WellPoint Systems reports 2008 fourth quarter and year end results



    CALGARY, April 27 /CNW/ - WellPoint Systems Inc. ("WellPoint" or the
"Company") (TSX-V:WPS), a leading provider of software and related solutions
to the energy industry, today announced its financial results for the quarter
and year ended December 31, 2008. All monetary values are in Canadian dollars
unless otherwise indicated.

    
    2008 Highlights

    -   Increased total revenue by 22.5% to $35.3 million, compared with
        $28.8 million in 2007;

    -   Increased non-Canadian revenue by $6.5 million to $26.9 million from
        $20.4 million in 2007. This was primarily due to the BOLO acquisition
        completed in August 2007;

    -   Closed US$15.2 million, US$2.0 million and CDN$2.7 million
        convertible secured debenture financings with Quorum Funding
        Corporation;

    -   Closed US$2.0 million license sale to the Company's new Middle East
        channel partner, QMENA, for WellPoint's Microsoft Dynamics AX energy
        suite;

    -   Closed $1.1 million convertible unsecured subordinated debenture
        financing with Raymond James Ltd.;

    -   Restructured the Company's debt to extend the maturity dates of
        various convertible debentures from 2009 to 2010;

    -   Decreased working capital deficiency by $15.6 million;

    -   Implemented several key management changes, including the promotion
        of Mr. Richard Slack, the former head of BOLO to the position of
        Chief Executive Officer of WellPoint. Mr. Slack had served as the
        Company's chief operating officer, responsible for managing
        day-to-day operations, since May 2008. During this period Mr. Slack
        appointed a new management team that is focused on returning
        WellPoint to profitability. As part of this focus, the Company was
        recently reorganized to leverage cost savings across all business
        units;

    -   Restructured the operations of the Company to generate annual cost
        reductions of $3.0-$4.0 million. The Company consolidated its R&D
        development center in Calgary with its head office to leverage
        synergies between product management, marketing, consulting and
        product development. The Company anticipates strong demand for its
        Dynamics AX platform based products and bringing these groups
        together will allow WellPoint to respond with greater speed to
        customer requirements;

    -   Brought to market the first phase of the Company's complete end to
        end business solution in Energy Broker. The product was successfully
        implemented at a key lighthouse customer;

    -   Finished the integration of two of WellPoint's major Microsoft AX
        products on a single platform;

    -   Passed the Software Solution Test for Microsoft Dynamics on the
        Energy Financial Management (EFM) software version 3.0.2.0. The
        Software Solution Test is a major requirement for Certified for
        Microsoft Dynamics(R) status, Microsoft's highest standard for
        partner-developed software. WellPoint's EFM solution is the only Oil
        & Gas Financial solution built on Dynamics AX to pass this milestone;

    -   Ranked 6th in the Over $20 Million Group for Alberta Venture's 2009
        Fast Growth 50 list, a ranking of Alberta's 50 fastest growing
        companies working in information technology, real estate development,
        and manufacturing, as well as business, financial and oilfield
        services. Rankings are based on growth in revenues, assets, profits,
        head count and other criteria over the past three years; and

    -   Received a ranking of number 28 on the Deloitte Technology Fast 50
        and 249 on the Deloitte's Technology 500, as a result of a 696%
        revenue growth rate from 2003 to 2007.
    

    "During the past year, WellPoint has brought together a new management
team which brings years of experience in successfully building and running
profitable companies," said Richard Slack, President and CEO of WellPoint
Systems. "This team has focused on recalibrating the company to adapt to
challenging market conditions. Our 2008 financial statements reflect these
challenges which include several one-time write-offs related to our
financings, goodwill, intangibles and deferred development costs. These items
significantly impacted our 2008 results. Since these are non-recurring, we
fully expect future results to improve substantially. We are optimistic about
the future of the business and attribute our success to a dedicated team of
highly skilled employees as well as a growing customer base."
    "2008 was a year in which WellPoint was repositioned to focus on
profitability and growth," said Mr. Charles V. Selby, Chairman of WellPoint's
Board of Directors. "Although the Company has achieved many of its preliminary
growth objectives - in large part through acquisition - the new management
team has been chartered to improve operational efficiency in order to generate
sustainable growth with profitability. We are confident that under
management's direction, the Company has turned the corner and is making strong
progress toward those goals."

    Fourth Quarter Financial Review

    Overall revenues for the fourth quarter of 2008 stayed relatively flat as
compared with the fourth quarter of 2007. License revenue increased to $1.7
million from $1.2 million in 2007 which was primarily due to an increase in
sales of WellPoint's BOLO product. Maintenance revenue grew to $2.7 million in
2008 from $2.3 million in 2007, an increase of 17%, due to growth in the
Company's customer base. WellPoint now provides maintenance to 433 customers
worldwide and continues to achieve maintenance and support customer retention
rates of approximately 99%. Professional services revenue decreased by $0.9
million in the fourth quarter of 2008 as compared with the same period of the
prior year. Demand for professional services is significantly affected by the
Company's license sales. During the third quarter of 2008 the Company
experienced weak license sales which had a negative impact on the Company's
fourth quarter professional services revenue. In 2007, the Company had a large
implementation in South America. This implementation was predominately
complete in the third quarter of 2008 which also contributed to the drop in
the 2008 fourth quarter professional services revenue. Further impacting the
professional services revenue was the extremely unstable general economic
climate at the end of 2008 where customers chose to preserve cash and defer
implementations and software enhancements.
    Revenue from outside of Canada decreased to $5.4 million in the fourth
quarter of 2008 from $5.7 million in 2007. This was primarily due to the
completion of the large implementation in South America in the third quarter
of 2008 partially offset by the increased revenues from BOLO.
    Gross profit was $4.3 million (55.7% of total revenue) compared with $3.4
million (44.2% of total revenue) for the fourth quarter of 2007. The $0.9
million (25.9%) increase in gross profit is attributed primarily to the
Company's revenue mix. During the fourth quarter of 2008 compared with the
same period of the prior year, the Company increased its sales of higher
margin licenses and maintenance revenue by $0.9 million and decreased its
lower margin professional services revenue by the same amount. This shift in
revenue mix resulted in an increase in both gross profit and gross margin.
    SG&A decreased to $2.7 million (35.7% of revenue) compared with $2.9
million (37.6% of revenue) in the fourth quarter of 2007. The decrease in SG&A
costs is a result of various cost optimization efforts implemented during the
latter half of 2008 and the reversal of discretionary employee bonuses
reflecting the current general economic conditions.
    Facilities expenses decreased slightly to $0.41 million compared with
$0.44 million in the third quarter of 2007. The decrease primarily relates to
consolidation of the Company's offices in Calgary.
    In 2008, the Company incurred research and development expenses of $1.5
million (19.6% of revenue) compared with $0.6 million (8.6% of revenue) for
the comparable period in 2007. The increase is related to the research in
connection with ongoing projects along with a decision to stop capitalizing
expenses related to the Company's Microsoft Dynamics AX product lines as they
no longer meet the criteria for capitalization. When combined with development
expenditures capitalized in the fourth quarter, the Company invested $1.9
million (24.5% of revenue) compared with $1.7 million (22.5% of revenue) in
the fourth quarter of 2007. The $0.1 million increase is primarily
attributable to investments in WellPoint Energy Broker including its
integration with the WellPoint Energy Financial Management system, enhanced
multicurrency functionality and additional investments made by the companies
acquired in 2007, including investments in WellPoint EAM.
    WellPoint Systems is committed to enhancing its position as a leading
provider of software and related solutions within the energy and natural
resources industries. The Company will increase its investment in the
development of new and innovative products utilizing the Microsoft AX Dynamics
architecture. This investment is a fundamental requirement as WellPoint
Systems continues to build products that meet the needs of its customers.
    The Company also wrote-off $0.6 million of deferred development costs
relating to projects that no longer met the criteria for deferral.
    Depreciation and amortization expenses decreased to $0.4 million compared
with $1.2 million for the fourth quarter of 2007. The decrease primarily
relates to the Company's decision to write-off a significant portion of its
deferred development costs in the third quarter of 2008. Since these costs
have been written off, there is no longer a requirement to amortize the
expenses.
    Interest expenses increased to $1.0 million as compared with $0.9 million
for the fourth quarter of 2007. The increase primarily stems from the new
financings in 2008 to retire the debt taken on as part of the 2007
acquisitions. As at December 31, 2008, the Company had notes payable, capital
leases and convertible debt with a carrying value of approximately $34.0
million with an effective annual interest rate of approximately 16.0%.
    Most of the Company's businesses are organized geographically so that
many expenses are incurred in the same currency as the revenue generated,
which mitigates some exposure to currency fluctuations. Following the
acquisition of BOLO in 2007, the Company significantly increased its net
liabilities denominated in United States dollars in connection with notes
payable issued in connection with the acquisition along with US convertible
debentures needed to complete the acquisition. The Company has not entered
into any forward hedging contracts and therefore experiences gains and losses
relating to foreign exchange. The loss for the three months ended December 31,
2008 was $2.5 million (2007 - $0.5 million gain).
    During the fourth quarter of 2008, the Company renegotiated its debt with
the Quorum Group of Companies ("Quorum") (as described below under Liquidity
and Capital Resources). The debt renegotiation with Quorum resulted in a
settlement of the debt for accounting purposes which required an immediate
expensing of the financing costs associated with the Quorum debt as well as
all future interest accretion costs to also be immediately expensed. As a
result of these non-cash expenses, the Company recorded a $6.3 million loss on
the extinguishment of its convertible debentures.
    The value of goodwill and intangible assets recorded as part of the iSoft
acquisition were impaired at December 31, 2008. As a result, the Company
recorded a non-cash goodwill impairment charge of $3.2 million and write-down
of intangible assets of $0.6 million related to its iSoft acquisition in
March, 2007.
    For the fourth quarter of 2008 the tax recovery was $0.8 million compared
with a tax recovery of $1.1 million in the same period of the prior year. The
tax recovery is primarily as a result of the Company's operations in the US.
    Due to the factors discussed above, the net loss for the fourth quarter
of 2008 was $14.0 million compared with a net loss of $4.7 million for the
fourth quarter of 2007. Basic and diluted net loss per share was ($0.31)
compared with a net loss per share of ($0.12) for the fourth quarter of 2007.
    Adjusted EBITDA loss was $0.8 million compared with Adjusted EBITDA loss
of $1.6 million for the fourth quarter of 2007. The 2008 adjusted EBITDA loss
was the result of the loss from operations which includes a significant
investment with the ongoing development of the Dynamics AX product line. The
EBITDA loss decreased by $0.9 million primarily due to the $0.9 million
increase in the Company's gross profit.

    2008 Financial Review

    Revenues increased by 22.5% to $35.3 million in 2008 compared with $28.9
million in the same period in 2007. The increase was primarily the result of
BOLO revenue of $19.8 million in 2008. Substantially offsetting this increase
is a decrease in license revenue in South America from 2007 levels.
    Revenue from outside of Canada increased to $26.9 million in 2008 from
$20.4 million in 2007. This was primarily due to the growth in US revenue
following the 2007 acquisition of BOLO. This increase would have been even
more substantial if not for the large license sale recognized in South America
in 2007.
    License revenue decreased to $9.1 million from $10.4 million in 2007. The
decrease is the result of license revenues recognized in South America in 2007
not recurring in 2008. Partially offsetting this is the $5.4 million of
license revenue attributed to BOLO in 2008. Maintenance revenue increased to
$9.8 million in 2008 from $6.6 million in 2007, an increase of 48.4% with a
substantial portion of the increase attributed to BOLO. WellPoint now provides
maintenance to 433 customers worldwide and continues to achieve maintenance
and support customer retention rates of approximately 99%. Revenue from
professional services increased to $16.4 million from $11.9 million in 2007,
an increase of 38.5%. The substantial increase in professional services
revenue is attributed primarily to the acquisition of BOLO and completion of
the 2007 South American contract in Q3 of 2008.
    Gross profit was $19.7 million (55.7% of total revenue) compared with
$17.4 million (60.4% of total revenue) for 2007. The $2.3 million increase in
gross profit dollars is attributable to the 2007 acquisitions. However, gross
profit as a percentage of sales, decreased 4.7%. This decrease in gross profit
percentage is consistent with the decrease in higher margin license revenue,
increases in lower margin professional services revenue and due to having
attained higher margins in 2007 as a result of the large South American
license sale.
    SG&A expenses increased to $14.1 million (40.0% of revenue) compared with
$11.4 million (39.7% of revenue) in the twelve months of 2007. The increase
primarily relates to the full year effect of the acquisitions of 2007 along
with higher expenses relating to bad debts in 2008 and restructuring charges
of $1.1 million; partially offsetting the increase are lower commissions and
administrative expenses that were associated with the large South American
contract recorded in 2007 that did not recur in 2008. During the second half
of 2008, the Company initiated various cost optimization strategies that are
anticipated to reduce SG&A costs by $3.0-$4.0 million per year. Further, due
to the negative general economic climate, the Company took additional steps in
2009 to reduce SG&A expenses by rolling back salaries at its North American
operations by 10%.
    Facilities expenses increased to $1.7 million compared with $1.4 million
in 2007. The increase primarily relates to the 2007 acquisitions.
    In 2008, the Company incurred research and development expenses of $5.3
million (15.0% of revenue) compared with $1.6 million (5.6% of revenue) in
2007. The increase is primarily related to the research in connection with
ongoing projects undertaken by the companies acquired in 2007 and the
inability of the Company to continue capitalizing certain R&D expenses as they
no longer meet the GAAP criteria for capitalization. When combined with
development expenditures capitalized in the year, the Company invested $8.1
million (22.9% of revenue) compared with $4.7 million (16.1% of revenue) in
2007. The $3.5 million increase is primarily attributable to investments in
WellPoint Energy Broker including its integration with the WellPoint Energy
Financial Management system, enhanced multicurrency functionality and
additional investments made by the companies acquired in 2007, including
investments in WellPoint Energy Asset Management.
    Depreciation and amortization expenses increased to $3.9 million compared
with $2.8 million in 2007. The increase primarily relates to the amortization
of intangibles purchased as part of the acquisitions completed in 2007.
    Interest expenses increased to $3.8 million as compared with $1.8 million
for 2007. The increase primarily stems from the new financings in 2008 and the
convertible debentures related to the BOLO and iSoft acquisitions. As at
December 31, 2008, the Company had notes payable and convertible debt with a
carrying value of approximately $34.0 million with an effective annual
interest rate of approximately 16.0%.
    The foreign exchange loss for 2008 was $3.5 million (2007 - $1.6 million
gain).
    For the year ended December 31, 2008 the tax recovery was $0.8 million
compared with tax recovery of $0.4 million in 2007. The tax recovery is
primarily as a result of the Company's operations in the US.
    The net loss for the year ended December 31, 2008 was $27.7 million
compared with a loss of $3.7 million for the same period in 2007. Basic and
diluted net loss per share was ($0.60) compared with a loss per share of
($0.09) in 2007. The net loss and decreased earnings per share are attributed
to the factors discussed above.
    Adjusted EBITDA loss was ($4.1) million compared with Adjusted EBITDA of
$0.1 million for 2007. The 2008 Adjusted EBITDA loss was the result of a
onetime restructuring charge of $1.1 million and research and development
spending of $8.1 million. A significant portion of the Company's research and
development spending is dedicated to the ongoing development of the Dynamics
AX product line.

    Outlook

    During 2008, the Company has invested significant capital and management
resources to integrate the BOLO and iSoft acquisitions into WellPoint Systems.
In 2009, with the acquisitions now in place, the Company will focus on
increasing its net income and Adjusted EBITDA and expects to advance on many
fronts, through the following initiatives:

    
    -   Establishing deeper partnerships across the globe, including expanded
        and new agent relationships in international markets. In 2009, the
        Company particularly intends to focus its activities on increasing
        market share and driving revenue from opportunities primarily in the
        North American and Middle Eastern markets;

    -   Increasing sales and marketing of WellPoint Energy Broker in the
        North American and Middle Eastern markets and WellPoint EAM and
        WellPoint EFM solutions worldwide;

    -   Continuing development and marketing of BOLO and Ideas to increase
        market share;

    -   Continuing development of the WellPoint EAM, WellPoint EFM, and
        WellPoint Energy Broker solutions to expand functionality as well as
        integration with best practices in the computer software industry;
        and

    -   Increasing operational efficiencies.
    

    The Company will also record revenue from the agreement the Company
signed on December 24, 2008 with Quorum MENA Limited ("QMENA"), for a license
sale of US$2.0 million. The agreement with QMENA requires the Company to
deliver the software in 2009 depending on when certain other conditions are
met. The Company has already delivered half of the software in Q1 2009 and
anticipates delivering the other half in Q2 2009.
    Although the Company anticipates it will continue to post net losses in
2009, the Company anticipates posting improved Adjusted EBITDA in 2009. The
Company will be in a net loss position primarily as a result of non-cash
interest accretion on its convertible debentures. As such, investors may
choose to use Adjusted EBITDA as an indicator of future earning potential and
value.
    The information contained in this news release is in summary form and
should be read in conjunction with the Company's audited consolidated
financial statements and Management's Discussion and Analysis for the year
ended December 31, 2008. Those documents are available through the internet on
the Canadian System for Electronic Document Analysis and Retrieval (SEDAR)
which can be accessed at www.sedar.com.

    
    Notes

    (1) "EBITDA" is a financial measure that does not have any standardized
    meaning prescribed by Canadian generally accepted accounting principles
    ("GAAP") and may not be comparable to similar measures presented by other
    companies. EBITDA is a measure of the Company's operating profitability.
    EBITDA provides an indication of the results generated by the Company's
    principal business activities prior to how these activities are financed,
    assets are amortized or how results are taxed in various jurisdictions.
    Adjusted EBITDA is Standardized EBITDA(1), excluding foreign exchange
    gains primarily related to the US dollar denominated debt of the Company
    and can vary significantly depending on exchange rate fluctuations, which
    are beyond the control of the Company, and write downs of deferred
    development and intangible costs, goodwill impairment, financing costs,
    stock based compensation, fees and expenses on settlement of debt and
    losses on extinguishment of debt and after deducting the annual amount
    invested in respect of deferred development costs, which, with the
    implementation of International Financial Reporting Standards in the year
    ended December 31, 2011, will generally be required to be expensed on an
    annual basis.

    (2) "Gross Profit" is a financial measure that does not have any
    standardized meaning prescribed by GAAP and may not be comparable to
    similar measures presented by other companies. Gross profit is provided
    to assist investors in determining WellPoint's ability to generate
    earnings from the sales of its products and services. Gross profit is
    calculated by subtracting direct expenses from revenue.
    


    About WellPoint Systems Inc.

    WellPoint provides premier software and related services for managing
critical operations within the energy industry. As a Microsoft Gold Certified
Partner since 2005, WellPoint is the only Independent Software Vendor (ISV)
and Microsoft Dynamics partner dedicated to the energy sector. It is breaking
new ground with the creation of a more comprehensive, integrated energy
software suite based on existing Microsoft ERP technology that utilizes
state-of-the-art Dynamics AX(R) and .NET architectures. WellPoint also
provides software and services under the BOLO, IDEAS International and iSoft
brands.
    Founded in 1997, Calgary-based WellPoint Systems also has major
operations in Denver, CO, Houston, TX, Livingston, NJ, Tampa, FL, Tunis,
Tunisia and Pretoria, South Africa. WellPoint is publicly traded on the TSX
Venture Exchange under the symbol WPS.

    This document contains forward-looking statements. Some forward-looking
statements may be identified by words like "expects", "anticipates", "plans",
"intends", "indicates" or similar expressions. The statements are not a
guarantee of future performance and are inherently subject to risks and
uncertainties. The Company's actual results could differ materially from those
currently anticipated due to a number of factors, including, but not limited
to, successful integration of structural changes, including restructuring
plans, acquisitions, technical or manufacturing or distribution issues, the
competitive environment for the Company's products, the degree of market
penetration of the Company's products, and other factors set forth in reports
and other documents filed by the Company with Canadian securities regulatory
authorities from time to time.

    
    The TSX Venture Exchange does not accept responsibility for the adequacy
    or accuracy of this release.



    WELLPOINT SYSTEMS INC.
    Consolidated Balance Sheets

    December 31, 2008 and 2007
    -------------------------------------------------------------------------
                                                          2008          2007
    -------------------------------------------------------------------------

    Assets
    Current assets:
      Cash                                        $    405,931  $          -
      Accounts receivable                            3,531,851     7,584,610
      Prepaid expenses                                 745,862       273,930
      Fair value of foreign exchange risk
       management contracts                                  -       176,000
      -----------------------------------------------------------------------
                                                     4,683,644     8,034,540
    Property and equipment                           1,106,449     1,038,175
    Deferred development costs                       2,118,586     4,753,447
    Intangible assets                               15,383,723    16,599,520
    Goodwill                                        24,442,074    19,916,094
    Future income taxes                                131,656             -
    -------------------------------------------------------------------------
                                                  $ 47,866,132  $ 50,341,766
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and Shareholders' Equity
    Current liabilities:
      Bank indebtedness                           $          -  $  1,204,188
      Accounts payable and accrued liabilities       5,717,886     4,841,221
      Current income tax liability                     106,096       419,231
      Deferred revenue                               4,876,343     2,144,633
      Other deferred credits                            54,558        54,558
      Current portion of long term notes payable        98,574    15,980,281
      Current portion of capital lease
       obligations                                      45,791             -
      Convertible debentures                         1,358,019     6,605,733
      -----------------------------------------------------------------------
                                                    12,257,267    31,249,845
    Long term notes payable                          6,004,527     4,877,299
    Capital lease obligations                           57,829             -
    Other deferred credits                              77,292       131,850
    Convertible debentures                          26,476,034       377,311
    Future income tax liability                              -       422,079
    -------------------------------------------------------------------------
                                                    44,872,949    37,058,384
    Shareholders' equity:
      Share capital                                 14,497,433    14,497,433
      Warrants/compensation options                          -     1,058,050
      Contributed surplus                            1,624,415       760,828
      Convertible debentures                         8,995,967     1,222,922
      Accumulated other comprehensive income
       (loss)                                        3,744,213      (389,856)
      Deficit                                      (25,868,845)   (3,865,985)
    -------------------------------------------------------------------------
                                                   (22,124,632)   (4,255,841)
    -------------------------------------------------------------------------
      Total shareholders' equity                     2,993,183    13,283,392
    -------------------------------------------------------------------------
                                                  $ 47,866,132  $ 50,341,776
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    WELLPOINT SYSTEMS INC.
    Consolidated Statements of Operations and Retained Earnings (deficit)
    (unaudited)

    -------------------------------------------------------------------------
                          Three months ended         Twelve months ended
                             December 31                 December 31
                          2008          2007          2008          2007
    -------------------------------------------------------------------------

    Revenue
      License         $  1,673,669  $  1,203,315  $  9,057,250  $ 10,349,437
      Maintenance        2,667,059     2,278,119     9,824,351     6,622,307
      Professional
       services          3,352,639     4,225,565    16,427,182    11,862,377
    -------------------------------------------------------------------------
                         7,693,367     7,706,999    35,308,783    28,834,121
    -------------------------------------------------------------------------

    Direct costs         3,409,650     4,302,656    15,625,997    11,408,070
    -------------------------------------------------------------------------
    Gross profit         4,283,717     3,404,343    19,682,786    17,426,051

    Expenses:
      Sales,
       general and
       administrative    2,742,649     2,900,770    14,137,099    11,442,474
      Loss on
       extinguishment
       of debt component
       of convertible
       debt              6,372,126             -     6,372,126             -
      Research and
       development       1,505,148       663,545     5,284,996     1,610,787
      Write down of
       deferred
       development
       costs               590,037       528,512     4,816,600       528,512
      Interest           1,035,518       870,182     3,856,744     1,844,382
      Depreciation and
       amortization        370,470     1,154,430     3,786,469     2,769,395
      Foreign exchange
       loss (gain)       2,463,476      (527,978)    3,502,088    (1,634,246)
      Goodwill
       impairment        3,207,626     1,605,036     3,207,626     1,605,036
      Facilities           407,114       436,977     1,734,339     1,367,474
      Fees and expenses
       on settlement of
       long term note
       payable                   -             -       614,505             -
      Write down of
       intangible assets   578,405             -       578,405             -
      Financing and
       amortization
       of debt and
       note payable
       issue costs        (174,527)    1,612,821       215,947     1,948,322
      -----------------------------------------------------------------------
                        19,098,042     9,244,295    48,106,944    21,482,136
    -------------------------------------------------------------------------
    Net income before
     income taxes      (14,814,325)   (5,839,952)  (28,424,158)   (4,056,085)

    Income taxes
      Current             (508,741)      621,439      (211,141)      621,439
      Future              (297,943)   (1,762,398)     (553,735)   (1,003,706)
    -------------------------------------------------------------------------
                          (806,684)   (1,140,959)     (764,876)     (382,267)
    -------------------------------------------------------------------------
    Net loss           (14,007,641)   (4,698,993)  (27,659,282)   (3,673,818)

    Retained earnings
     (deficit),
     beginning of
     period            (17,517,626)      833,008    (3,865,985)     (192,167)

    Gain on
     extinguishment
     of equity
     component of
     convertible debt    5,656,422             -     5,656,422             -

    -------------------------------------------------------------------------
    Deficit, end of
     period           $(25,868,845) $ (3,865,985) $(25,868,845) $ (3,865,985)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net loss per share
      Basic and
       diluted        $      (0.31) $      (0.12) $      (0.60) $      (0.09)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    





For further information:

For further information: Richard Slack, President and Chief Executive
Officer, (303) 987-2238, rick.slack@wellpointsystems.com; Bharat Mahajan, CA,
Chief Financial Officer, (403) 444-3916, bharat.mahajan@wellpointsystems.com

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WELLPOINT SYSTEMS INC.

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