RDM Corporation Announces Record Fiscal 2004

Net earnings were $364,000 for the year ended September 30, 2004 compared to a net loss of $479,000 in 2003. The Companys net earnings per share were $0.02 as compared to a loss per share of $0.03 in the previous year. 2004 Highlights - Check 21 Act took effect October 28, 2004 providing expanded market opportunities for RDM - RDM selected by four of the largest U.S. banks to provide transaction processing services - Version 1.4 of ITMS, RDMs Image and Transaction Management System, released - Average weekly transaction volume exceeded 300,000 items by year-end - Significant increase in both revenues and profitability Revenue growth was positively impacted by strong Digital Imaging and Electronic Payments Solutions business unit revenues, representing 58% and 29% of total annual revenues respectively. Digital Imagings strong performance was primarily due to increased demand for cheque conversion products, largely EC6000 scanners. While the majority of Electronic Payments Solutions revenues were generated from government organizations in fiscal 2004, for the first time, approximately $1 million of the divisions revenues were generated from large private sector U.S. financial institutions looking to benefit from RDMs expertise. RDMs Quality Assurance and Electronic Payments Solutions operating divisions gross profit margin levels were strong, however, Digital Imaging gross profit margins were lower than planned due to delays in getting the Companys next generation EC6000 and Synergy products to market, compounded by some price pressure in the point-of-sale hardware market. Operating expenses for the year were $6.6 million or 38% of total revenues as compared to $5.9 million or 48% of fiscal 2003 revenues. Sales and marketing expenses, as well as general and administration expenses, remained similar to the prior year while research and development expenses rose 33% as a result of increased investment in ITMS and Digital Imaging product development. The Company ended fiscal 2004 with $4 million in cash and cash equivalents and $8.1 million in working capital. A significant trend impacting the Company that is expected to fuel its growth is the Check Clearing for the 21st Century Act (Check 21), which took effect in the United States October 28, 2004. It encourages an industry shift away from traditional methods of handling paper cheques by granting Image Replacement documents generated from electronic images the same legal status as the original paper cheque. The Check 21 Act was created primarily in response to the September 11th, 2001 attacks that halted virtually all cheque payments and forced the U.S. government to rethink how the American Payments Industry processes the over 40 billion cheques written each year. The Company expects to see continued growth in each of its operating segments with Digital Imaging leading the Companys growth. RDM is committed to growing its revenues in 2005 through increasing scanner sales and related product offerings. As well, recurring ITMS transaction revenues are expected to grow significantly as a result of its strategic partnerships with large U.S.-based financial institutions. By fiscal year-end, four of the largest U.S. banks had selected RDMs ITMS and the Company looks forward to bringing on additional banks and broadening existing relationships in fiscal 2005. During the year, ITMS volumes increased significantly and by year-end, average weekly ITMS volume surpassed 300,000 items, or 15,000,000 annualized. For the fourth quarter of 2004, total revenues were $4.1 million as compared to $3.6 million in the previous year. Fourth quarter 2004 earnings were $341,000 compared to $165,000 in the previous year and gross margins were 43% compared to 47%. Earnings per share was $0.02 compared to $0.01 in 2003.