Atlantis reports 2007 third quarter results



    Company announces comprehensive plan aimed at reducing costs and ongoing
    operating expenses by 15 per cent annually

    This news release may contain forward-looking statements. Reference
    should be made to "Forward-looking Statements" at the end of this news
    release. All amounts are stated in thousands of Canadian dollars except
    where otherwise noted.

    TORONTO, Nov. 14 /CNW/ - Atlantis Systems Corp. (TSX: AIQ), a globally
recognized training integrator in the military, commercial aviation and energy
markets, today announced its financial and operating results for the three-
and nine-month periods ended September 30, 2007.

    Q3 2007 Operational & Financial Summary

    
    -  Completed acquisition of the Eduplus Division ("Eduplus") of
       Tecsult Inc. Eduplus is an e-learning provider to the aviation and
       naval defence sectors.
    -  Reached agreement to conduct extensive field trials of the Helicopter
       Virtual Task Trainer ("HVTT") at a training centre of a major North
       American commercial aviation training company.
    -  Subsequent to quarter end, CAE announced that a pan-Canadian team,
       which includes Atlantis, was the only qualified bidder for a Canadian
       Forces Operational Training Systems Provider (OTSP) initially targeted
       to the C-130J and CH-47.
    -  Revenue of $6.8 million in Q3 2007, a decrease of 41% from
       $11.5 million in Q3 2006.
    -  Net loss in the third quarter was $1.6 million, or ($0.03) per share,
       compared with a profit in the prior year of $1.4 million, or $0.03 per
       share.
    -  Order backlog of $41.4 million at September 30, 2007, an increase of
       $2.5 million from the prior quarter.
    -  Cash and cash equivalents were $5.7 million at September 30, 2007.
    -  Working capital was $3.8 million compared to $4.0 million as at
       December 31, 2006.
    

    For the third quarter of 2007, revenue was $6.8 million, a decline of 41%
from $11.5 million in the prior year, which mainly reflects a decrease in
revenues from the CFTS program as the majority of the subcontractor milestones
on this program have been achieved. The CFTS program is moving from
development stage to full operational capability in anticipation of (launch
date). In addition to contracted revenue from the support services portion of
this contract, the Company believes it is well positioned for upgrade orders,
extensions to current training programs and opportunities with third-party
foreign governments.
    The Company's order backlog at September 30, 2007 was $41.4 million and
included $26.1 million from the CFTS program (of which $18.4 million related
to support services for the 20-year support period) and $9.3 million from
Eduplus contracts. The backlog declined from the comparable backlog of
$59.7 million at September 30, 2006, primarily due to a $22.0 million net
reduction on the CFTS program.
    "While there were several important operating achievements in the
quarter, including the acquisition of Eduplus, the continued on-time,
on-budget delivery on the CFTS program and some positive developments with our
HVTT and OTSP programs, we have seen delays in the timing of anticipated new
business," said Andrew Day, President and CEO of Atlantis. "As a result, we
felt it was prudent to initiate a plan that reduces our cost structure to
reflect these current delays but does not impact our ability to service
existing business or pursue new opportunities that have been identified. This
plan is expected to save approximately $4.0 million annually, increase our
average margins and enable us to achieve profitability in 2008. To date we
have implemented over $1 million in targeted cost reductions"
    Mr. Day added that this plan is in response to delays in the timing of
anticipated business rather than a change in the Company's long-term outlook
or growth strategy.
    "We continue to believe we are well positioned to execute our strategy
and build our pipeline in military, civil aviation and nuclear markets, and we
remain highly focused on sales and marketing activities to turn these
opportunities into new bookings. Over time, we continue to believe our
strategy will allow us to diversify revenue to reduce short-term variability
in the military market."
    Operating expenses for the third quarter were $2.4 million, $0.2 million
less than the $2.6 million reported in the same period last year, primarily
due to a 10% decline in general and administration expenses. Net loss for the
third quarter was $1.6 million, or $0.03 per share, compared with a net profit
of $1.37 million, or $0.03 per share, in the third quarter of 2006.
    Revenue for the nine months ended September 30, 2007 was $27.8 million, a
7% increase over the same period last year. For the year-to-date period, the
Company recognized a loss of $0.7 million, or $0.01 per share, compared with a
loss of $1.3 million, or $0.02 per share, for the same period in 2006.
    At September 30, 2007, Atlantis had cash and cash equivalents of
$5.7 million, compared with $13.6 million at December 31, 2006 and
$3.7 million at June 30, 2007.
    Also, as at September 30, 2007, the Company was in compliance with all
financial covenants included in the term loan facility except the EBITDA ratio
and the annual maximum capital expenditure limit. The Company has not received
a waiver for the breach of these covenants, which constitutes an event of
default under the credit facility, with the bank having the right to demand
repayment of the loan. As a result, the entire loan is classified as a current
liability. The maximum capital expenditure limit was exceeded by $10 as at
September 30, 2007. All bank credit facilities are secured against all of the
assets of the Company. As of today, the bank has not demanded payment of the
loan. The Company currently has sufficient cash on hand to repay the loan. The
Company expects to be compliant with the covenants in the third quarter of
2008.
    The Company is currently in discussions with the bank to remedy the
covenant breaches and is investigating alternate sources of financing should
the need arise.

    Cost Reduction Plan
    -------------------

    The cost reduction plan is aimed at reducing the Company's costs and
overall operating expenses by approximately 15% annually. A combination of
workforce reductions and other cost-cutting measures are expected to result in
annual savings of approximately 4.0 million beginning in fiscal 2008. This
plan will result in one-time termination benefits of approximately
$0.8 million, to be largely recorded in the fourth quarter of 2007.
    The cost reduction plan is not expected to impact the Company's ability
to service current contracts or pursue new opportunities that have been
identified. Workforce reductions are primarily focused on
non-revenue-generating positions. While the Company plans to reduce costs at
its ASA operations it will continue to maintain a presence in the U.S. and
retain the security clearances required to meet U.S. government procurement
policies.
    Atlantis expects that the new cost structure will allow it to achieve
profitability in 2008 based on its revised near-term expectations. Average
margins are expected to increase in fiscal 2008 as a result of the impact of
cost savings and the shift to higher-margin business as CFTS becomes a lower
percentage of the Company's total revenue.
    For more information about third quarter results, please refer to the Q3
2007 Financial Statements and Management's Discussion and Analysis filed on
SEDAR at www.sedar.com.

    Notice of Conference Call

    Atlantis will be hosting a conference call on Thursday, November 15, 2007
at 8:00 a.m. (EST) to discuss third quarter 2007 financial results and its
cost reduction plan as well as provide an update on the Company's outlook for
the rest of 2007 and 2008.

    
    Date:                 Thursday, November 15, 2007
    Time:                 8:00 a.m. EST
    Live Call Number:     416-646-3095 or 1-800-796-7558
    Conference Replay:    416-640-1917 or 1-877-289-8525
    Passcode:             21252920 followed by the number sign - Available
                          until midnight November 22, 2007
    

    About Atlantis Systems Corp.

    Headquartered near Toronto, Canada, Atlantis is a globally recognized
training integrator for customers in the military, commercial aviation sectors
and energy markets. Atlantis combines desktop and full-flight simulation,
knowledge management, learning management systems, flight training devices and
multimedia e-learning to provide integrated flight training and aircraft
maintenance training to a global list of customers. For more than 29 years,
Atlantis has drawn on its extensive engineering background and proprietary
technology to offer cost-efficient, state of the art alternatives to real-life
conditions and situations. Atlantis is registered under a number of quality
management programs including ISO 9001:2000, AS 9100:2004, CSA-Z299.1-1985,
Boeing BQMS D6-82479 and Rockwell Collins RC-9000, among others. To learn
more, please visit the Company's web site at www.atlantissi.com.

    Forward-Looking Statements

    Certain statements in this release are considered "forward-looking".
These forward-looking statements are based on current expectations and various
estimates, factors and assumptions and involve known and unknown risks,
uncertainties and other factors. The material factors and assumptions that
were applied in making the forward-looking statements in this release include
but are not limited to assumptions regarding: the proportion of in-house and
subcontractor work on the CFTS program and the ability of subcontractors to
meet deadlines on this program; the level of activity under the CFTS program;
the proportion of CFTS to non-CFS revenue; our ability to complete new and
existing projects on time and on budget; our ability to win new projects; the
performance of subcontractors generally; expected developments in the nuclear
and aerospace industry; ASA's capability to deliver e-learning and other
programs on time and on budget and the level of spending on the Company's
direct U.S.-market initiative. Material factors that could cause Atlantis'
actual results to differ materially from the forward-looking statements in
this release include risks and uncertainties relating to: our ability to
convert sales and marketing pursuits into order backlog; reliance on
subcontractors; the Company's U.S. subsidiary, ASA; reliance on key customers;
the level of military expenditures and developments in the nuclear and
aerospace industry; relationships with existing U.S. prime contractors; the
availability of skilled personnel; our ability to source capital to fund our
operations; our ability to repay bank debt on demand; and our ability to
operate as a going concern. Atlantis cannot provide any assurance that the
predictions of forward-looking statements will materialize. Atlantis assumes
no obligation to update or revise any forward-looking statement, whether as a
result of new information, future events or any other reason. Additional
information regarding risks and uncertainties that could affect Atlantis'
business is contained in the Business Risk Factors section of Atlantis's
Annual MD&A and the Description of the Business - Risk Factors section in
Atlantis' Annual Information Form, both of which are available on SEDAR at
www.sedar.com.


    
    ATLANTIS SYSTEMS CORP.
    Consolidated Balance Sheets

    (Expressed in thousands of Canadian dollars)
    -------------------------------------------------------------------------

                                                  September 30,  December 31,
                                                      2007           2006
                                                   (unaudited)
                                                 -------------- -------------

    ASSETS
    Current assets
      Cash and cash equivalents                   $      5,656  $     13,636
      Trade and other receivables                        2,199         6,459
      Unbilled revenue                                   3,407           524
      Inventory                                            563           427
    -------------------------------------------------------------------------
                                                        11,825        21,046
    -------------------------------------------------------------------------

    Restricted cash                                          -         2,051
    Capital assets, net                                  1,775         1,747
    Other long-term assets                                 235           111
    Mortgage receivable                                    395           384
    Deferred development costs                           1,564         1,669
    Core technology                                      3,187             -
    Goodwill                                            11,735        11,735
    -------------------------------------------------------------------------
                                                        18,891        17,697
    -------------------------------------------------------------------------
                                                  $     30,716  $     38,743
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES
    Current liabilities
      Accounts payable and accrued liabilities    $      3,870  $      7,024
      Accrued costs on percentage completion               132           444
      Deferred revenue                                   1,266         9,452
      Term debt                                          2,800             -
      Convertible debenture                                  -           100
    -------------------------------------------------------------------------
                                                         8,068        17,020

    SHAREHOLDERS' EQUITY
      Share capital                                     89,377        88,080
      Contributed surplus                                8,900         8,574
      Deficit                                          (75,629)      (74,931)
    -------------------------------------------------------------------------
                                                        22,648        21,723
    -------------------------------------------------------------------------
                                                  $     30,716  $     38,743
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    ATLANTIS SYSTEMS CORP.
    Consolidated Statements of Operations, Comprehensive Income and
    Deficit
    For the three and nine months ended September 30
    (unaudited)
    (Expressed in thousands of Canadian dollars except per share amounts)
    ----------------------------------------------------------------------

                         For the three months        For the nine months
                          ended September 30          ended September 30
                     ---------------------------- ---------------------------
                           2007          2006          2007          2006
                     -------------- ------------- ------------- -------------

    Revenue           $      6,750  $     11,509  $     27,820  $     25,963
    Cost of revenue          5,669         7,715        20,008        18,064
    -------------------------------------------------------------------------
    Gross margin             1,081         3,794         7,812         7,899
    -------------------------------------------------------------------------

    Expenses
      General and
       administrative        1,640         1,819         5,572         5,429
      Selling and
       marketing               745           781         2,392         2,320
      Stock options             40            49           142           168
    -------------------------------------------------------------------------
                             2,425         2,649         8,106         7,917
    -------------------------------------------------------------------------
    Operating (loss)
     income before the
     undernoted items       (1,344)        1,145          (294)          (18)

      Depreciation and
       amortization            286           120           610           306
      Interest and
       financing
       costs, net              (38)         (124)         (207)        1,187
      Gain on
       extinguishment
       of debenture              -          (224)            -          (224)
      Loss on disposal
       of capital assets         2             -             1
    -------------------------------------------------------------------------
    Net (loss) income
     and comprehensive
     income                 (1,594)        1,373          (698)       (1,287)

    Deficit, beginning
     of period             (74,035)      (76,156)      (74,931)      (73,496)
    -------------------------------------------------------------------------
    Deficit, end of
     period           $    (75,629) $    (74,783) $    (75,629) $    (74,783)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net (loss) income
     per share
      Basic           $      (0.03) $       0.03  $      (0.01) $      (0.02)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
      Diluted         $      (0.03) $       0.02  $      (0.01) $      (0.02)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Weighted average
     number of shares
      Basic             54,741,643    52,842,476    54,351,362    52,767,628
      Diluted           54,741,643    55,925,545    54,351,362    52,767,628



    ATLANTIS SYSTEMS CORP.
    Consolidated Statements of Cash Flows
    For the three and nine months ended September 30
    (unaudited)
    (Expressed in thousands of Canadian dollars)
    ------------------------------------------------------------------------

                         For the three months        For the nine months
                          ended September 30          ended September 30
                     ---------------------------- ---------------------------
                           2007          2006          2007          2006
                     -------------- ------------- ------------- -------------

    Cash flows provided
     by (used in) :
    Operating activities :
    Net (loss) income $     (1,594) $      1,373  $       (698) $     (1,287)
    Items not affecting
     cash:
      Depreciation and
       amortization            286           120           610           306
      Loss on disposal
       of capital assets         2                           1             -
      Stock options
       expensed                 40            49           142           168
      Accretion on
       debentures                -             -             -         1,065
      Amortization of
       deferred financing
       costs                     -             -             -           223
      Gain on
       extinguishment
       of debenture              -          (224)            -          (224)
    -------------------------------------------------------------------------
                            (1,266)        1,318            55           251
      Interest on
       mortgage
       receivable               (4)           (4)          (11)          (11)
      Deferred development
       costs                     -            (4)            -          (143)
      Other long-term
       assets                   10            18          (128)          (17)
      Net change in
       non-cash working
       capital                 792         4,006       (10,995)       12,334
    -------------------------------------------------------------------------
                              (468)        5,334       (11,079)       12,414
    -------------------------------------------------------------------------

    Investing activities :
    Investment in
     capital assets           (155)          (92)         (510)         (820)
    Proceeds from
     disposal of
     capital assets              -             -             1             -
    Eduplus acquisition     (2,124)            -        (2,124)            -
    Restricted cash          2,051        (2,051)        2,051        (2,051)
    -------------------------------------------------------------------------
                              (228)       (2,143)         (582)       (2,871)
    -------------------------------------------------------------------------

    Financing activities :
    Term debt                2,800             -         2,800             -
    Exercise of common
     share purchase
     warrants                    -             -           873             -
    Exercise of options
     to common shares            -             -           108           107
    (Repayment) issuance
     of convertible
     debenture                (100)       (3,000)         (100)       (3,000)
    -------------------------------------------------------------------------
                             2,700        (3,000)        3,681        (2,893)
    -------------------------------------------------------------------------
    Net (decrease)
     increase in cash
     and cash equivalents    2,004           191        (7,980)        6,650
    Cash and cash
     equivalents,
     beginning of
     period                  3,652        15,214        13,636         8,755
    -------------------------------------------------------------------------
    Cash and cash
     equivalents, end
     of period        $      5,656  $     15,405  $      5,656  $     15,405
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    SUPPLEMENTAL
     INFORMATION
    Cash and cash
     equivalents are
     comprised of:
      Cash            $      5,656  $     12,022  $      5,656  $     12,022
      Cash equivalents           -         3,383             -         3,383
    -------------------------------------------------------------------------
                      $      5,656  $     15,405  $      5,656  $     15,405
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Interest paid     $          1  $         44  $          6  $        202
    Income taxes paid $          -  $          -  $          -  $          -

    





For further information:

For further information: George Chiarucci, Chief Financial Officer, Tel:
(905) 792-1981, Email: gchiarucci@atlantissi.com; Craig Armitage, The Equicom
Group, Tel: (416) 815-0700 x278, Email: carmitage@equicomgroup.com

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ATLANTIS SYSTEMS CORP.

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