Atlantis reports 2007 second quarter unaudited financial results



    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 Stock Exchange Symbol: AIQ

    TORONTO, Aug. 8 /CNW/ - Atlantis Systems Corp. (TSX: AIQ), a globally
recognized training integrator in military, commercial aviation and energy
markets, today announced its financial and operating results for the three and
six-month periods ended June 30, 2007.
    In the second quarter of 2007, Atlantis generated revenues of
$15.2 million, versus revenues of $5.9 million for the same period in 2006, an
increase of 157%. For the three months ended June 30, 2007, Atlantis reported
net income of $2.7 million or $0.05 per share compared to a loss of
$2.8 million, or $0.05 per share for the same period in 2006.
    The major component of the increase is related to the CFTS program. CFTS
program revenues for the second quarter of 2007 include the achievement of
subcontractor milestones originally expected for the first quarter of 2007.
    Consolidated revenue for the six months ended June 30, 2007 was
$21.1 million, a 46% increase over the $14.5 million recorded for the six
months ended June 30, 2006. For the six months ended June 30, 2007, Atlantis
reported net income of $0.9 million, or $0.02 per share, compared to a loss of
$2.7 million, or $0.05 per share for the same period in 2006. Revenue for the
CFTS program was $15.3 million for the six months ended June 30, 2007,
compared to $9.3 million for the comparable period in 2006, a $6.0 million
increase. CFTS program revenues for the period reflect increased revenue
recognized from the start of work on the follow-up CFTS order received in the
first quarter of 2007, while profitability was increased by the effect of
reduced program cost estimates as a result of taking work in-house that had
previously been performed by a subcontractor.

    
    Operational Highlights

    -  On April 2, Atlantis announced that it had been awarded new contracts
       in the nuclear and military sectors with a total value of over
       $5 million.

    -  On April 10, Atlantis' U.S. subsidiary, Atlantis Systems America, Inc.
       ("ASA"), qualified as a U.S. defence contractor - entering into a
       Special Security Agreement with the U.S. Department of Defence,
       completing a Defence Contract Audit Agency review, and qualifying to
       bid under certain U.S. Army and U.S. Navy indefinite
       delivery/indefinite quantity contract vehicles. On April 26, ASA won
       its first contract, worth U.S. $2.7 million, to provide services to a
       customer in the U.S. defence sector.

    -  On May 4 Atlantis announced that it had entered into an agreement to
       purchase certain assets of Tecsult Eduplus, a courseware provider in
       the military aerospace and naval defence sectors. This transaction is
       currently subject to the completion of due diligence.

    -  On June 14 the Company announced that Atlantis Systems America had
       qualified under the U.S. Navy/Marine Corps Seaport-E indefinite
       delivery/indefinite quantity military procurement program, which will
       allow ASA to bid directly for work under this program as a prime
       contractor.

    -  On June 20 Atlantis announced that it had reached an understanding
       with Grob Aerospace to provide integrated training solutions for the
       Grob G-120 training aircraft as part of Grob's offering to its
       customers. This is the first time Atlantis products will be offered as
       part of an original equipment manufacturer sale.

    -  During the first half, Atlantis strengthened its management ranks
       through the addition of a new chief financial officer and a chief
       marketing officer.
    

    "Atlantis is continuing to successfully execute on its growth strategy,"
stated Andrew Day, President and CEO of Atlantis. "We are actively pursuing
opportunities in the military and nuclear sectors and we are beginning to gain
traction as demonstrated by the $8 million in new contract awards won in the
first half of the year. The transferability of our proprietary training
platform should allow us to further penetrate these markets and diversify our
revenue base."
    As at June 30, 2007, contracted backlog was $38.9 million versus
$59.5 million at June 30, 2006 and $50.7 million at March 31, 2007. This
year-over-year decrease consists of a $26.7 million net reduction on the CFTS
program, offset by a $6.1 million increase in the non-CFTS order backlog.
Contracted backlog at June 30, 2007 consisted of $30.3 million from the CFTS
program (which includes $18.4 million in support services for the twenty-year
support period) and $8.6 million from all other contracts.
    "The order backlog has dropped from the same period last year primarily
as a result of solid progress on the CFTS program," said Andrew Day. "We
believe that current pursuits, including further upgrades to the CFTS program,
will replenish our order backlog."
    At June 30, 2007, Atlantis had cash and cash equivalents of $3.7 million,
compared with $13.6 million at December 31, 2006 and $9.1 million at March 31,
2007. The Company has in place a secured bank operating line of credit of up
to $5.0 million with a major Canadian chartered bank. The operating line is
not currently drawn.
    For more information about first quarter results, please refer to the Q2
2007 Financial Statements and Management's Discussion and Analysis filed on
SEDAR (www.sedar.com).

    Notice of Conference Call

    Atlantis will be hosting a conference call on Thursday, August 9, 2007 at
8:00 a.m. (EDT) to discuss its second quarter 2007 financial results and other
corporate developments, and provide an update on the Company's outlook for
2007.

    
    Date                 Thursday, August 9, 2007
    Time                 8:00 a.m. EST
    Live Call Number     416-646-3095 or 800-814-3911
    Conference Replay    416-640-1917 or 877-289-8525
    Pass code -          21242924 followed by the number sighn - Available
                         from August 9 to midnight August 16, 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 courseware 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 courseware and other
programs on time and on budget; the level of spending on the Company's direct
U.S.-market initiative; and matters relating to the agreement with Tecsult
Inc., including due diligence, achievement of board and regulatory approvals
and plans for an ongoing relationship with Tecsult Inc. 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; and the agreement with
Tecsult Inc. 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)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                            June 30, 2007  December 31, 2006
                                        -----------------  -----------------
                                               (unaudited)
    ASSETS
    Current assets
      Cash and cash equivalents                 $   3,652          $  13,636
      Trade and other receivables                   3,903              6,459
      Unbilled revenue                              2,669                524
      Inventory                                       527                427
    -------------------------------------------------------------------------
                                                   10,751             21,046
    -------------------------------------------------------------------------

    Restricted cash                                 2,051              2,051
    Capital assets, net                             1,741              1,747
    Other long-term assets                            249                111
    Mortgage receivable                               391                384
    Deferred development costs                      1,669              1,669
    Goodwill                                       11,735             11,735
    -------------------------------------------------------------------------
                                                   17,836             17,697
    -------------------------------------------------------------------------
                                                $  28,587          $  38,743
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES
    Current liabilities
      Accounts payable and accrued liabilities  $   2,616          $   7,024
      Accrued costs on percentage completion          117                444
      Deferred revenue                              2,052              9,452
      Convertible debenture                           100                100
    -------------------------------------------------------------------------
                                                    4,885             17,020
    -------------------------------------------------------------------------

    SHAREHOLDERS' EQUITY
      Share capital                                88,877             88,080
      Contributed surplus                           8,860              8,574
      Deficit                                     (74,035)           (74,931)
    -------------------------------------------------------------------------
                                                   23,702             21,723
    -------------------------------------------------------------------------
                                                $  28,587          $  38,743
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



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

                                For the three months      For the six months
                                       ended June 30           ended June 30
                               ---------------------   ---------------------
                                    2007        2006        2007        2006
                               ----------  ----------  ----------  ----------
                                           (Restated)              (Restated)

    Revenue                    $  15,241   $   5,923   $  21,070   $  14,454
    Cost of revenue                9,736       4,334      14,339      10,349
    -------------------------------------------------------------------------
    Gross margin                   5,505       1,589       6,731       4,105
    -------------------------------------------------------------------------

    Expenses
      General and administrative   1,935       2,027       3,932       3,610
      Selling and marketing          735         917       1,647       1,539
      Stock options                   60          84         102         119
    -------------------------------------------------------------------------
                                   2,730       3,028       5,681       5,268
    -------------------------------------------------------------------------
    Operating income (loss)
     before the undernoted items   2,775      (1,439)      1,050      (1,163)

      Depreciation and
       amortization                  171         113         324         186
      Interest and financing
       (income) costs, net           (67)      1,202        (169)      1,311
      Gain on disposal of capital
       assets                          -           -          (1)
    -------------------------------------------------------------------------
    Net income (loss) and
     comprehensive income          2,671      (2,754)        896      (2,660)

    Deficit, beginning of
     period                      (76,706)    (73,402)    (74,931)    (73,496)
    -------------------------------------------------------------------------
    Deficit, end of period     $ (74,035)  $ (76,156)  $ (74,035)  $ (76,156)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net income (loss)
     per share
      Basic                    $    0.05   $   (0.05)  $    0.02   $   (0.05)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
      Diluted                  $    0.05   $   (0.05)  $    0.02   $   (0.05)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Weighted average number
     of shares
      Basic                   54,699,431  52,781,853  54,152,990  52,729,584
      Diluted                 55,440,870  52,781,853  55,163,936  52,729,584



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


                                For the three months      For the six months
                                       ended June 30           ended June 30
                               ---------------------   ---------------------
                                    2007        2006        2007        2006
                               ----------  ----------  ----------  ----------
                                           (Restated)              (Restated)

    Cash flows provided by (used in):

    Operating activities:
    Net income (loss)          $   2,671   $  (2,754)  $     896   $  (2,660)
    Items not affecting cash:
      Depreciation and
       amortization                  171         113         324         186
      Gain on disposal of
       capital assets                  -           -          (1)          -
      Stock options expensed          60          84         102         119
      Accretion on debentures          -         980           -       1,065
      Amortization of deferred
       financing costs                 -         199           -         223
    -------------------------------------------------------------------------
                                   2,902      (1,378)      1,321      (1,067)

      Interest on mortgage
       receivable                     (3)         (3)         (7)         (7)
      Deferred development costs       -         (63)          -        (139)
      Other long-term assets        (141)         85        (138)        (35)
      Net change in non-cash
       working capital            (8,032)      2,648     (11,787)      8,328
    -------------------------------------------------------------------------
                                  (5,274)      1,289     (10,611)      7,080
    -------------------------------------------------------------------------

    Investing activities:
    Investment in capital assets    (192)       (350)       (355)       (729)
    Proceeds from disposal of
     capital assets                    -           -           1           -
    -------------------------------------------------------------------------
                                    (192)       (350)       (354)       (729)
    -------------------------------------------------------------------------

    Financing activities:
    Exercise of common share
     purchase warrants                 -           -         873           -
    Exercise of options to
     common shares                     -          31         108         108
    -------------------------------------------------------------------------
                                       -          31         981         108
    -------------------------------------------------------------------------
    Net (decrease) increase in
     cash and cash equivalents    (5,466)        970      (9,984)      6,459
    Cash and cash equivalents,
     beginning of period           9,118      14,244      13,636       8,755
    -------------------------------------------------------------------------
    Cash and cash equivalents,
     end of period             $   3,652   $  15,214   $   3,652   $  15,214
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    SUPPLEMENTAL INFORMATION

    Cash and cash equivalents
     are comprised of:
      Cash                     $   3,621   $   9,603   $   3,621   $   9,603
      Cash equivalents                31       5,611          31       5,611
    -------------------------------------------------------------------------
                               $   3,652   $  15,214   $   3,652   $  15,214
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Interest paid              $       3   $      79   $       5   $     158
    Income taxes paid          $       -   $       -   $       -   $       -
    

    %SEDAR: 00002161E




For further information:

For further information: George Chiarucci, Chief Financial Officer,
Atlantis Systems Corp., (905) 792-1981, GChiarucci@atlantissi.com; Kevin
O'Connor, Genoa Management, (416) 962-3300, koconnor@genoa.ca

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ATLANTIS SYSTEMS CORP.

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