Criticalcontrol Sltns Cp CCZFF

Financials

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CriticalControl announces 2006 Second Quarter Financial Results - Quarter highlighted by RDA acquisition - CALGARY, Aug. 29 /CNW/ - CriticalControl Solutions Corp., (TSX-V:CCZ) today reported its second quarter financial results for the three months ended June 30, 2006. (All dollar amounts are expressed in thousands unless otherwise stated): << Highlights for the quarter included (Q2 2006 compared to Q2 2005): - 16% increase in total revenue to $6,106 in 2006 from $5,261 in 2005; - EBITDA(1) decreased to $595 in 2006 from $776 in 2005; - 3% increase in gross margin(2), as a percentage of revenue, to 46% in 2006 from 43% in 2005; - Acquired the Remote Data Acquisition ("RDA") Network from Crimtech Services Ltd; - Extended the term of financing agreements with Wellington Financial. >> "Management is pleased with our continued growth in gross margin, which combined with strong growth from our upstream technology group, fosters long term profitability. In the short term, our operating results were affected by foreign exchange losses on existing contracts and an aggressive investment in sales and research and development for our gas measurement solutions," said Alykhan Mamdani, President of CriticalControl. "In order to sustain the growth in our upstream technologies, we continue to optimize our processes and accelerate the development of our technologies. Our investment in these initiatives combined with increased results from our sales initiatives will provide returns by the fourth quarter of 2006. The acquisition of the RDA Network allows us to further leverage our investment and accelerate our penetration into our target market." Q2 Financial Review (in thousands): Total revenue was $6,106 for the three months ended June 30, 2006 compared to $5,261 for the same three month period in 2005 - an increase of $845 or 16%. The acquisition of Netflow in July 2005, Deines in November 2005 and RDA in May 2006 contributed additional revenue of $780 for the three month period ended June 30, 2006 when compared to 2005. Revenue from the Energy sector was $2,946 for the three months ended June 30, 2006 compared to $2,561 for the same three month period in 2005, an increase of $385 or 15%. This increase is attributable to acquisitions of NetFlow, Deines, and RDA all contributing $740, $105 and $135 respectively in 2006. Revenue growth was tempered by a $501 drop in revenue from the Corporation's proprietary pipeline operations applications ("PipeWorks"), which was a result of project completions. Revenue from the Government sector was $2,949 for the three months ended June 30, 2006 compared to $2,265 for the same three month period in 2005, an increase of $684 or 30%. The Deines Imaging acquisition on October 31, 2005 contributed $165. The remaining $519 or 75% of the Government Revenue for the three months ended June 2005 resulted from organic growth, primarily due to an increase in the imaging and document control services provided to various ministries of the Government of Alberta. Revenue from other sectors was $211 for the three months ended June 30, 2006 compared to $435 for the same three month period in 2005, a decrease of $224 or 51%. This decrease was attributable to reduced resources invested in areas of the business the Corporation did not deem profitable or strategic. Gross margin(1) as a percentage of revenue was 46% for the three months ended June 30, 2006 compared to 43% for the same three month period 2005, an increase of 3%. Higher gross margins on a quarter-over-quarter basis reflect improved financial performance. EBITDA decreased to $595 for the three months ended June 30, 2006 compared to $776 for the same three month period in 2005. Selling and administrative expenses ("SG&A") were $1,796 for the three months ended June 30, 2006 compared to $1,382 for the same three month period in 2005, an increase of $414 or 30%. As with the cost of revenue, the largest component of SG&A is salaries which amounted to $1,056 for the three months ended June 30, 2006 compared to $855 for the same three month period in 2005. In 2006 various reductions continue to be made to streamline administrative functions and eliminate duplicate positions resulting from these acquisitions. Interest expense was $411 the three months ended June 30, 2006 compared to $410 for the same three month period in 2005. $196 (or 47%) of the Q2 interest expense was non-cash related to Warrants issued in conjunction with the financing compared with $198 (or 48%) for the comparable period in 2005. Net loss was $203 or (0.00) per share for the three months ended June 30, 2006 compared to a net income of $95 or $0.00 per share basic and diluted for the same three month period in 2005. Earnings were affected by increased investment in sales and research and development to support the expansion in gas measurement solutions. Increased amortization from acquisitions of $93 and a $227 increase in foreign exchange losses when compared to the same three month period in 2005 contributed to the net loss. First Half 2006 Financial Review: Total revenue was $12,999 for the six months ended June 30, 2006 compared to $8,831 for the same six month period in 2005 - an increase of $4,168 or 47%. The acquisition of BMP Energy in March 2005, Netflow in July 2005, Deines in November 2005 and RDA in May 2006 contributed additional revenue of $2,843 for the six month period ended June 30, 2006 when compared to 2005. Revenue from the Energy sector was $6,229 for the six months ended June 30, 2006 compared to $3,809 for the same six month period in 2005, an increase of $2,420 or 64%. This increase is attributable to acquisitions of BMP Energy, NetFlow, and RDA all contributing $1,302 $1,833 and $135 respectively in 2006. Revenue from the Government sector was $6,256 for the six months ended June 30, 2006 compared to $4,066 for the same six month period in 2005, an increase of $2,190 or 54%. The Deines Imaging acquisition on October 31, 2005 contributed $383. The remaining $1,807 or 82% of the Government Revenue for the six months ended June 2005 resulted from organic growth, primarily due to an increase in the imaging and document control services provided to various ministries of the Government of Alberta. Revenue from other sectors was $514 for the six months ended June 30, 2006 compared to $956 for the same six month period in 2005, a decrease of $442 or 46%. This decrease was attributable to reduced resources invested in areas of the business the Corporation did not deem profitable or strategic. Gross margin(1) as a percentage of revenue was 46% for the six months ended June 30, 2006 compared to 38% for the same three month period 2005, an increase of 8%. EBITDA increased to $1,475 for the six months ended June 30, 2006 compared to ($581) for the same six month period in 2005. The corporation's working capital position decreased to $4,280 at June 30, 2006 compared to $5,931 at June 30, 2005. Net loss was $106 or (0.00) per share for the six months ended June 30, 2006 an improvement compared to a net loss of $718 or $(0.01) per share basic and diluted for the same six month period in 2005. The overall gross margin improved by $2,472 whereas the operating expenses increased by $1,860. EBITDA Reconciliation to Net Income: << Reconciliation of EBITDA to net income is shown below: For the three months ended 30-Jun-06 30-Jun-05 ---------- ---------- Net income (loss) (203) 95 Add: Interest - Long Term Debt 411 410 Depreciation of Capital Assets 271 178 Amortization of Customer Contracts 116 93 ---------------------------- ---------------------------- EBITDA 595 776 ---------------------------- ---------------------------- >> Subsequent Events: On August 9, 2006, CriticalControl acquired 100% of the outstanding shares of ProTrend Software Inc. for $1,175 in cash and shares of CriticalControl, subject to working capital adjustments. $775 of the purchase price was paid in cash and 1,843,318 shares of CriticalControl were issued to the vendors. An addition $108 will be payable over 3 years based upon certain performance criteria. The primary component of CriticalControl's offering to its gas producer client base is gas measurement and well site monitoring and control services. ProTrend provides software to effectively manage gas and liquid analyses ("Fluid Analyses") for the same measurement points. Fluid Analyses provide a breakdown of the components of gas produced at the well site and is used in combination with measurement data to account for value of gas at each measurement point for both production and joint venture accounting purposes. Revenue from ProTrend for the 6 months ended June 30, 2006 was $232, compared to $160 for the same period in 2005. Similarly, earnings before interest, taxes, depreciation and amortization from ProTrend for the 6 months ended June 30, 2006 were $54, compared to $26 for the same period in 2005. << (1) EBITDA, defined as earnings, before interest, taxes, depreciation and amortization, does not have any standardized meaning prescribed by GAAP, but management believes is a useful supplemental measure of operational performance. (2) Gross margin, defined as revenue less direct cost of revenue, and gross margin percentage do not have any standardized meaning prescribed by GAAP, and may not be comparable to similar measures used by other companies. Management believes that Gross Margin is a key performance indicator of the operational performance of the Corporation's business and its ability to increase profitability through growth. >> We seek safe harbour. About CriticalControl: CriticalControl is a technology company that builds, implements and manages critical business process solutions. Our proprietary products are data management tools to operate the critical business operations of our government and energy sector clients. In addition to our proprietary products, we implement large scale document and records management solutions using our strong domain expertise and in depth knowledge of our customer base. Where critical processes require unconditional continuity, our clients look to us to manage and perform certain operational functions on a short term or long term, outsourced basis. For more information please visit www.criticalcontrol.com. The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this press release. For further information: Alykhan Mamdani, President, Tel [phone]; or David Feick, The Equicom Group, Tel [phone], Fax [phone], [e-mail]