Dexits Revenue Improves

Under the terms of a five-year Merchant Licence Agreement signed with Bell Canada last year, the Company earned licence fees of $500,000 in the quarter ended March 31, 2005 as well as the quarter ended December 31, 2004. The remainder of the revenue in the three months ending March 31, 2005 was derived from recurring merchant transaction fees and consumer refill fees as well as POS terminal and RFID reader sales and miscellaneous fees. In the quarter ended March 31, 2005, Dexit also received a payment of $3 million for the second year licence fee under the Bell Canada Merchant License Agreement. This represents an increase of 50 percent from the $2 million paid under this Agreement in 2004. As at March 31, 2005, this payment was recorded on the Companys books as deferred revenue and will be taken into revenue over the one-year period from April 1, 2005 to March 31, 2006. In line with the Companys strategic decision not to pursue direct consumer acquisition programs in 2005 in favour of supporting the consumer acquisition efforts undertaken by its channel partners, sales and marketing expenses during the first quarter of 2005 declined to $816 thousand from $1.3 million in the same period last year and $1.4 million in the previous quarter. For the three-month period ended March 31, 2005, the Company reported a net loss of $2.3 million or $0.23 per share, compared with a net loss of $2.9 million or $0.49 per share in the comparable period in 2004 and a net loss of $2.5 million or $0.25 per share for the previous three-month period ending December 31, 2004. Per-share calculations are based on weighted average shares outstanding of 10,052,000 in the first quarter of 2005, 10,052,000 in the fourth quarter of 2004 and 5,875,000 in the first quarter of 2004. On March 31, 2005, Dexit had cash, cash equivalents and short-term investments of $15.7 million compared with $17.7 million at the end of 2004. The number of shares outstanding as at March 31, 2005 was 10,052,167. Key operational highlights in the quarter include the following: - Dexit entered into an agreement with Smart Systems Technologies (SST) to add SSTs loyalty functionality to the Dexit platform and for Dexit to be the preferred pre-paid payments supplier to SST in the US market - Dexit introduced the Dexit Integration Device - a patent-pending point-of-sale hardware technology that enables Dexit RFID readers to integrate directly into merchant point-of-sale solutions, eliminating the need for rekeying data and further reducing transaction times - Dexit added enhanced functionality to the Dexit solution to allow consumers to refill their Dexit account using credit cards