Redknee Reports 24% Revenue Growth and Profitability in First Quarter 2009



    Company sees growth and expansion within customer base

    MISSISSAUGA, ON, Feb. 12 /CNW/ - Redknee (TSX/AIM: RKN) a leading
provider of mission-critical billing and charging software and solutions for
communications service providers, today announces its results for the first
quarter of fiscal 2009, ended December 31, 2008.

    
    Q1 HIGHLIGHTS:
    --------------

    -   First quarter 2009 revenue up 24% to $14.2 million (Q1 2008:
        $11.5 million)
    -   Gross margin increases to 76% (Q1 2008:  67%)
    -   EBITDA(1) of $0.9 million (Q1 2008: loss of $1.7 million)
    -   Operating profit of $3.2 million (Q1 2008: loss of $2.1 million)
    -   Basic earnings per share of $0.05 (Q1 2008: loss per share of
        ($0.04))
    -   Signed two multi-million dollar contracts with Tier 1 customers
    -   Cash and investments at $23.9 million (September 30, 2008:
        $15.3 million)
    -   US $10 million in available line of credit with Export Development
        Canada
    -   10 issued patents, 50 pending applications, and 6 further patent
        applications at various stages of the grant/issuance process
    

    Canadian-based Redknee reports in Canadian dollars, but generates a
majority of its revenue from US dollar, Euro and UK pound priced and
denominated contracts.
    "Redknee continues to deliver on its stated corporate strategy. We have
continued to invest in the high growth markets of Africa, the Middle East, and
Asia Pacific, while building support among Tier 1 operators in Europe and
North America." stated Lucas Skoczkowski, CEO for Redknee. He added "This
growth, combined with a robust renewal rate of customer support service
agreements, has resulted in increased revenue, an improved cash position, and
profitability for the quarter. We will remain focused on profitable growth in
fiscal 2009."

    Please see section regarding Forward-Looking Statements which forms an
integral part of this release. These results along with the unaudited
consolidated financial statements and the Company's MD&A are available on the
Company's website at www.redknee.com and on SEDAR at www.sedar.com.

    
    ----------------------------
    (1) Earnings Before Interest Expense, Income Taxes, Depreciation, and
        Amortization (EBITDA) is a non-GAAP measure. While useful in
        understanding Company operational results, EBITDA is not standardized
        and may not be comparable to similar results reported by other
        companies. EBITDA described above is calculated as Income (loss) from
        operations, plus foreign exchange gain/loss, amortization and
        stock-based compensation.

    Overview
    --------
    Redknee remains focused on the three core elements of its corporate
strategy:

    -   Provide mission-critical solutions to our global customer base;
    -   Achieve market leadership in our target markets, including the high-
        growth regions of Africa, the Middle East and Asia Pacific; and
    -   Continue to increase the proportion of recurring revenues in our
        business model.
    

    Redknee's mission critical solutions have experienced sales growth in the
first quarter of fiscal 2009, with our Next Generation Rating & Charging and
location solutions contributing more than 50% of revenue. Sales of Redknee's
Turnkey Converged Billing solutions also grew steadily, contributing an
additional 40% of our overall quarterly revenue.
    Global telecom carriers continue to recognize Redknee's market leadership
solution. In the first quarter of fiscal 2009, we signed two multi-million
dollar contracts, one from an existing Tier 1 customer and the other from a
new Tier 1 customer. Furthermore, Redknee expanded upon its existing customer
base in our high growth markets through the extension of existing licenses and
the sale of additional solutions.
    Growth of recurring revenue was enhanced by a robust renewal of customer
support service agreements. In the interest of offering a more tailored suite
of services to address the market opportunity presented by our global customer
base, Redknee has introduced a new tiered structure for customer service
packages. This tiered structure covers a full spectrum of service offerings -
from a basic product support plan to full on-site managed service
capabilities.
    Redknee believes that it remains well-positioned during this period of
economic uncertainty. The Company has a strong employee base, a growing number
of customers, and the right product offering to meet our customers' demands.
Market trends further support our approach: data services continue to grow in
Tier 1 markets, and wireless subscriber numbers continue to expand in the high
growth markets of Africa, the Middle East and Asia Pacific.

    Financial Review
    ----------------

    For the first quarter of fiscal 2009, Redknee's revenue grew by 24% to
$14.2 million compared to revenue of $11.5 million in the first quarter of
fiscal 2008.
    Gross margin in the period increased to $10.8 million or 76% of revenue
from $7.7 million or 67% of revenue in the first quarter of fiscal 2008.
    Operating profit for the quarter increased to $3.2 million as compared to
a loss of $2.1 million in the first quarter of fiscal 2008. Excluding foreign
exchange loss (gain), amortization and stock compensation expense (EBITDA)
Redknee recorded an EBITDA of $0.9 million for the first quarter of fiscal
2009 as compared to an EBITDA loss of $1.7 million for the first quarter of
fiscal 2008.
    Net income in Q1 fiscal 2009 was $2.9 million or $0.05 per share, as
compared to a loss of $2.2 million or ($0.04) per share in Q1 fiscal 2008. Net
income for the period was positively impacted by net realized and unrealized
foreign exchange gains of $2.6 million as a result of the decline of the
Canadian dollar against the US dollar.
    Cash and investments as at December 31, 2008 was $23.9 million versus
$15.3 million as at September 30, 2008.
    The following table outlines the Company's results of operations for the
period indicated. In addition to the summary financial statements appended at
the end of this release, the company's financial statements and MD&A are
available on the Company's website at and are posted on SEDAR.

    
    Unaudited                              Three         Three
    CDN$000's                             Months        Months
                                           Ended         Ended           %
                                      Dec .31-08    Dec. 31-07        Change

    Revenue
      Products and Services               $9,398        $8,219            14%
      Support and Subscriptions            4,819         3,259            48%
                                      -------------------------
                                          14,217        11,478            24%

    Cost of revenue                        3,370         3,742           -10%

                                      -------------------------
    Gross profit                          10,847         7,736            40%

                                              76%           67%
    Operating expenses
      Selling and marketing                4,380         3,777            16%
      General and administrative           2,370         2,614            -9%
      Research and development             3,344         3,281             2%
      Amortization of property and
       equipment                             192            63           205%
      Foreign currency exchange loss
      (gain)                              (2,638)          109         -2520%
                                      -------------------------
                                           7,648         9,844           -22%

    Income (Loss) from operations          3,199        (2,108)         -252%
      Interest income                         25           203           -88%
      Interest expense                        (2)           (1)          100%
                                      -------------------------
    Income (Loss) before income taxes      3,222        (1,906)         -269%
      Income taxes                           361           292            24%
                                      -------------------------
    Income (Loss) for the period           2,861        (2,198)         -230%
                                      -------------------------
                                      -------------------------
    

    CONFERENCE CALL

    The Company will discuss the results on a conference call at 8:00 a.m.
EST (1:00 BST) today.
    To participate in the conference call please dial the following numbers
five minutes before the start of the call to ensure your participation:

    
    Local dial-in number        416 644 3423

    Toll-free North America     800 589 8577

    Toll-free United Kingdom    00 800 2288 3501
    

    A webcast will also be available at:
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2544300
    The conference call will be archived for replay by telephone at:
416-640-1917 or Toll-Free at 1-877-289- 8525 (passcode: 21297341 followed by
the number sign) from approximately 10:00 am February 12, 2009 through to
February 26, 2009.


    FORWARD-LOOKING STATEMENTS

    Certain statements in this Release which are not historical facts may
constitute forward-looking statements or forward-looking information within
the meaning of applicable securities laws ("forward-looking statements"). Any
statements related to Redknee's projected revenues, earnings, growth rates,
revenue mix, staffing and resources, and product plans are forward looking
statements as are any statements relating to future events, conditions or
circumstances. The use of terms such as "believes", "anticipated", "expected",
"projected", "targeting", "estimate", "intend" and similar terms are intended
to assist in identification of these forward-looking statements. Readers are
cautioned not to place undue reliance upon any such forward-looking
statements. Such forward-looking statements are not promises or guarantees of
future performance and involve both known and unknown risks and uncertainties
that may cause the actual results, performance, achievements or developments
of Redknee to differ materially from the results, performance, achievements or
developments expressed or implied by such forward-looking statements.
    Forward-looking statements are based on management's current plans,
estimates, projections, beliefs and opinions. Except as required by law,
Redknee does not undertake any obligation to update forward-looking statements
should assumptions related to these plans, estimates, projections, beliefs and
opinions change.
    Many factors could cause the actual results of Redknee to differ
materially from the results, performance, achievements or developments
expressed or implied by such forward-looking statements, including, without
limitation, each of the following factors, which are further discussed in the
section of the Company's AIF entitled Risk Factors, and which is available on
SEDAR at www.sedar.com and on the Company's website at www.redknee.com.

    About Redknee

    Redknee is a leading global provider of innovative communication software
products, solutions and services. Redknee's award-winning solutions enable
operators to monetize the value of each subscriber transaction, while
personalizing the subscriber experience to meet mainstream, niche and
individual market segment requirements. Redknee's revenue generating solutions
provide advanced converged billing, rating, charging and policy for voice,
messaging and new generation data services to over 70 network operators in
over 50 countries. Established in 1999, Redknee Solutions Inc. (TSX/AIM: RKN)
is the parent of the wholly-owned operating subsidiary Redknee Inc. and its
various subsidiaries. References to Redknee refer to the combined operations
of those entities. For more information, please visit www.redknee.com.


    
    Redknee Solutions Inc.

    Interim Consolidated Financial Statements
    (Unaudited)
    December 31, 2008
    (expressed in Canadian dollars)



    Redknee Solutions Inc.
    Interim Consolidated Balance Sheet
    (Unaudited)
    -------------------------------------------------------------------------
    (expressed in Canadian dollars)
                                                   December 31, September 30,
                                                          2008          2008
                                                             $             $
    Assets

    Current assets
    Cash and cash equivalents                       19,298,755    15,242,607
    Short-term investments                           4,566,965        56,363
    Trade accounts and other receivables             9,902,682    11,192,182
    Unbilled revenue                                 5,190,975     6,060,452
    Investment tax credits and income taxes
     receivable                                        625,000       600,000
    Prepaid expenses                                 1,067,759     1,066,584
    Goods in transit                                   364,440       325,716
                                                  ---------------------------
                                                    41,016,576    34,543,904

    Restricted cash (note 7)                           481,160       409,919

    Property and equipment                             602,052       580,053

    Intangible assets                                1,313,423     1,388,761

    Other assets                                       576,199       528,294
                                                  ---------------------------
                                                    43,989,410    37,450,931
                                                  ---------------------------
                                                  ---------------------------
    Liabilities

    Current liabilities
    Accounts payable                                 1,035,291     2,172,268
    Accrued liabilities                             10,258,108     8,678,539
    Income taxes payable                             2,467,023     2,100,785
    Deferred revenue                                 7,747,559     5,084,287
    Current portion of obligations under
     capital leases                                          -           619
                                                  ---------------------------
                                                    21,507,981    18,036,498
                                                  ---------------------------
    Shareholders' Equity

    Share capital, net of employee share
     purchase loans                                 40,222,052    39,686,701
                                                  ---------------------------

    Contributed surplus                              4,081,216     4,410,677
                                                  ---------------------------

    Deficit                                        (21,610,880)  (24,471,986)

    Accumulated other comprehensive loss,
     net of income taxes                              (210,959)     (210,959)
                                                  ---------------------------
    Total deficit and accumulated other
     comprehensive loss                            (21,821,839)  (24,682,945)
                                                  ---------------------------

                                                    22,481,429    19,414,433
                                                  ---------------------------

                                                    43,989,410    37,450,931
                                                  ---------------------------
                                                  ---------------------------

    Guarantees and contingencies (note 7)


    Approved by the Board of Directors

    (signed) "Jim Pelot" Director          (signed) "Colley Clarke" Director
    --------------------                   ------------------------



    Redknee Solutions Inc.
    Interim Consolidated Statement of Operations
    (Unaudited)
    For the three months ended December 31
    ------------------------------------------------------------------------
    (expressed in Canadian dollars)

                                                          2008          2007
                                                             $             $
    Revenue
    Software, services and other                     9,398,531     8,219,240
    Support                                          4,818,570     3,258,503
                                                  ---------------------------
                                                    14,217,101    11,477,743
    Cost of revenue                                  3,369,931     3,742,016
                                                  ---------------------------
                                                  ---------------------------

    Gross profit                                    10,847,170     7,735,727
                                                  ---------------------------
    Operating expenses
    Selling and marketing                            4,379,946     3,776,585
    General and administrative                       2,370,134     2,614,316
    Research and development (note 4)                3,343,337     3,281,274
    Amortization of property and equipment and
     intangible assets                                 192,237        62,678
    Foreign currency exchange (gain) loss           (2,637,959)      109,400
                                                  ---------------------------

                                                     7,647,695     9,844,253
                                                  ---------------------------

    Income (loss) from operations                    3,199,475    (2,108,526)

    Interest income                                    (25,076)     (202,792)

    Interest expense                                     2,030         1,003
                                                  ---------------------------

    Income (loss) before income taxes                3,222,521    (1,906,737)

    Income taxes
    Current                                            361,415       291,681
                                                  ---------------------------

    Net income (loss) for the period                 2,861,106    (2,198,418)
                                                  ---------------------------
                                                  ---------------------------
    Net income (loss) per common share (note 2)
    Basic                                                 0.05         (0.04)
    Diluted                                               0.05         (0.04)

    Weighted average number of common shares
     (note 2)
    Basic                                           56,643,532    56,328,674
    Diluted                                         57,111,032    56,328,674



    Redknee Solutions Inc.
    Interim Consolidated Statement of Comprehensive Income (Loss)
    (Unaudited)
    For the three months ended December 31
    -------------------------------------------------------------------------
    (expressed in Canadian dollars)
                                                          2008          2007
                                                             $             $

    Net income (loss) for the period                 2,861,106    (2,198,418)
    Other comprehensive income, net of income taxes
    Foreign currency translation adjustment                  -             -
                                                  ---------------------------

    Comprehensive income (loss) for the period       2,861,106    (2,198,418)
                                                  ---------------------------
                                                  ---------------------------



    Redknee Solutions Inc.
    Interim Consolidated Statement of Shareholders' Equity
    (Unaudited)
    For the three months ended December 31
    -------------------------------------------------------------------------
    (expressed in Canadian dollars)
                                                                        2008
                       ------------------------------------------------------
                                                      Employee
                                   Share capital         share
                       --------------------------     purchase   Contributed
                            Number        Amount         loans       surplus
                                               $             $             $
    Balance -
     September 30,
      2008              58,350,626    40,663,829      (977,128)    4,410,677
    Stock-based
     compensation
     (note 3)                    -             -             -       188,239
    Net income for the
     period                      -             -             -             -
    Collection of
     employee share
     purchase loans              -             -        17,651             -
    Restricted share
     units vested and
     exercised (note 3)    417,500       517,700             -      (517,700)
                       ------------------------------------------------------
    Balance -
     December 31,
     2008               58,768,126    41,181,529      (959,477)    4,081,216
                       ------------------------------------------------------
                       ------------------------------------------------------

                                                          2008
                       -----------------------------------------
                                     Accumulated
                                           other         Total
                                   comprehensive  shareholders'
                           Deficit          loss        equity
                                 $             $             $
    Balance -
     September 30,
      2008             (24,471,986)     (210,959)   19,414,433
    Stock-based
     compensation
     (note 3)                    -             -       188,239
    Net income for the
     period              2,861,106             -     2,861,106
    Collection of
     employee share
     purchase loans              -             -        17,651
    Restricted share
     units vested and
     exercised (note 3)          -             -             -
                       ----------------------------------------
    Balance -
     December 31,
     2008              (21,610,880)     (210,959)   22,481,429
                       ----------------------------------------
                       ----------------------------------------


                                                                        2007
                       ------------------------------------------------------
                                                      Employee
                                   Share capital         share
                       --------------------------     purchase   Contributed
                            Number        Amount         loans       surplus
                                               $             $             $
    Balance -
     September 30,
     2007               58,350,626    40,663,829      (895,531)    3,520,838
    Stock-based
     compensation
     (note 3)                    -             -             -       203,495
    Loss for
     the period                  -             -             -             -
    Employee share
     purchase loans              -             -       (86,317)       (9,910)
                       ------------------------------------------------------
    Balance -
     December 31,
     2007               58,350,626    40,663,829      (981,848)    3,714,423
                       ------------------------------------------------------
                       ------------------------------------------------------


                                                           2007
                       -----------------------------------------
                                     Accumulated
                                           other         Total
                                   comprehensive  shareholders'
                           Deficit          loss        equity
                                 $             $             $

    Balance -
     September 30,
     2007              (20,060,782)     (210,959)    23,017,395
    Stock-based
     compensation
     (note 3)                    -             -        203,495
    Loss for
     the period         (2,198,418)            -     (2,198,418)
    Employee share
     purchase loans              -             -        (96,227)
                       -----------------------------------------
    Balance -
     December 31,
     2007              (22,259,200)     (210,959)    20,926,245
                       -----------------------------------------
                       -----------------------------------------



    Redknee Solutions Inc.
    Interim Consolidated Statement of Cash Flows
    (Unaudited)
    For the three months ended December 31
    -------------------------------------------------------------------------
    (expressed in Canadian dollars)
                                                          2008          2007
                                                             $             $
    Cash provided by (used in)
    Operating activities
    Net income (loss) for the period                 2,861,106    (2,198,418)
    Items not involving cash
      Amortization of property and equipment           116,899        62,678
      Amortization of intangible assets                 75,338             -
      Unrealized foreign currency exchange gain     (2,517,090)      (47,034)
      Stock-based compensation (note 3)                188,239       203,495
    Change in non-cash operating working
     capital (note 5)                                6,831,323    (3,823,842)
                                                  ---------------------------

                                                     7,555,815    (5,803,121)
                                                  ---------------------------
    Financing activities
    Employee loans                                      17,651             -
    Repayment of obligations under capital leases         (619)      (15,051)
                                                  ---------------------------

                                                        17,032       (15,051)
                                                  ---------------------------
    Investing activities
    (Purchase of) proceeds from short-term
     investments                                    (4,510,602)    4,133,863
    Purchase of property and equipment                (138,898)      (66,343)
    Increase in other assets                           (47,905)     (559,667)
    Loan to Argent Networks                                  -      (529,463)
    Increase in restricted cash                         (1,241)            -
                                                  ---------------------------

                                                    (4,698,646)    2,978,390
                                                  ---------------------------
    Effect of foreign currency exchange rate
     changes on cash and cash equivalents            1,181,947        49,850
                                                  ---------------------------
    Increase (decrease) in cash and cash
     equivalents during the period                   4,056,148    (2,789,932)
    Cash and cash equivalents -
     Beginning of period                            15,242,607     8,927,770
                                                  ---------------------------
    Cash and cash equivalents -
     End of period                                  19,298,755     6,137,838
                                                  ---------------------------
                                                  ---------------------------
    Supplemental cash flow information
    Interest paid                                        2,030         1,003
    Interest received                                   25,076       202,792
    Cash taxes/investment tax credits received,
     net of income taxes paid                          173,184             -



    Redknee Solutions Inc.
    Notes to Interim Consolidated Financial Statements
    (Unaudited)
    For the three months ended December 31, 2008
    -------------------------------------------------------------------------
    (expressed in Canadian dollars, except as otherwise indicated)

        Nature of operations

        Redknee Solutions Inc. (the Company) was incorporated in Canada on
        November 1, 2006. Pursuant to an  amalgamation agreement dated
        February 15, 2007 (the Amalgamation Agreement) among the Company;
        Redknee Inc. (Redknee), a company under common control with the
        Company; and 2117580 Ontario Inc., a wholly owned subsidiary of the
        Company. Redknee and 2117580 Ontario Inc. were amalgamated to form a
        successor company, Redknee Inc., as a wholly owned subsidiary of the
        Company. The above transaction is considered to be among companies
        under common control and the interim consolidated financial
        statements of the Company reflect the amalgamation as if the
        companies had always been amalgamated.

        The Company's software products allow its wireless telecommunications
        network operator customers to extend and enhance their capabilities
        and service offerings, enabling them to introduce new revenue through
        the  introduction of network-based services, including call and
        subscriber management, multimedia messaging information services and
        location aware services. In addition, the Company's software products
        also manage and analyze, in real-time, complex and critical network
        operations, such as service provisioning, network management and
        customer care, as well as provide real-time rating, charging and
        billing.

    1   Summary of significant accounting policies

        a) Basis of presentation

           These unaudited interim consolidated financial statements have
           been prepared in accordance with Canadian generally accepted
           accounting principles (GAAP) and have been prepared on a basis
           consistent with the audited consolidated financial statements for
           the year ended September 30, 2008, except as described below.
           Certain of the prior period's amounts have been reclassified to
           conform with the current period's presentation.

           The preparation of these interim consolidated financial statements
           requires management to make assumptions and estimates that affect
           the figures within these interim consolidated financial statements
           and notes. Actual results could differ significantly from those
           assumptions and estimates. Furthermore, the operating results for
           the interim periods presented are not necessarily indicative of
           the results anticipated for the full year. In the opinion of
           management, these interim consolidated financial statements
           reflect adjustments necessary to state fairly the results for the
           periods presented.

        b) Principle of consolidation

           The interim consolidated financial statements include the
           financial statements of the Company, Redknee and its wholly owned
           subsidiary companies, of which the principal subsidiaries are
           Redknee (Ireland) Ltd., Redknee (Germany) GmbH, Redknee (UK) Ltd.,
           Redknee (ME) FZ-LLC (Dubai), Redknee (US) Ltd. and Redknee (India)
           Technologies Pvt. Ltd. All significant intercompany balances and
           transactions have been eliminated on consolidation. The Company
           does not have any entities to be consolidated under Accounting
           Guideline 15, Consolidation of Variable Interest Entities.

        c) Changes in accounting policies

           Financial statement presentation

           In April 2007, The Canadian Institute of Chartered Accountants
           (CICA) Accounting Standards Board  amended Handbook Section 1400,
           General Standards of Financial Statement Presentation. These
           amendments require management to disclose any uncertainties that
           cast significant doubt on the entity's  ability to continue as a
           going concern. In assessing whether the going concern assumption
           is appropriate, management must take into account all available
           information about the future, which is at least, but is not
           limited to, 12 months from the balance sheet date. The standard is
           effective for years beginning on or after January 1, 2008. The
           Company adopted this standard on October 1, 2008 and it did not
           have an impact on the interim consolidated financial statements.

           Goodwill and other intangible assets

           In February 2008, the CICA issued Handbook Section 3064, Goodwill
           and Intangible Assets, which replaces Handbook Sections 3062,
           Goodwill and Other Intangible Assets and 3450, Research and
           Development Costs. This standard establishes the standards for the
           recognition, measurement and disclosure of goodwill and intangible
           assets. The standard becomes effective for years beginning on or
           after October 1, 2008. The Company adopted this standard on
           October 1, 2008 and it did not have an impact on the interim
           consolidated financial statements.

        d) Future changes in accounting standards

           International Financing Reporting Standards

           In February 2008, the Canadian Accounting Standards Board
           confirmed that the use of International Financial Reporting
           Standards (IFRS) will be required for fiscal years beginning on or
           after January 1, 2011 for publicly accountable profit-oriented
           enterprises. IFRS will replace current Canadian GAAP. Companies
           will be required to provide comparative IFRS information for the
           previous fiscal year. The Company is currently evaluating the
           impact of adopting IFRS on its consolidated financial statements.

    2   Net income (loss) per common share

        As a result of the loss for the three-month period ended December 31,
        2007, all potentially dilutive securities, being stock options,
        unvested restricted share units and shares issued under the share
        purchase plan for which loans were given totalling 8,539,879 shares
        were considered anti-dilutive.

        For the three-month period ended December 31, 2008, the diluted
        weighted average shares outstanding include unvested restricted
        share units. Shares relating to outstanding employee share purchase
        loans and outstanding stock options in the amount of 7,739,065
        shares have been excluded because the impact would be anti-dilutive.

        A reconciliation of the number of shares used for purposes of
        calculating basic and diluted income (loss) per share is as follows:

                                                          2008          2007
           Weighted average number of shares
            outstanding                             58,628,959    58,350,626
           Less: Shares associated with
            outstanding share purchase loans         1,985,427     2,021,952
                                                  ---------------------------
           Basic weighted average number of
            shares outstanding                      56,643,532    56,328,674
           Add: Unvested restricted share units        467,500             -
                                                  ---------------------------
           Diluted weighted average
            shares outstanding                      57,111,032    56,328,674
                                                  ---------------------------
                                                  ---------------------------

    3   Stock-based compensation

        During the three months ended December 31, 2008, 75,000 (2007 - nil)
        stock options, with a weighted fair value of $0.17 per common share
        at the date of grant, were issued to employees. The fair value of the
        stock options was determined using a Black-Scholes option pricing
        model with the following assumptions:

           Risk free interest rate                                      3.03%
           Expected volatility                                          68.3%
           Expected life                                              7 years
           Expected dividends                                             nil

        The stock-based compensation expense during the period was $121,898
        (2007 - $134,908) relating to the Company's stock options.

        The Company also recorded a stock-based compensation expense of
        $66,341 (2007 - $68,587) relating to the Company's restricted share
        plan. No restricted shares were granted during the period, as the
        plan was cancelled in November 2006.

    4   Research and development expenses

        During the three months ended December 31, the research and
        development expenses were as follows:

                                                          2008          2007
                                                             $             $

        Gross research and development expenses      3,368,337     3,331,274
        Less: Investment tax credits recognized         25,000        50,000
                                                  ---------------------------
                                                     3,343,337     3,281,274
                                                  ---------------------------
                                                  ---------------------------

        In 2007 and 2008, the Company continued to earn investment tax
        credits related to research and development expenses. However, due to
        the Company's past tax losses, the majority of the credits were not
        afforded asset recognition in the interim consolidated balance sheet.

    5   Change in non-cash operating working capital

                                                          2008          2007
                                                             $             $
        Trade accounts and other receivables         2,637,858    (6,007,211)
        Unbilled revenue                               886,880       716,546
        Investment tax credits and income taxes
         receivable                                    (25,000)      (50,000)
        Prepaid expenses                                (1,175)      170,355
        Accounts payable                            (1,237,595)     (769,490)
        Accrued liabilities                          1,579,569     1,099,349
        Deferred revenue                             2,663,272       985,293
        Income taxes payable                           366,238       158,237
        Goods in transit                               (38,724)     (126,921)
                                                  ---------------------------

                                                     6,831,323    (3,823,842)
                                                  ---------------------------
                                                  ---------------------------

    6   Segmented reporting

        The Company reviewed its operations and determined that it operates
        in a single reportable operating segment, the telecommunications
        software market. The single reportable operating segment derives its
        revenue from the sale of software products and related services and
        hardware. The following information provides the required enterprise-
        wide disclosures.

        The Company's revenue for the three months ended December 31 by
        geographic area is as follows:
                                                          2008          2007
                                                             $             $

           Europe, Middle East and Africa            4,235,657     4,683,264
           Americas                                  7,779,408     4,828,035
           Asia and Pacific Rim                      2,202,036     1,966,444
                                                  ---------------------------

                                                    14,217,101    11,477,743
                                                  ---------------------------
                                                  ---------------------------

        Revenue is attributed to geographic locations based on the location
        of the external customer. Sales related to Canadian customers were
        $34,490 and $361,768 for each of 2008 and 2007, respectively.

                                                          2008          2007
                                                             $             $
        Revenue by type
          Software and services                      9,033,225     7,858,080
          Third party software and hardware            365,306       361,160
          Support                                    4,818,570     3,258,503
                                                  ---------------------------

                                                    14,217,101    11,477,743
                                                  ---------------------------
                                                  ---------------------------


        The Company's property and equipment by geographic area are as
        follows:
                                                   December 31, September 30,
                                                          2008          2008
                                                             $             $

          Australia                                      6,302             -
          Canada                                       519,274       460,569
          Ireland/United Kingdom                        74,499        95,680
          India                                              -         7,829
          Other                                          1,977        15,975
                                                  ---------------------------

                                                       602,052       580,053
                                                  ---------------------------
                                                  ---------------------------

        In the period ended December 31, 2008, one customer accounted for
        approximately 39% of revenue (2007 - two customers accounted for 13%
        and 14%).

    7   Guarantees and contingencies

        a) Letters of credit

           As at December 31, 2008, the Company had outstanding letters of
           credit of $481,160 (September 30 - $409,919) relating to customer
           contracts, which are secured by restricted cash in the
           consolidated balance sheet.

        b) Line of credit

           As at December 31, 2008, the Company has a credit facility with
           Export Development Corporation for up to an aggregate principal
           amount of US$10,000,000, to assist in financing (i) one or more
           acquisitions or (ii) working capital. A commitment fee is payable
           equal to 1% per annum of all amounts that have been allocated but
           not drawn. As at December 31, 2008, there were no allocations or
           amounts drawn.

        c) Guarantees

           The Company has provided routine indemnifications to its customers
           against liability if the Company's products infringe on a third
           party's intellectual property rights. The maximum exposure from
           these indemnifications cannot be reasonably estimated. In some
           cases, the Company has recourse against other parties to mitigate
           its risk of loss from these guarantees. The Company has never been
           called to perform its obligations under these indemnifications
           and the Company is not subject to any pending litigation in these
           matters.

        d) Litigation and claims

           The Company is involved in certain claims and litigation arising
           out of the ordinary course and conduct of business. Management
           assesses such claims and, if considered likely to result in a loss
           and, when the amount of the loss is quantifiable, provisions for
           loss are made, based on management's assessment of the most likely
           outcome. Management does not provide claims for which the outcome
           is not determinable or claims where the amount of the loss cannot
           be reasonably estimated. Any settlements or awards under such
           claims are provided for when reasonably determinable. The Company
           is not currently a party to, or has any of its property as the
           subject of, legal proceedings, which would be material to the
           Company's  financial condition or results of operations.
    





For further information:

For further information: Redknee Solutions Inc., Lucas Skoczkowski,
Chief Executive Officer, (905) 625-2622; Colley Clarke, Chief Financial
Officer, (905) 625-2773; Buchanan Communications, Jeremy Garcia, Tel: +44 (0)
20 7466 5000; Canaccord Adams, Neil Johnson, Ryan Gaffney, Tel: +44 (0) 20
7050 6500


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