ROCKVILLE, Md. (Map) - ROCKVILLE, Md., March 27 /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 incident response management, today announced its operating results for the fourth quarter and the full year of 2007.

Recent Business Highlights -- Fourth quarter revenues increased 71%, to $4.1 million, when compared with the prior-year period. -- Fourth quarter gross profit increased 73%, to $2.1 million, when compared with the prior-year period. -- During the fourth quarter, the August acquisition of Milwaukee based Security Holding Corp ("SHC") was fully integrated into the Company. It was the first full quarter for which its finances were recognized as part of VUANCE. In addition, the sales teams have now been fully integrated into a reorganized and market-focused sales team. -- A pilot program by Anglo America's Chilean copper mines to increase safety and productivity was completed and VUANCE's Active RFID solutions are now being implemented in other mines. -- VUANCE's announced how its Active RFID and electronic access control products offered a set of solutions for Charlotte Country Florida Airport in Punta Gorda, and other airports in the future. -- VUANCE's AAID Security Solutions President, Pete Martin, was selected as an Influential Security Industry Vendor by Security Magazine.

Fourth Quarter and Year Ended 2007 Operating Results

Revenues for the quarter ended December 31, 2007 increased 71% to $4.1 million compared with revenues of $2.4 million in the fourth quarter of 2006. For the year ended December 31, 2007, revenues increased 47.4% to $13 million versus $8.8 million in 2006.

Gross profit increased 73% to $2.1 million in the most recent quarter, versus $1.2 million in the three months ended December 31, 2006. For the year ended December 31, 2007, gross profit increased 38.9% to $7.4 million, compared with $5.3 million for the year ended December 31, 2006.

The Company reported a net loss of $6.1 million, or $(1.19) per share, in the three months ended December 31, 2007, compared with a net income of $7.9 million, or $1.90 per diluted share, in the fourth quarter of 2006. A net loss of $11.3 million, or $(2.57) per share, was recorded during the full year 2007, versus a net income of $5.4 million, or $1.32 per diluted share, in 2006. A significant amount of the net loss in the fourth quarter of 2007 reflected a permanent reduction in the value of the shares of On Track Innovation (Nasdaq: OTIV).

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 $461,000, the Company's net loss totaled $5.6 million, or $(1.10) per share, in the fourth quarter of 2007, versus a non-GAAP net income of $8.1 million, or $1.94 per diluted share, in the three months ended December 31, 2006. Non- cash stock-based compensation and BCF of convertible bonds of $184,000 was recorded in the fourth quarter of 2006. Excluding non-cash stock-based compensation, amortization of intangibles assets related to SHC acquisition, onetime expenses and BCF of convertible bonds of $1.6 million the Company's non-GAAP net loss totaled $9.7 million, or $(2.21) per share, in the year ended December 31, 2007, compared with a non-GAAP net income of $5.8 million, $1.41 per diluted share, in the previous year. Non-cash stock-based compensation and BCF of convertible bonds of $391,000 was recorded in 2006.

Management Comments

"We are pleased to report that revenue and gross profits increased 71% and 73%, respectively, in the fourth quarter of 2007 and 47% and 39% for the year as a whole when compared with the prior-year periods. This demonstrates that re-positioning the Company to focus on selling within the more stable US market can create a solid business model for VUANCE," stated Eyal Tuchman, Chief Executive Officer of VUANCE Ltd. "Indeed, the numbers were in line with management's expectations."

"The fourth quarter net loss was higher than a year earlier, reflecting (1) the need to recognize the significant price decrease of OTI shares, (2) the impact of SHC consolidation, and (3) higher selling and marketing expenses related to our focus on providing Real-time Location, Electronic Access Control, and Incident Response Management Solutions within select vertical markets within the United States. The annual net loss was higher for these reasons as well as the substantial additional costs related to the two completed acquisitions during 2007."

"This was a significant quarter for VUANCE, as we began executing management's plan to grow revenues in the United States by acquiring synergistic companies that can increase our sales power. With the integration now in place, we can focus on our goals of increasing our share of the market for long-range active RFID, electronic access control, credentialing and incident response management systems within the public safety, commercial, and government sectors. Indeed, we're building closer relationships with our business partners, leading system integrators and distributors, who appreciate VUANCE's strong competitive advantage: we're the only company to offer this full range of products enabling the business partners to provide their clients with seamless, end-to-end solutions."

Mr. Tuchman concluded, "With a solid business model on which to build, we are optimistic about 2008. We anticipate sales revenues of over $20 million this year. We will remain alert for organic growth and acquisition opportunities that can contribute to our forward momentum within target vertical markets. In addition, during the fourth quarter of 2007 we began implementing added cost controls, which will take effect during 2008 and assist VUANCE in achieving operational profitability by the end of 2008 and net profitability in future years."

Investor Conference Call

VUANCE will host an investor conference call to discuss its fourth quarter and year ended 2007 operating results today, Thursday, March 27, 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 fourth 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):

In Israel: 03-9180609 In the US (toll free): 1-888-407-2553 In the UK (toll free): 0-800-917-9141

A replay of the teleconference will be available for a one-week period from 14:00 EDT (20:00 Israel Time) on March 27, 2008 until 13:00 EDT on April 03, 2008. To access the replay, please call one of the following numbers:

In Israel: 03- 9255946 In the US (toll free): 1-888-254-7270 In the UK (toll free): 0-800-917-1246

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 range of products enables end-to-end solutions that can be employed to successfully overcome the most difficult security challenges. Its Incident Response Management System (IRMS) 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 www.vuance.com.

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.

Investor/Media Contact Jerry Cahn, Ph.D., J.D. Target 3 Communications Tel: 646-827-0009 Fax: 646-827-9009 Jerry@target3.com CONDENSED CONSOLIDATED BALANCE SHEETS U.S. dollars in thousands December 31, December 31, 2007 2006 Unaudited Audited ASSETS CURRENT ASSETS: Cash and cash equivalents $2,114 $2,444 Restricted cash deposit 3,172 859 Marketable securities 4,054 11,077 Trade receivables, net of allowance for doubtful accounts 2,463 2,625 Other accounts receivable and prepaid expenses 2,400 717 Inventories 566 270 Total current assets 14,769 17,992 INVESTMENTS AND LONG-TERM RECEIVABLES: Investment in restricted marketable securities of other company - 4,431 Long term trade receivables - 79 Severance pay fund 309 239 Total investments and long-term receivables 309 4,749 PROPERTY AND EQUIPMENT, NET 218 160 OTHER ASSETS Goodwill 3,644 - Intangibles assets and deferred charges 2,012 197 Total Other Assets 5,656 197 TOTAL ASSETS $20,952 $23,098 CONDENSED CONSOLIDATED BALANCE SHEETS U.S. dollars in thousands December 31, December 31, 2007 2006 Unaudited Audited LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Short-term bank credit and current maturities of long-term loan $478 $668 Trade payables 1,498 823 Employees and payroll accruals 299 533 Accrued expenses and other liabilities 6,641 3,428 Total current liabilities 8,916 5,452 LONG-TERM LIABILITIES: Convertible bonds 2,441 2,255 Long-term loan, net of current maturities - 67 Accrued severance pay 362 323 Total long-term liabilities 2,803 2,645 COMMITMENTS AND CONTINGENT LIABILITIES SHAREHOLDER'S EQUITY 9,233 15,001 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $20,952 $23,098 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS U.S. dollars in thousands (except share data) Year ended Three months ended December 31, December 31, 2007 2006 2007 2006 Unaudited Audited Unaudited Unaudited Revenues $12,961 $8,795 $4,074 $2,383 Cost of revenues 5,600 3,494 1,934 1,147 Gross profit 7,361 5,301 2,140 1,236 Operating expenses: Research and development 1,716 1,362 812 356 Selling and marketing 9,041 5,619 2,947 2,030 General and administrative 3,192 2,737 935 902 Litigation settlement expenses 34 108 - 43 Total operating expenses 13,983 9,826 4,694 3,331 Capital gain from the sale of the e-ID Division - 10,536 - 10,536 Operating income (loss) (6,622) 6,011 (2,554) 8,441 Financial expenses, net (4,652) (204) (3,508) (120) Other expenses, net - (367) - (372) Income (Loss) before taxes on income (11,274) 5,440 (6,062) 7,949 Taxes on income (37) - (37) - Net Income (loss) $(11,311) $5,440 $(6,099) $7,949 Basic earnings (loss) per share(1) $(2.57) $1.37 $(1.19) $1.99 Diluted earnings (loss) per share(1) $(2.57) $1.32 $(1.19) $1.90 Weighted average number of Ordinary shares used in computing basic earnings (loss) per share (1) 4,391,860 3,969,209 5,124,273 3,986,054 Weighted average number of Ordinary shares used in computing diluted earnings (loss) per share (1) 4,391,860 4,133,225 5,124,273 4,173,651 (1) A 1 for 5.88235 reverse split of our common stock became effective for trading purposes on May 14, 2007. All earnings per share and weighted-average share amounts are presented on a post-split basis. RECONCILIATION BETWEEN GAAP TO NON-GAAP STATEMENTS OF OPERATIONS U.S. dollars in thousands (except share data) Year ended Year ended December 31, 2007 December 31, 2006 GAAP Adjustment Non-GAAP GAAP Adjustment Non-GAAP Unaudited Unaudited Revenues $12,961 - $12,961 $8,795 - $8,795 Cost of revenues 5,600 (5)(a) 5,595 3,494 - 3,494 Gross profit 7,361 5 7,366 5,301 - 5,301 Operating expenses: Research and development 1,716 (399)(a)(b) 1,317 1,362 (31)(a) 1,331 Selling and marketing 9,041 (243)(a)(b) 8,798 5,619 (106)(a) 5,513 General and admini- strative 3,192 (667)(a)(c) 2,525 2,737 (224)(a) 2,513 Litigation settlement expenses 34 - 34 108 - 108 Total operating expenses 13,983 (1,309)(a)(b)(c) 12,674 9,826 (361)(a) 9,465 Capital gain from the sale of the e-ID Division - - - 10,536 - 10,536 Operating Income (loss) (6,622) 1,314 (5,308) 6,011 361 6,372 Financial income (expenses), net (4,652) 268(d) (4,384) (204) 30(d) (174) Other income (expenses), net - - - (367) - (367) Income (Loss) before taxes on income (11,274) 1,582 (9,692) 5,440 391 5,831 Taxes on income (37) - (37) - - - Net Income (loss) $(11,311) $1,582 $(9,729) $5,440 $391 $5,831 Basic earnings (loss) per share (e) $(2.57) $0.36 $(2.21) $1.37 $0.10 $1.47 Diluted earnings (loss) per share (e) $(2.57) $0.36 $(2.21) $1.32 $0.09 $1.41 Weighted average number of Ordinary shares used in computing basic earnings (loss) per share(e) 4,391,860 4,391,860 4,391,860 3,969,209 3,969,209 3,969,209 Weighted average number of Ordinary shares used in computing diluted earnings (loss) per share(e) 4,391,860 4,391,860 4,133,860 4,133,225 4,133,225 4,133,225 (a) The effect of stock-based compensation. (b) The effect of amortization of intangibles assets related to acquisition. (c) The effect of onetime provision for litigation-related expenses (d) Beneficial conversion feature and amortization of discount on convertible bonds and other related expenses. (e) A 1-for-5.88235 reverse split of our common stock became effective for trading purposes on May 14, 2007. All earnings per share and weighted- average share amounts are presented on a post-split basis. RECONCILIATION BETWEEN GAAP TO NON-GAAP STATEMENTS OF OPERATIONS U.S. dollars in thousands (except share data) Three months ended Three months ended December 31, 2007 December 31, 2006 GAAP Adjustment Non-GAAP GAAP Adjustment Non-GAAP Unaudited Unaudited Revenues $4,074 - $4,074 $2,383 - $2,383 Cost of revenues 1,934 (3)(a) 1,931 1,147 - 1,147 Gross profit 2,140 3 2,143 1,236 - 1,236 Operating expenses: Research and development 812 (257)(a)(b) 555 356 - 356 Selling and marketing 2,947 (108)(a)(b) 2,839 2,030 (72)(a) 1,958 General and administrative 935 (84)(a)(c) 851 902 (82)(a) 820 Litigation settlement expenses - - - 43 - 43 Total operating expenses 4,694 (449)(a)(b)(c) 4,245 3,331 (154)(a) 3,177 Capital gain from the sale of the e-ID Division - - - 10,536 - 10,536 Operating Income (loss) (2,554) 452 (2,102) 8,441 154 8,595 Financial income (expenses), net (3,508) 9(c) (3,499) (120) 30(c) (90) Other income (expenses), net - - - (372) - (372) Income (Loss) before taxes on income (6,062) 461 (5,601) $7,949 $184 $8,133 Taxes on income (37) - (37) - - - Net Income (loss) $(6,099) $461 $(5,638) $7,949 $184 $8,133 Basic earnings (loss) per share(d) $(1.19) $0.09 $(1.10) $1.99 $0.05 $2.04 Diluted earnings (loss) per share(d) $(1.19) $0.09 $(1.10) $1.90 $0.04 $1.94 Weighted average number of Ordinary shares used in computing basic earnings (loss)per share(d) 5,124,273 5,124,273 5,124,273 3,986,054 3,986,054 3,986,054 Weighted average number of Ordinary shares used in computing diluted earnings (loss) per share(d) 5,124,273 5,124,273 5,124,273 4,173,651 4,173,651 4,173,651 (a) The effect of stock-based compensation. (b) The effect of amortization of intangibles assets related to acquisition. (c) Beneficial conversion feature and amortization of discount on convertible bonds and other related expenses. (d) A 1-for-5.88235 reverse split of our common stock became effective for trading purposes on May 14, 2007. All earnings per share and weighted average share amounts are presented on a post-split basis. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS U.S. dollars in thousands Year ended Three months ended December 31, December 31, 2007 2006 2007 2006 Unaudited Audited Unaudited Unaudited Cash flows from operating activities: Net Income (loss) $(11,311) $5,440 $(6,099) $7,949 Adjustments to reconcile net income (loss) to net cash used in operating activities: Depreciation and amortization 225 355 133 88 Increase (decrease) in accrued severance pay (382) 128 (149) 55 Stock based compensation 1,072 361 321 154 Capital gain from the sale of the e-ID Division - (10,536) - (10,536) Amortization of deferred charges 90 6 22 6 Amortization of discount on convertible bonds 268 30 85 30 Write down of loan regarding an investment in an affiliated company - 275 - 275 Decrease (increase) in trade receivables 883 (1,442) 276 350 Decrease (increase) in other accounts receivable and prepaid expenses (1,943) 254 (490) 90 Decrease (increase) in inventories 32 212 (16) 128 Increase (decrease) in trade payables 95 53 100 (129) Increase (decrease) in employees and payroll accruals (234) 211 36 120 Increase (decrease) in accrued expenses and other liabilities 2,433 1,586 (2,199) 405 Capital loss from sale of marketable securities 1,116 - 636 - Loss on sale of property and equipment 58 8 49 8 Decrease in value of marketable securities, net 2,699 - 2,699 - Exchange differences on principle of long-term loan 9 12 2 3 Net cash used in operating activities (4,890) (3,047) (4,594) (1,004) Cash flows from investing activities: Purchase of property and equipment (116) (93) (35) (1) Purchase of subsidiary that was consolidated for the first time.* (153) - - - Decrease (increase) in severance pay fund 278 (95) 106 (38) Capitalization of software and intangible assets (509) - - - Amounts carried to deferred charges (52) (163) - (163) Proceeds from restricted cash deposits, net (2,313) 229 (40) 67 Proceeds from marketable securities of municipal bond, net - 650 350 - Cash paid in respect of sale of the e-ID Division - (52) - (52) Proceeds from sale of marketable securities of other company 7,639 - 2,916 - Net cash provided by (used in) investing activities 4,774 476 3,297 (187) Cash flows from financing activities: Short-term bank credit, net (336) (307) 45 3 Long-term loan received 2,850 204 - - Proceeds from issuance of convertible bonds and warrants, net - 3,139 - 3,139 Principal payment of long-term loan (2,780) (224) (71) (67) Proceeds from exercise of options and warrants, net 82 92 30 54 Issuance of share capital through a private placement, net of issuance costs (30) (183) (30) (3) Net cash provided by (used in) financing activities (214) 2,721 (26) 3,126 Increase (decrease) in cash and cash equivalents (330) 150 (1,323) 1,935 Cash and cash equivalents at the beginning of the period 2,444 2,294 3,437 509 Cash and cash equivalents at the end of the period $2,114 $2,444 $2,114 $2,444 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS U.S. dollars in thousands Year ended Three months ended December 31, December 31, 2007 2006 2007 2006 Unaudited Audited Unaudited Unaudited Supplemental disclosure of cash flows information: Sale of the e-ID Division Assets and Liabilities of the division, at the date of sale: Working Capital, net - 2,073 - 2,073 Fixed assets, net - 2,800 - 2,800 Intangible assets - 47 - 47 Fair value of Marketable securities received as proceeds, net - (15,508) - (15,508) Capital gain from the sale of the e-ID Division: - 10,536 - 10,536 $- $(52) $- $(52) Cash paid during the period for: Interest $146 $76 $20 $19 Supplemental disclosure of non-cash activities: Trade payable and Employees and payroll accruals related to capitalization of software $- $- $- $- Issuing shares capital against redemption of note payable $432 $- $- $- Accrued expenses related to issuance of shares $- $19 $- $- Issuance of warrants to service provider $- $40 $- $40 *Purchase of subsidiary that was consolidated for the first time: Year ended December 31, 2007 Unaudited Assets and Liabilities of the subsidiary for the purchase day: Operating capital (excluding cash and cash equivalents) 1,156 Property and equipment, net (38) Other assets (1,531) Goodwill that was formed at the purchase (3,643) Share capital 14 Additional paid-in capital 3,889 $(153)