Identive Group Announces Fourth Quarter And Fiscal 2010 Results

Note Regarding Forward Looking Information:

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. Forward-looking statements can be identified by words such as "anticipates," "believes," "plans," "will," "intends," "expects," and similar references to the future. Examples of such statements include, without limitation, statements we make about our expectations regarding worldwide demand for our ID products and solutions, trends in the secure ID market, our position as an innovative leader in the secure ID market, and our future growth and profitability. These statements are based on current expectations or beliefs, as well as a number of assumptions about future events that are subject to risks and uncertainties that may cause actual results to differ materially from those contemplated herein. Our financial results may not meet expectations, our cost savings may not be in the amounts or the time frames we expect; and we may not be successful in our strategy of pursuing both organic and acquisitive growth. Readers should not unduly rely on these forward-looking statements, which are not a guarantee of future performance and are subject to a number of risks and uncertainties, many of which are outside our control, that could cause our actual business and operating results to differ. Factors that could cause actual results to differ materially from those in the forward-looking statements include our ability to successfully integrate acquired businesses into ours; our ability to effect significant reductions in our expense base; our ability to reduce the transaction costs associated with mergers and acquisitions; our ability to grow the Company based on a strategy of providing products, components and services for the identification systems value chain; our ability to grow market share and revenues based on participation in early stage markets for contactless products; our ability to retain and hire experienced management personnel; our ability to successfully develop and introduce new products that satisfy the evolving and increasingly complex requirements of customers; whether the markets in which we participate or target may grow, converge or standardize at anticipated rates or at all, including the identification and identity markets that we are targeting; our ability to acquire the components we need to build our own products; and our ability to successfully compete in the markets in which we participate or target. For a discussion of further risks and uncertainties related to our business, please refer to our public company reports, including our Annual Report on Form 10-K for the year ended December 31, 2009 and subsequent reports filed with the U.S. Securities and Exchange Commission.

All trade names are trademarks or registered trademarks of their respective holders.

IDENTIVE GROUP, INC.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(unaudited)
	Three Months Ended			Twelve Months Ended
	December 31, 2010	September 30, 2010 (A)	December 31, 2009	December 31, 2010	December 31, 2009
Net revenue	$ 27,807	$ 20,511	$ 11,865	$ 84,843	$  41,315
Cost of revenue	15,979	11,563	7,168	47,485	21,971
Gross profit	11,828	8,948	4,697	37,358	19,344
Operating expenses:
Research and development	1,202	1,035	1,078	4,715	4,253
Sales and marketing	5,497	4,823	4,125	20,375	12,886
General and administrative	5,608	5,341	5,723	21,809	16,431
Restructuring	--	--	--	337	--
Impairments on intangibles	--	--	647	--	647
Gain on sale of assets	--	--	--	--	(1,417)
Total operating expenses	12,307	11,199	11,573	47,236	32,800
Income (loss) from operations	(479)	(2,251)	(6,876)	(9,878)	(13,456)
Loss and impairment on equity investments	--	--	(1,450)	--	(2,244)
Other income	264	--	--	264	--
Interest expense, net	(211)	(208)	(195)	(865)	(487)
Foreign currency gains (losses), net	(59)	388	(210)	(234)	76
Loss from continuing operations before income taxes and non-controlling interest	(485)	(2,071)	(8,731)	(10,713)	(16,111)
(Provision) benefit for income taxes	(522)	(39)	242	345	1,549
Loss from continuing operations	(1,007)	(2,110)	(8,489)	(10,368)	(14,562)
Less: net income (loss) attributable to non-controlling interest	105	109	--	630	--
Loss from continuing operations attributable to Identive Group, Inc.	(902)	(2,001)	(8,489)	(9,738)	(14,562)
Gain (loss) from discontinued operations, net of income taxes	150	(24)	78	220	383
Net loss attributable to Identive Group, Inc.	(752)	(2,025)	(8,411)	(9,518)	(14,179)
Basic and diluted loss per share attributable to Identive Group, Inc.:
Loss from continuing operations	$(0.02)	$(0.05)	$(0.34)	$(0.23)	$(0.66)
Income from discontinued operations	$0.00	$0.00	$0.00	$0.01	$0.02
Net loss per share	$(0.02)	$(0.05)	$(0.34)	$(0.22)	$(0.64)
Basic and diluted shares used in computing loss per share	45,120	43,279	25,135	42,722	22,047
(A) In connection with preparation of its annual financial statements and fourth quarter 2010 results, the Company determined that an error occurred in the recognition of revenue related to the sale of readers for the German national ID program as reported for the third quarter of 2010. Upon review of Accounting Standards Codification 605, Revenue Recognition, the Company concluded that not all criteria for recognizing the sale were in fact met until the fourth quarter of 2010.  As a result, revenue of approximately $2.8 million reported in the Company's Form 10-Q for the quarter ended September 30, 2010 was overstated, resulting in an impact of $1.2 million on operating profit and net income. The Audit Committee, after reviewing the matter with management, has concluded that the required adjustment to the Company's third quarter financial statements is not material. The Company will include the restated third quarter results (as presented in the table above) in the interim footnote disclosure of its 2010 Annual Report on Form 10-K and in its third quarter 2011 Form 10-Q.

IDENTIVE GROUP, INC.
Condensed Consolidated Balance Sheets
(In thousands)
	December 31,	December 31,
	2010	2009
ASSETS	(unaudited)	(B)
Current assets:
Cash and cash equivalents	$ 10,799	$ 4,836
Accounts receivable, net	15,231	6,739
Inventories, net	10,584	5,379
Income taxes receivable	126	274
Other current assets	2,088	1,647
Total current assets	38,828	18,875
Property and equipment, net	5,373	683
Goodwill	47,126	21,895
Intangible assets, net	33,865	22,082
Other assets, net	793	1,036
Total assets	$ 125,985	$ 64,571
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$ 12,833	$  5,530
Bank line of credit	574	--
Mortgage loan payable to bank	56	--
Notes payable	1,040	--
Liability to related party	1,058	1,027
Accrued compensation and related benefits	3,694	2,884
Accrued professional fees	5,245	1,321
Income taxes payable	44	188
Other accrued expenses and liabilities	4,979	3,811
Total current liabilities	29,523	14,761
Long-term debt note	950	--
Long-term liability to related parties	7,615	7,899
Long-term income taxes payable	458	456
Deferred tax liability	6,795	3,515
Long-term mortgage loan payable to bank	840	--
Total liabilities	46,181	26,631
Total equity	79,804	37,940
Total liabilities and stockholders' equity	$ 125,985	$ 64,571
(B) This condensed consolidated balance sheet has been derived from the audited consolidated financial statements at December 31, 2009.

IDENTIVE GROUP, INC.
Reconciliation of GAAP and Non-GAAP Financial Information
(In thousands)
(unaudited)
	Three Months Ended			Twelve Months Ended
	December 31, 2010	September 30, 2010 (C)	December 31, 2009	December 31, 2010	December 31, 2009
Reconciliation of GAAP gross profit margin and non-GAAP gross profit margin
GAAP cost of revenue	$ 15,979	$ 11,563	$ 7,168	$ 47,485	$ 21,971
Overhead allocation	(536)	(493)	(570)	(1,956)	(1,596)
Amortization and depreciation	(497)	(384)	(130)	(1,746)	(367)
Stock-based compensation	(1)	(3)	(6)	(15)	(15)
Total reconciling items included in GAAP cost of revenue	(1,034)	(880)	(706)	(3,717)	(1,978)
Non-GAAP cost of revenue	$ 14,945	$ 10,683	$ 6,462	$ 43,768	$ 19,993
Non-GAAP gross profit margin	46%	48%	46%	48%	52%
Reconciliation of GAAP operating expenses and overhead costs
GAAP operating expenses	$ 12,307	$ 11,199	$ 11,573	$ 47,236	$ 32,800
Overhead allocation	536	493	570	1,956	1,596
Amortization and depreciation	(724)	(756)	(220)	(2,950)	(694)
Stock-based compensation	(1,555)	(565)	(948)	(2,558)	(1,142)
Acquisition costs	(134)	(253)	(1,256)	(1,452)	(4,002)
Transition and integration costs	(451)	(274)	--	(2,254)	(536)
Impairment of intangibles	--	--	(647)	--	(647)
Gain on sale of assets	--	--	--	--	1,417
Total reconciling items included in GAAP operating expenses	(2,328)	(1,355)	(2,501)	(7,258)	(4,008)
Overhead costs	$ 9,979	$ 9,844	$ 9,072	$ 39,978	$ 28,792
Reconciliation of GAAP net loss to adjusted EBITDA gain (loss)
Net loss attributable to Identive Group, Inc.	(752)	(2,025)	(8,411)	(9,518)	(14,179)
(Benefit) Provision for income taxes	522	39	(242)	(345)	(1,549)
(Gain) Loss from discontinued operations, net of income taxes	(10)	79	(36)	58	(226)
Gain on sale of discontinued operations, net of income taxes	(140)	(55)	(42)	(278)	(157)
Net (income)/loss attributable to noncontrolling interest	(105)	(109)	--	(630)	--
Interest expense (income), net	211	208	195	865	487
Foreign currency losses (gains), net	59	(388)	210	234	(76)
Other expenses (income)	(264)	--	--	(264)	--
Amortization and depreciation	1,221	1,140	350	4,696	1,061
Stock-based compensation	1,556	568	954	2,573	1,157
Acquisition costs	134	253	1,256	1,452	4,002
Transition and integration costs	451	274	--	2,254	536
Gain on sale of assets	--	--	--	--	(1,417)
Impairment of intangibles	--	--	647	--	647
Loss on equity investments	--	--	1,450	--	2,244
Total reconciling items included in GAAP net loss	3,635	2,009	4,742	10,615	6,709
Adjusted EBITDA gain (loss)	$ 2,883	$ (16)	$ (3,669)	$ 1,097	$ (7,470)

IDENTIVE GROUP, INC.
Reconciliation of GAAP and Non-GAAP Financial Information
(In thousands, except per share data)
(unaudited)
	Three Months Ended			Twelve Months Ended
	December 31, 2010	September 30, 2010 (C)	December 31, 2009	December 31, 2010	December 31, 2009
Reconciliation of GAAP net loss to GAAP net income (loss) before amortization
Net loss attributable to Identive Group, Inc.	$(752)	$(2,025)	$(8,411)	$(9,518)	$(14,179)
Reconciling items included in GAAP net loss:
Amortization expense	948	894	251	3,637	668
Total reconciling items included in GAAP net loss	948	894	251	3,637	668
Net income (loss) attributable to Identive Group, Inc., before amortization	$  196	$(1,131)	$(8,160)	$(5,881)	$(13,511)
Weighted average shares used to compute basic and diluted loss per share	45,120	43,279	25,135	42,722	22,047
Basic and diluted net loss per share attributable to Identive Group, Inc.:
Net earnings (loss) per share before amortization	$ 0.00	$ (0.03)	$ (0.32)	$ (0.14)	$ (0.61)
(C)  As stated in the footnote to the condensed consolidated statement of operations in this press release, the Company determined that an error occurred in the recognition of revenue related to the sale of readers for the German national ID program as reported for the third quarter of 2010 and these sales were subsequently recognized in the 2010 fourth quarter. As a result, revenue, gross margin, operating performance and net income/(loss) for the third quarter of 2010 have been restated. The Company will include the restated third quarter results in the interim footnote disclosure of its 2010 Annual Report on Form 10-K and in its third quarter 2011 Form 10-Q.

CONTACT: Darby Dye
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         Fabien B. Nestmann
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