- Published: 12 February 2009
- Written by Editor
Redknee Reports 24% Revenue Growth and Profitability in First Quarter 2009
Company sees growth and expansion within customer base
Redknee (TSX/AIM: RKN) a leading provider of mission-critical billing and charging software and solutions for communications service providers, today announces its results for the first quarter of fiscal 2009, ended December 31, 2008.
Q1 HIGHLIGHTS:
--------------
- First quarter 2009 revenue up 24% to $14.2 million (Q1 2008: $11.5 million)
- Gross margin increases to 76% (Q1 2008: 67%)
- EBITDA(1) of $0.9 million (Q1 2008: loss of $1.7 million)
- Operating profit of $3.2 million (Q1 2008: loss of $2.1 million)
- Basic earnings per share of $0.05 (Q1 2008: loss per share of
($0.04))
- Signed two multi-million dollar contracts with Tier 1 customers
- Cash and investments at $23.9 million (September 30, 2008:
$15.3 million)
- US $10 million in available line of credit with Export Development
Canada
- 10 issued patents, 50 pending applications, and 6 further patent
applications at various stages of the grant/issuance process
>>
Canadian-based Redknee reports in Canadian dollars, but generates a majority of its revenue from US dollar, Euro and UK pound priced and denominated contracts.
"Redknee continues to deliver on its stated corporate strategy. We have continued to invest in the high growth markets of Africa, the Middle East, and Asia Pacific, while building support among Tier 1 operators in Europe and North America." stated Lucas Skoczkowski, CEO for Redknee. He added "This growth, combined with a robust renewal rate of customer support service agreements, has resulted in increased revenue, an improved cash position, and profitability for the quarter. We will remain focused on profitable growth in fiscal 2009."
Please see section regarding Forward-Looking Statements which forms an integral part of this release. These results along with the unaudited consolidated financial statements and the Company's MD&A are available on the Company's website at www.redknee.com and on SEDAR at www.sedar.com.
<<
----------------------------
(1) Earnings Before Interest Expense, Income Taxes, Depreciation, and
Amortization (EBITDA) is a non-GAAP measure. While useful in
understanding Company operational results, EBITDA is not standardized
and may not be comparable to similar results reported by other
companies. EBITDA described above is calculated as Income (loss) from
operations, plus foreign exchange gain/loss, amortization and
stock-based compensation.
Overview
--------
Redknee remains focused on the three core elements of its corporate
strategy:
- Provide mission-critical solutions to our global customer base;
- Achieve market leadership in our target markets, including the high-
growth regions of Africa, the Middle East and Asia Pacific; and
- Continue to increase the proportion of recurring revenues in our
business model.
>>
Redknee's mission critical solutions have experienced sales growth in the first quarter of fiscal 2009, with our Next Generation Rating & Charging and location solutions contributing more than 50% of revenue. Sales of Redknee's Turnkey Converged Billing solutions also grew steadily, contributing an additional 40% of our overall quarterly revenue.
Global telecom carriers continue to recognize Redknee's market leadership solution. In the first quarter of fiscal 2009, we signed two multi-million dollar contracts, one from an existing Tier 1 customer and the other from a new Tier 1 customer. Furthermore, Redknee expanded upon its existing customer base in our high growth markets through the extension of existing licenses and the sale of additional solutions.
Growth of recurring revenue was enhanced by a robust renewal of customer support service agreements. In the interest of offering a more tailored suite of services to address the market opportunity presented by our global customer base, Redknee has introduced a new tiered structure for customer service packages. This tiered structure covers a full spectrum of service offerings - from a basic product support plan to full on-site managed service capabilities.
Redknee believes that it remains well-positioned during this period of economic uncertainty. The Company has a strong employee base, a growing number of customers, and the right product offering to meet our customers' demands. Market trends further support our approach: data services continue to grow in Tier 1 markets, and wireless subscriber numbers continue to expand in the high growth markets of Africa, the Middle East and Asia Pacific.
Financial Review
----------------
For the first quarter of fiscal 2009, Redknee's revenue grew by 24% to $14.2 million compared to revenue of $11.5 million in the first quarter of fiscal 2008.
Gross margin in the period increased to $10.8 million or 76% of revenue from $7.7 million or 67% of revenue in the first quarter of fiscal 2008.
Operating profit for the quarter increased to $3.2 million as compared to a loss of $2.1 million in the first quarter of fiscal 2008. Excluding foreign exchange loss (gain), amortization and stock compensation expense (EBITDA) Redknee recorded an EBITDA of $0.9 million for the first quarter of fiscal 2009 as compared to an EBITDA loss of $1.7 million for the first quarter of fiscal 2008.
Net income in Q1 fiscal 2009 was $2.9 million or $0.05 per share, as compared to a loss of $2.2 million or ($0.04) per share in Q1 fiscal 2008. Net income for the period was positively impacted by net realized and unrealized foreign exchange gains of $2.6 million as a result of the decline of the Canadian dollar against the US dollar.
Cash and investments as at December 31, 2008 was $23.9 million versus $15.3 million as at September 30, 2008.
The following table outlines the Company's results of operations for the period indicated. In addition to the summary financial statements appended at the end of this release, the company's financial statements and MD&A are available on the Company's website at and are posted on SEDAR.
<<
Unaudited Three Three
CDN$000's Months Months
Ended Ended %
Dec .31-08 Dec. 31-07 Change
Revenue
Products and Services $9,398 $8,219 14%
Support and Subscriptions 4,819 3,259 48%
-------------------------
14,217 11,478 24%
Cost of revenue 3,370 3,742 -10%
-------------------------
Gross profit 10,847 7,736 40%
76% 67%
Operating expenses
Selling and marketing 4,380 3,777 16%
General and administrative 2,370 2,614 -9%
Research and development 3,344 3,281 2%
Amortization of property and
equipment 192 63 205%
Foreign currency exchange loss
(gain) (2,638) 109 -2520%
-------------------------
7,648 9,844 -22%
Income (Loss) from operations 3,199 (2,108) -252%
Interest income 25 203 -88%
Interest expense (2) (1) 100%
-------------------------
Income (Loss) before income taxes 3,222 (1,906) -269%
Income taxes 361 292 24%
-------------------------
Income (Loss) for the period 2,861 (2,198) -230%
-------------------------
-------------------------
>>
CONFERENCE CALL
The Company will discuss the results on a conference call at 8:00 a.m. EST (1:00 BST) today.
To participate in the conference call please dial the following numbers five minutes before the start of the call to ensure your participation:
<< Local dial-in number 416 644 3423 Toll-free North America 800 589 8577 Toll-free United Kingdom 00 800 2288 3501 >>
A webcast will also be available at: http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2544300
The conference call will be archived for replay by telephone at: 416-640-1917 or Toll-Free at 1-877-289- 8525 (passcode: 21297341 followed by the number sign) from approximately 10:00 am February 12, 2009 through to February 26, 2009.
FORWARD-LOOKING STATEMENTS
Certain statements in this Release which are not historical facts may constitute forward-looking statements or forward-looking information within the meaning of applicable securities laws ("forward-looking statements"). Any statements related to Redknee's projected revenues, earnings, growth rates, revenue mix, staffing and resources, and product plans are forward looking statements as are any statements relating to future events, conditions or circumstances. The use of terms such as "believes", "anticipated", "expected", "projected", "targeting", "estimate", "intend" and similar terms are intended to assist in identification of these forward-looking statements. Readers are cautioned not to place undue reliance upon any such forward-looking statements. Such forward-looking statements are not promises or guarantees of future performance and involve both known and unknown risks and uncertainties that may cause the actual results, performance, achievements or developments of Redknee to differ materially from the results, performance, achievements or developments expressed or implied by such forward-looking statements.
Forward-looking statements are based on management's current plans, estimates, projections, beliefs and opinions. Except as required by law, Redknee does not undertake any obligation to update forward-looking statements should assumptions related to these plans, estimates, projections, beliefs and opinions change.
Many factors could cause the actual results of Redknee to differ materially from the results, performance, achievements or developments expressed or implied by such forward-looking statements, including, without limitation, each of the following factors, which are further discussed in the section of the Company's AIF entitled Risk Factors, and which is available on SEDAR at www.sedar.com and on the Company's website at www.redknee.com.
About Redknee
Redknee is a leading global provider of innovative communication software products, solutions and services. Redknee's award-winning solutions enable operators to monetize the value of each subscriber transaction, while personalizing the subscriber experience to meet mainstream, niche and individual market segment requirements. Redknee's revenue generating solutions provide advanced converged billing, rating, charging and policy for voice, messaging and new generation data services to over 70 network operators in over 50 countries. Established in 1999, Redknee Solutions Inc. (TSX/AIM: RKN) is the parent of the wholly-owned operating subsidiary Redknee Inc. and its various subsidiaries. References to Redknee refer to the combined operations of those entities. For more information, please visit www.redknee.com.
<<
Redknee Solutions Inc.
Interim Consolidated Financial Statements
(Unaudited)
December 31, 2008
(expressed in Canadian dollars)
Redknee Solutions Inc.
Interim Consolidated Balance Sheet
(Unaudited)
-------------------------------------------------------------------------
(expressed in Canadian dollars)
December 31, September 30,
2008 2008
$ $
Assets
Current assets
Cash and cash equivalents 19,298,755 15,242,607
Short-term investments 4,566,965 56,363
Trade accounts and other receivables 9,902,682 11,192,182
Unbilled revenue 5,190,975 6,060,452
Investment tax credits and income taxes
receivable 625,000 600,000
Prepaid expenses 1,067,759 1,066,584
Goods in transit 364,440 325,716
---------------------------
41,016,576 34,543,904
Restricted cash (note 7) 481,160 409,919
Property and equipment 602,052 580,053
Intangible assets 1,313,423 1,388,761
Other assets 576,199 528,294
---------------------------
43,989,410 37,450,931
---------------------------
---------------------------
Liabilities
Current liabilities
Accounts payable 1,035,291 2,172,268
Accrued liabilities 10,258,108 8,678,539
Income taxes payable 2,467,023 2,100,785
Deferred revenue 7,747,559 5,084,287
Current portion of obligations under
capital leases - 619
---------------------------
21,507,981 18,036,498
---------------------------
Shareholders' Equity
Share capital, net of employee share
purchase loans 40,222,052 39,686,701
---------------------------
Contributed surplus 4,081,216 4,410,677
---------------------------
Deficit (21,610,880) (24,471,986)
Accumulated other comprehensive loss,
net of income taxes (210,959) (210,959)
---------------------------
Total deficit and accumulated other
comprehensive loss (21,821,839) (24,682,945)
---------------------------
22,481,429 19,414,433
---------------------------
43,989,410 37,450,931
---------------------------
---------------------------
Guarantees and contingencies (note 7)
Approved by the Board of Directors
(signed) "Jim Pelot" Director (signed) "Colley Clarke" Director
-------------------- ------------------------
Redknee Solutions Inc.
Interim Consolidated Statement of Operations
(Unaudited)
For the three months ended December 31
------------------------------------------------------------------------
(expressed in Canadian dollars)
2008 2007
$ $
Revenue
Software, services and other 9,398,531 8,219,240
Support 4,818,570 3,258,503
---------------------------
14,217,101 11,477,743
Cost of revenue 3,369,931 3,742,016
---------------------------
---------------------------
Gross profit 10,847,170 7,735,727
---------------------------
Operating expenses
Selling and marketing 4,379,946 3,776,585
General and administrative 2,370,134 2,614,316
Research and development (note 4) 3,343,337 3,281,274
Amortization of property and equipment and
intangible assets 192,237 62,678
Foreign currency exchange (gain) loss (2,637,959) 109,400
---------------------------
7,647,695 9,844,253
---------------------------
Income (loss) from operations 3,199,475 (2,108,526)
Interest income (25,076) (202,792)
Interest expense 2,030 1,003
---------------------------
Income (loss) before income taxes 3,222,521 (1,906,737)
Income taxes
Current 361,415 291,681
---------------------------
Net income (loss) for the period 2,861,106 (2,198,418)
---------------------------
---------------------------
Net income (loss) per common share (note 2)
Basic 0.05 (0.04)
Diluted 0.05 (0.04)
Weighted average number of common shares
(note 2)
Basic 56,643,532 56,328,674
Diluted 57,111,032 56,328,674
Redknee Solutions Inc.
Interim Consolidated Statement of Comprehensive Income (Loss)
(Unaudited)
For the three months ended December 31
-------------------------------------------------------------------------
(expressed in Canadian dollars)
2008 2007
$ $
Net income (loss) for the period 2,861,106 (2,198,418)
Other comprehensive income, net of income taxes
Foreign currency translation adjustment - -
---------------------------
Comprehensive income (loss) for the period 2,861,106 (2,198,418)
---------------------------
---------------------------
Redknee Solutions Inc.
Interim Consolidated Statement of Shareholders' Equity
(Unaudited)
For the three months ended December 31
-------------------------------------------------------------------------
(expressed in Canadian dollars)
2008
------------------------------------------------------
Employee
Share capital share
-------------------------- purchase Contributed
Number Amount loans surplus
$ $ $
Balance -
September 30,
2008 58,350,626 40,663,829 (977,128) 4,410,677
Stock-based
compensation
(note 3) - - - 188,239
Net income for the
period - - - -
Collection of
employee share
purchase loans - - 17,651 -
Restricted share
units vested and
exercised (note 3) 417,500 517,700 - (517,700)
------------------------------------------------------
Balance -
December 31,
2008 58,768,126 41,181,529 (959,477) 4,081,216
------------------------------------------------------
------------------------------------------------------
2008
-----------------------------------------
Accumulated
other Total
comprehensive shareholders'
Deficit loss equity
$ $ $
Balance -
September 30,
2008 (24,471,986) (210,959) 19,414,433
Stock-based
compensation
(note 3) - - 188,239
Net income for the
period 2,861,106 - 2,861,106
Collection of
employee share
purchase loans - - 17,651
Restricted share
units vested and
exercised (note 3) - - -
----------------------------------------
Balance -
December 31,
2008 (21,610,880) (210,959) 22,481,429
----------------------------------------
----------------------------------------
2007
------------------------------------------------------
Employee
Share capital share
-------------------------- purchase Contributed
Number Amount loans surplus
$ $ $
Balance -
September 30,
2007 58,350,626 40,663,829 (895,531) 3,520,838
Stock-based
compensation
(note 3) - - - 203,495
Loss for
the period - - - -
Employee share
purchase loans - - (86,317) (9,910)
------------------------------------------------------
Balance -
December 31,
2007 58,350,626 40,663,829 (981,848) 3,714,423
------------------------------------------------------
------------------------------------------------------
2007
-----------------------------------------
Accumulated
other Total
comprehensive shareholders'
Deficit loss equity
$ $ $
Balance -
September 30,
2007 (20,060,782) (210,959) 23,017,395
Stock-based
compensation
(note 3) - - 203,495
Loss for
the period (2,198,418) - (2,198,418)
Employee share
purchase loans - - (96,227)
-----------------------------------------
Balance -
December 31,
2007 (22,259,200) (210,959) 20,926,245
-----------------------------------------
-----------------------------------------
Redknee Solutions Inc.
Interim Consolidated Statement of Cash Flows
(Unaudited)
For the three months ended December 31
-------------------------------------------------------------------------
(expressed in Canadian dollars)
2008 2007
$ $
Cash provided by (used in)
Operating activities
Net income (loss) for the period 2,861,106 (2,198,418)
Items not involving cash
Amortization of property and equipment 116,899 62,678
Amortization of intangible assets 75,338 -
Unrealized foreign currency exchange gain (2,517,090) (47,034)
Stock-based compensation (note 3) 188,239 203,495
Change in non-cash operating working
capital (note 5) 6,831,323 (3,823,842)
---------------------------
7,555,815 (5,803,121)
---------------------------
Financing activities
Employee loans 17,651 -
Repayment of obligations under capital leases (619) (15,051)
---------------------------
17,032 (15,051)
---------------------------
Investing activities
(Purchase of) proceeds from short-term
investments (4,510,602) 4,133,863
Purchase of property and equipment (138,898) (66,343)
Increase in other assets (47,905) (559,667)
Loan to Argent Networks - (529,463)
Increase in restricted cash (1,241) -
---------------------------
(4,698,646) 2,978,390
---------------------------
Effect of foreign currency exchange rate
changes on cash and cash equivalents 1,181,947 49,850
---------------------------
Increase (decrease) in cash and cash
equivalents during the period 4,056,148 (2,789,932)
Cash and cash equivalents -
Beginning of period 15,242,607 8,927,770
---------------------------
Cash and cash equivalents -
End of period 19,298,755 6,137,838
---------------------------
---------------------------
Supplemental cash flow information
Interest paid 2,030 1,003
Interest received 25,076 202,792
Cash taxes/investment tax credits received,
net of income taxes paid 173,184 -
Redknee Solutions Inc.
Notes to Interim Consolidated Financial Statements
(Unaudited)
For the three months ended December 31, 2008
-------------------------------------------------------------------------
(expressed in Canadian dollars, except as otherwise indicated)
Nature of operations
Redknee Solutions Inc. (the Company) was incorporated in Canada on
November 1, 2006. Pursuant to an amalgamation agreement dated
February 15, 2007 (the Amalgamation Agreement) among the Company;
Redknee Inc. (Redknee), a company under common control with the
Company; and 2117580 Ontario Inc., a wholly owned subsidiary of the
Company. Redknee and 2117580 Ontario Inc. were amalgamated to form a
successor company, Redknee Inc., as a wholly owned subsidiary of the
Company. The above transaction is considered to be among companies
under common control and the interim consolidated financial
statements of the Company reflect the amalgamation as if the
companies had always been amalgamated.
The Company's software products allow its wireless telecommunications
network operator customers to extend and enhance their capabilities
and service offerings, enabling them to introduce new revenue through
the introduction of network-based services, including call and
subscriber management, multimedia messaging information services and
location aware services. In addition, the Company's software products
also manage and analyze, in real-time, complex and critical network
operations, such as service provisioning, network management and
customer care, as well as provide real-time rating, charging and
billing.
1 Summary of significant accounting policies
a) Basis of presentation
These unaudited interim consolidated financial statements have
been prepared in accordance with Canadian generally accepted
accounting principles (GAAP) and have been prepared on a basis
consistent with the audited consolidated financial statements for
the year ended September 30, 2008, except as described below.
Certain of the prior period's amounts have been reclassified to
conform with the current period's presentation.
The preparation of these interim consolidated financial statements
requires management to make assumptions and estimates that affect
the figures within these interim consolidated financial statements
and notes. Actual results could differ significantly from those
assumptions and estimates. Furthermore, the operating results for
the interim periods presented are not necessarily indicative of
the results anticipated for the full year. In the opinion of
management, these interim consolidated financial statements
reflect adjustments necessary to state fairly the results for the
periods presented.
b) Principle of consolidation
The interim consolidated financial statements include the
financial statements of the Company, Redknee and its wholly owned
subsidiary companies, of which the principal subsidiaries are
Redknee (Ireland) Ltd., Redknee (Germany) GmbH, Redknee (UK) Ltd.,
Redknee (ME) FZ-LLC (Dubai), Redknee (US) Ltd. and Redknee (India)
Technologies Pvt. Ltd. All significant intercompany balances and
transactions have been eliminated on consolidation. The Company
does not have any entities to be consolidated under Accounting
Guideline 15, Consolidation of Variable Interest Entities.
c) Changes in accounting policies
Financial statement presentation
In April 2007, The Canadian Institute of Chartered Accountants
(CICA) Accounting Standards Board amended Handbook Section 1400,
General Standards of Financial Statement Presentation. These
amendments require management to disclose any uncertainties that
cast significant doubt on the entity's ability to continue as a
going concern. In assessing whether the going concern assumption
is appropriate, management must take into account all available
information about the future, which is at least, but is not
limited to, 12 months from the balance sheet date. The standard is
effective for years beginning on or after January 1, 2008. The
Company adopted this standard on October 1, 2008 and it did not
have an impact on the interim consolidated financial statements.
Goodwill and other intangible assets
In February 2008, the CICA issued Handbook Section 3064, Goodwill
and Intangible Assets, which replaces Handbook Sections 3062,
Goodwill and Other Intangible Assets and 3450, Research and
Development Costs. This standard establishes the standards for the
recognition, measurement and disclosure of goodwill and intangible
assets. The standard becomes effective for years beginning on or
after October 1, 2008. The Company adopted this standard on
October 1, 2008 and it did not have an impact on the interim
consolidated financial statements.
d) Future changes in accounting standards
International Financing Reporting Standards
In February 2008, the Canadian Accounting Standards Board
confirmed that the use of International Financial Reporting
Standards (IFRS) will be required for fiscal years beginning on or
after January 1, 2011 for publicly accountable profit-oriented
enterprises. IFRS will replace current Canadian GAAP. Companies
will be required to provide comparative IFRS information for the
previous fiscal year. The Company is currently evaluating the
impact of adopting IFRS on its consolidated financial statements.
2 Net income (loss) per common share
As a result of the loss for the three-month period ended December 31,
2007, all potentially dilutive securities, being stock options,
unvested restricted share units and shares issued under the share
purchase plan for which loans were given totalling 8,539,879 shares
were considered anti-dilutive.
For the three-month period ended December 31, 2008, the diluted
weighted average shares outstanding include unvested restricted
share units. Shares relating to outstanding employee share purchase
loans and outstanding stock options in the amount of 7,739,065
shares have been excluded because the impact would be anti-dilutive.
A reconciliation of the number of shares used for purposes of
calculating basic and diluted income (loss) per share is as follows:
2008 2007
Weighted average number of shares
outstanding 58,628,959 58,350,626
Less: Shares associated with
outstanding share purchase loans 1,985,427 2,021,952
---------------------------
Basic weighted average number of
shares outstanding 56,643,532 56,328,674
Add: Unvested restricted share units 467,500 -
---------------------------
Diluted weighted average
shares outstanding 57,111,032 56,328,674
---------------------------
---------------------------
3 Stock-based compensation
During the three months ended December 31, 2008, 75,000 (2007 - nil)
stock options, with a weighted fair value of $0.17 per common share
at the date of grant, were issued to employees. The fair value of the
stock options was determined using a Black-Scholes option pricing
model with the following assumptions:
Risk free interest rate 3.03%
Expected volatility 68.3%
Expected life 7 years
Expected dividends nil
The stock-based compensation expense during the period was $121,898
(2007 - $134,908) relating to the Company's stock options.
The Company also recorded a stock-based compensation expense of
$66,341 (2007 - $68,587) relating to the Company's restricted share
plan. No restricted shares were granted during the period, as the
plan was cancelled in November 2006.
4 Research and development expenses
During the three months ended December 31, the research and
development expenses were as follows:
2008 2007
$ $
Gross research and development expenses 3,368,337 3,331,274
Less: Investment tax credits recognized 25,000 50,000
---------------------------
3,343,337 3,281,274
---------------------------
---------------------------
In 2007 and 2008, the Company continued to earn investment tax
credits related to research and development expenses. However, due to
the Company's past tax losses, the majority of the credits were not
afforded asset recognition in the interim consolidated balance sheet.
5 Change in non-cash operating working capital
2008 2007
$ $
Trade accounts and other receivables 2,637,858 (6,007,211)
Unbilled revenue 886,880 716,546
Investment tax credits and income taxes
receivable (25,000) (50,000)
Prepaid expenses (1,175) 170,355
Accounts payable (1,237,595) (769,490)
Accrued liabilities 1,579,569 1,099,349
Deferred revenue 2,663,272 985,293
Income taxes payable 366,238 158,237
Goods in transit (38,724) (126,921)
---------------------------
6,831,323 (3,823,842)
---------------------------
---------------------------
6 Segmented reporting
The Company reviewed its operations and determined that it operates
in a single reportable operating segment, the telecommunications
software market. The single reportable operating segment derives its
revenue from the sale of software products and related services and
hardware. The following information provides the required enterprise-
wide disclosures.
The Company's revenue for the three months ended December 31 by
geographic area is as follows:
2008 2007
$ $
Europe, Middle East and Africa 4,235,657 4,683,264
Americas 7,779,408 4,828,035
Asia and Pacific Rim 2,202,036 1,966,444
---------------------------
14,217,101 11,477,743
---------------------------
---------------------------
Revenue is attributed to geographic locations based on the location
of the external customer. Sales related to Canadian customers were
$34,490 and $361,768 for each of 2008 and 2007, respectively.
2008 2007
$ $
Revenue by type
Software and services 9,033,225 7,858,080
Third party software and hardware 365,306 361,160
Support 4,818,570 3,258,503
---------------------------
14,217,101 11,477,743
---------------------------
---------------------------
The Company's property and equipment by geographic area are as
follows:
December 31, September 30,
2008 2008
$ $
Australia 6,302 -
Canada 519,274 460,569
Ireland/United Kingdom 74,499 95,680
India - 7,829
Other 1,977 15,975
---------------------------
602,052 580,053
---------------------------
---------------------------
In the period ended December 31, 2008, one customer accounted for
approximately 39% of revenue (2007 - two customers accounted for 13%
and 14%).
7 Guarantees and contingencies
a) Letters of credit
As at December 31, 2008, the Company had outstanding letters of
credit of $481,160 (September 30 - $409,919) relating to customer
contracts, which are secured by restricted cash in the
consolidated balance sheet.
b) Line of credit
As at December 31, 2008, the Company has a credit facility with
Export Development Corporation for up to an aggregate principal
amount of US$10,000,000, to assist in financing (i) one or more
acquisitions or (ii) working capital. A commitment fee is payable
equal to 1% per annum of all amounts that have been allocated but
not drawn. As at December 31, 2008, there were no allocations or
amounts drawn.
c) Guarantees
The Company has provided routine indemnifications to its customers
against liability if the Company's products infringe on a third
party's intellectual property rights. The maximum exposure from
these indemnifications cannot be reasonably estimated. In some
cases, the Company has recourse against other parties to mitigate
its risk of loss from these guarantees. The Company has never been
called to perform its obligations under these indemnifications
and the Company is not subject to any pending litigation in these
matters.
d) Litigation and claims
The Company is involved in certain claims and litigation arising
out of the ordinary course and conduct of business. Management
assesses such claims and, if considered likely to result in a loss
and, when the amount of the loss is quantifiable, provisions for
loss are made, based on management's assessment of the most likely
outcome. Management does not provide claims for which the outcome
is not determinable or claims where the amount of the loss cannot
be reasonably estimated. Any settlements or awards under such
claims are provided for when reasonably determinable. The Company
is not currently a party to, or has any of its property as the
subject of, legal proceedings, which would be material to the
Company's financial condition or results of operations.
>>
SOURCE: RedKnee Inc.
Redknee Solutions Inc., Lucas Skoczkowski, Chief Executive Officer, (905) 625-2622; Colley Clarke, Chief Financial Officer, (905) 625-2773; Buchanan Communications, Jeremy Garcia, Tel: +44 (0) 20 7466 5000; Canaccord Adams, Neil Johnson, Ryan Gaffney, Tel: +44 (0) 20 7050 6500
