Atlantis Systems announces 2006 fourth quarter and year-end financial results

    Strong performance by Canadian operations offset by investment in U.S.
    Restatement of previously reported revenue.
    Award of two new contracts valued at over $5 million.

    This news release may contain forward-looking statements. Reference
    should be made to "Forward-looking Statements" at the end of this news

    Toronto Stock Exchange Symbol: AIQ

    TORONTO, April 3 /CNW/ - Atlantis Systems Corp. (TSX: AIQ) today
announced its audited financial results for the year ended December 31, 2006,
which included strong revenue and gross margin, increased cash and cash
equivalents at year end, and increased profits from its Canadian operations.
Significant investment in its U.S. subsidiary, however, resulted in a net loss
for the year.
    "The very strong performance of our Canadian operations was offset by the
expenses we incurred in expanding in the U.S.," said Andrew Day, President and
CEO of Atlantis. "We believe that this is a temporary situation as we continue
to implement our strategic plan of pursuing contracts directly with the U.S.
government. The U.S. is the largest single military market for simulation
products with a national defense budget of over $500 billion."
    Atlantis recently reviewed its revenue recognition for contracts with
multiple deliverables, including its prior year assessment that certain
contracts contained separate units of accounting. As the assessment is that
such contracts, which have initial phases and then provide for support
services, do not qualify as separate units of accounting and should be treated
as single contracts rather than as two separate contracts, Atlantis has
restated revenue for the year ended December 31, 2005. The result of
correcting this error is that revenue and cost of revenue for 2005 have been
reduced by $697 thousand and $483 thousand, respectively. As at December 31,
2005, deferred revenue increased by $697 thousand and accrued costs on
percentage of completion decreased by $483 thousand. This correction decreased
the basic and diluted net income per share for 2005 by $0.01 per share to
$0.03 per share. The restatement does not affect periods prior to January 1,
    In addition, Atlantis also announced that it has recently been awarded
two contracts with a combined value of over $5 million. The first is an
extension of an existing contract for a customer in the nuclear sector under
which Atlantis will continue to provide simulation and contract engineering
support services. Under the second contract, Atlantis will provide
simulation-based courseware development for an undisclosed customer. Both
orders are expected to be delivered within the year.
    "I am especially pleased to announce these two key contracts," said
Mr. Day. "The contract extension consolidates our entry into the nuclear
sector, and the team is pleased that we have won repeat business in this
strategically important sector that we entered just over a year ago." Mr. Day
continued: "The courseware order is especially gratifying. We expect to
deliver this order primarily through the courseware development team at our
Orlando-based operation, ASA," said Mr. Day.
    Atlantis Systems Corp. is a globally recognized training integrator
specializing in the military, commercial aviation and energy sectors. The
Company operates in Canada and internationally through its wholly-owned
subsidiary Atlantis Systems International Inc. (ASI), and in the U.S. through
its wholly-owned subsidiary Atlantis Systems America, Inc. (ASA) based in
Orlando, Florida.

    Financial Highlights for 2006 (all dollar amounts are in Canadian dollars
    unless otherwise specified and reflect the above-mentioned restatement):

    -   Revenue increased 13% to $37.1 million
    -   Gross margin increased more than 14% to $10.9 million
    -   The Company had a net loss of $1.4 million ($0.03 per share),
        compared to net income of $1.7 million or $0.03 per share in 2005
    -   Cash and cash equivalents were $13.6 million (excluding restricted
        cash of $2.1 million) at December 31, 2006, up from $8.8 million at
        the end of 2005
    -   Invested $3.2 million in ASA

    The Company's Canadian operations had a profit of $2.6 million, up 40%
over Canadian operations in 2005. However, significant investments in
expanding the Company's U.S. operations (a $3.2 million expense) and non-cash
charges ($840 thousand) related to the reclassification as a current liability
and redemption of a convertible secured debenture put Atlantis in an overall
net loss position.
    There are now about 65 employees at ASA, and during 2006 the subsidiary
created and made its first delivery of electronic courseware to ASI which
previously was supplied by an outside contractor. This capability allows
Atlantis to have direct control more of the courseware element of the
Contracted Flying Training and Support (CFTS) program for the Canadian Forces
(CF), and is aligned with the strategy of building out Atlantis' overall
in-house training capability.
    Also early in 2006, the Company signed its first contract with a nuclear
power generator, and two additional contracts were signed for hardware and
software engineering services through the rest of the year. Although this is
yet a relatively modest market for Atlantis, representing just 2% of its total
revenue for the year, the Company sees significant potential as the number of
new and rebuilt nuclear plants is expected to grow rapidly.
    "We are excited about our prospects in the nuclear industry with hundreds
of new and rebuilt plants slated to come on stream around the world in the
years ahead," said Mr. Day. "We see other opportunities, in other areas. As a
leading provider of integrated training and learning solutions, it is our
strategy to continue to win contracts from existing customers and to diversify
into new geographic, sectoral and product markets."
    Throughout 2006, Atlantis continued to deliver on its commitments under
the CFTS program. Under the CFTS program, the Company is responsible for the
development, integration and support of CFTS' ground-based training system for
a twenty-three year period. The contracts are expected to yield approximately
$84 million in revenues, with some components being developed and manufactured
by the Company and a significant portion being provided by sub-contractors.
    To date, Atlantis has recognized revenues from CFTS of $16.8 million in
2005 and $26.3 million in 2006, for a total of $43.1 million, leaving
approximately $40.5 million to be recognized over the remaining life of the
contract, which includes the $18 million in support services for a further
twenty years.
    Other contracts awarded in 2006, totaling $12.1 million, included:

    -   providing an EH-101 helicopter cockpit procedures trainer to the
        Royal Danish Air Force (RDAF) through prime contractor AgustaWestland
    -   upgrading three existing Atlantis Boeing 767 flight training devices
        for Air Canada
    -   providing weapons load trainers to the CF for the CF-18 aircraft
    -   providing ongoing maintenance for two Atlantis Airbus 320 flight
        training devices for Spirit Airlines

    Fourth Quarter 2006

    Revenues for the three months ended December 31, 2006 were $11.2 million
versus $7.1 million for the same period in 2005, an increase of 58%. During
the fourth quarter of 2005, the contracts with Kelowna Flightcraft were
finalized, necessitating a catch-up adjustment of revenue and gross margin of
approximately $1.3 million, related to the second and third quarters once the
Company moved from the initial enabling contract, which was cost-based, to
final contracts with Kelowna Flightcraft that permitted
percent-completion-based revenue recognition.
    Gross margin was $3.0 million, or 26.6%, versus $3.1 million, or 43.0%,
for the same period in 2005. The 2005 gross margin included the approximate
$1.3 million catch-up adjustment mentioned above. This one-time catch-up
adjustment in 2005 increased the fourth quarter 2005 gross margin percentage
from 27.8% to the reported 43.0%.
    Loss for the fourth quarter was $148,000 (($0.00) per share) versus net
income of $569,000 or $0.01 per share for the same period in 2005. This
year-over-year decrease resulted primarily from the inclusion of the CFTS
margin catch-up adjustment in the fourth quarter of 2005, increased expenses
for ASA in the fourth quarter of 2006, offset by the additional direct
contribution attributable to higher revenues in the fourth quarter of 2006
versus the same period in 2005.
    For more information about fourth quarter and year-end results, please
refer to the 2006 Management's Discussion and Analysis filed on SEDAR

    Notice of Conference Call

    Atlantis will be hosting a conference call on Wednesday, April 11, 2007
at 9:00 am (EDT) to discuss its fiscal 2006 year-end financial results and
other corporate developments, and provide an update on the Company's outlook
for 2007. An advisory specifying call details will be distributed during the
week of April 9.

    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 over twenty-eight
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

    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; the level of activity under the CFTS program; the completion
profile of new and existing projects; the cost to complete contracted work;
the performance of contracts in accordance with their terms; the proportion of
CFTS to non-CFTS revenue; expected developments in the nuclear industry; ASA's
capability to deliver courseware; and the level of spending on the Company's
direct U.S.-market initiative. Material factors that could cause Atlantis'
actual results to differ materially from the forward-looking statements in
this release include risks and uncertainties relating to: the CFTS program;
reliance on subcontractors; the Company's U.S. subsidiary, ASA; reliance on
key customers; the level of military expenditures and developments in the
nuclear industry; relationships with existing U.S. prime contractors; and the
availability of skilled personnel. 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

    Consolidated Balance Sheets
    (Stated in thousands of dollars)
    As at December 31, 2006 and 2005

                                                        2006         2005
                                                    ------------ ------------
    Current assets
      Cash and cash equivalents                      $   13,636   $    8,755
      Trade and other receivables                         6,459        8,374
      Unbilled revenue                                      524        3,501
      Inventory                                             427          352

                                                    ------------ ------------
                                                         21,046       20,982

                                                    ------------ ------------

    Restricted cash                                       2,051            -
    Capital assets, net                                   1,747          886
    Other long-term assets                                  111          117
    Mortgage receivable                                     384          370
    Deferred development costs                            1,669        1,542
    Deferred financing costs                                  -          223
    Goodwill                                             11,735       11,735

                                                    ------------ ------------
                                                         17,697       14,873

                                                    ------------ ------------
                                                     $   38,743   $   35,855
                                                    ------------ ------------
                                                    ------------ ------------

    Current liabilities
      Accounts payable and accrued liabilities       $    7,024   $    5,103
      Accrued costs on percentage completion                444          107
      Deferred revenue                                    9,452        5,686
      Convertible debenture                                 100            -

                                                    ------------ ------------
                                                         17,020       10,896
    Convertible debentures                                    -        2,035

                                                    ------------ ------------
                                                         17,020       12,931

                                                    ------------ ------------
      Share capital                                      88,080       91,512
      Contributed surplus                                 8,574        4,908
      Deficit                                           (74,931)     (73,496)

                                                    ------------ ------------
                                                         21,723       22,924

                                                    ------------ ------------
                                                     $   38,743   $   35,855
                                                    ------------ ------------
                                                    ------------ ------------

    Consolidated Statements of Operations and Deficit
    For the years ended December 31, 2006 and 2005
    (Stated in thousands of dollars except per share amounts)

                                                        2006         2005
                                                    ------------ ------------

    Revenue                                          $   37,115   $   32,937
    Cost of revenue                                      26,252       23,429

                                                    ------------ ------------
    Gross margin                                         10,863        9,508

                                                    ------------ ------------
      General and administrative                          7,504        3,580
      Selling and marketing                               3,239        2,066
      Stock options                                         230          725

                                                    ------------ ------------
                                                         10,973        6,371

                                                    ------------ ------------
    Operating (loss) income before the
     undernoted items                                      (110)       3,137
      Depreciation and amortization                         446          190
      Interest expense and financing costs, net           1,103          529
      Other expenses                                          -          714
      Gain on extinguishment of debenture                  (224)           -

                                                    ------------ ------------
    Net (loss) income                                    (1,435)       1,704

    Deficit, beginning of year                          (73,496)     (75,200)

                                                    ------------ ------------
    Deficit, end of year                             $  (74,931)  $  (73,496)
                                                    ------------ ------------
                                                    ------------ ------------

    Net (loss) income per share
      Basic                                          $    (0.03)  $     0.03
      Diluted                                        $    (0.03)  $     0.03

    Weighted average number of shares
      Basic                                          52,791,645   49,570,595
      Diluted                                        52,791,645   51,519,759

    Consolidated Statements of Cash Flows
    (Stated in thousands of dollars)
    For the years ended December 31, 2006 and 2005

                                                        2006         2005
                                                    ------------ ------------
    Cash flows provided by (used in) :                             Restated

    Operating activities:

    Net (loss) income                                $   (1,435)  $    1,704
    Items not affecting cash:
      Depreciation and amortization                         446          190
      Stock options expensed                                230          725
      Accretion on debentures                             1,065          220
      Amortization of deferred financing costs              286           46
      Gain on extinguishment of debenture                  (224)           -

                                                    ------------ ------------
                                                            368        2,885

      Interest on mortgage receivable                       (14)         (12)
      Deferred development costs                           (127)      (1,542)
      Other long-term assets                                  6         (117)
      Net change in non-cash working capital             10,800        2,193

                                                    ------------ ------------
                                                         11,033        3,407

                                                    ------------ ------------
    Investing activities:
    Investment in capital assets                         (1,266)        (637)
    Restricted cash                                      (2,051)           -

                                                    ------------ ------------
                                                         (3,317)        (637)
                                                    ------------ ------------
    Financing activities:
    Common share issuance                                     -        2,040
    Share issuance costs                                      -         (113)
    Exercise of common share purchase warrants                -        1,734
    Exercise of options to purchase common shares           165          239
    (Repayment) issuance of convertible debenture        (3,000)       3,100
    Debenture financing costs                                 -         (398)
    Repayment of promissory notes                             -         (986)

                                                    ------------ ------------
                                                         (2,835)       5,616

                                                    ------------ ------------
    Net increase in cash and cash equivalents             4,881        8,386
    Cash and cash equivalents, beginning of year          8,755          369

                                                    ------------ ------------
    Cash and cash equivalents, end of year           $   13,636   $    8,755
                                                    ------------ ------------
                                                    ------------ ------------

    Interest paid                                    $      203   $      497
    Income taxes paid                                $        -   $        -

For further information:

For further information: Douglas Donderi, Vice-President, Corporate
Development and Corporate Secretary, Atlantis Systems Corp., (905) 759-1046,

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