "This demonstrates that our re-positioned sales model is working: to increase solution sales that can generate higher profit margins. Indeed, the numbers were in line with management's expectations."

"The first quarter net loss was higher than a year earlier, reflecting the impact of acquisition and integration of SHC, the significant price decrease of OTI shares and the recognition of onetime deferred expenses related to our convertible bond agreements," Mr. Tuchman continued. "It's important to note that our operating loss, excluding non-cash and non-operational elements, has narrowed to approximately $1.6 million compared with $2.1 million in the previous quarter. Moreover, we anticipate further reductions throughout this year."

Mr. Tuchman concluded, "VUANCE continues to experience positive improvements in our pipeline of potential projects as we establish closer relationships with business partners who appreciate our comprehensive technological offering. We offer a compelling range of products and are the only organization equipped to provide customers with seamless, end-to-end solutions. Therefore, we reiterate our annual sales goal of over $20 million. Further, through diligent management of our expenses and execution of cost control initiatives already put in place, we also repeat our goal of achieving operational breakeven by the end of 2008 and profitability in future years."