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."

Investor Conference Call

VUANCE will host an investor conference call to discuss its first quarter and year ended 2008 operating results today, Tuesday, June 3, 2008 at 10:00 AM Eastern Daylight Time (EDT) (16:00 Israel Time). During the call, Mr. Eyal Tuchman , CEO, and Mr. Lior Maza , CFO, will discuss the Company's first quarter and annual results.

To participate in the conference call, please call one of the following numbers five minutes before 10:00 AM EDT (16:00 Israel Time):

A replay of the teleconference will be available for a one-week period from 14:00 EDT (20:00 Israel Time) on June 3, 2008 until 13:00 EDT on June 10, 2008 . To access the replay, please call one of the following numbers:

Use of Non-GAAP Financial Information

In addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, VUANCE uses non-GAAP measures of operational profit, net income and earnings per share, which are adjustments from results based on GAAP to exclude non-cash equity-based compensation charges in accordance with SFAS 123( R ), onetime expenses and beneficial conversion feature and amortization of discount on convertible bonds and related expenses. VUANCE management believes the non-GAAP financial information provided in this release provides meaningful supplemental information regarding our performance and enhances the understanding of the Company's on-going economic performance. The presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP. Management uses both GAAP and non-GAAP information in evaluating and operating the business and as such deemed it important to provide all this information to investors.

About VUANCE Ltd.

VUANCE Ltd. develops and markets state-of-the-art security solutions for viewing, tracking, locating, credentialing, and managing essential assets and personnel. VUANCE solutions encompass electronic access control, urban security, and critical situation management systems as well as long-range Active RFID for public safety, commercial, and government sectors. The Company's comprehensive product line enables end-to-end solutions that can be employed to successfully overcome the most difficult security challenges. Its Critical Situation Management System (CSMS) is the industry's most comprehensive mobile credentialing and access control system, designed to meet the needs of Homeland Security and other public initiatives. VUANCE is serious about security.

VUANCE Ltd. is headquartered in Rockville, MD . Its common stock is listed on the NASDAQ Capital Market and on the Euronext Exchange under the symbol "VUNC". For more information, visit

Safe Harbor

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are subject to known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Statements preceded or followed by or that otherwise include the words "believes", "expects", "anticipates", "intends", "projects", "estimates", "plans", and similar expressions or future or conditional verbs such as "will", "should", "would", "may" and "could" are generally forward-looking in nature and not historical facts. Forward-looking statements in this release also include statements about business and economic trends. Investors should also consider the areas of risk described under the heading "Forward Looking Statements" and those factors captioned as "Risk Factors" in the Company's periodic reports under the Securities Exchange Act of 1934, as amended, or in connection with any forward-looking statements that may be made by the Company.

The Company also disclaims any duty to comment upon or correct information that may be contained in reports published by the investment community.