Smartcool Comments on Fiscal 2011 and Discusses 2012

VANCOUVER, May 9, 2012 /CNW/ - Smartcool Systems Inc. (TSX-V: SSC) has reported its audited fourth quarter results for the three months and the fiscal year ended December 31, 2011.

The year ending December 31, 2011 was a challenging year for Smartcool where expectations for revenue growth did not materialize until the fourth quarter of the year, when customer relationships that had been developed throughout the year showed revenue recognition across major retailers in the UK and Europe. Revenue for the fourth quarter was $1,937,749 up 45% from the previous year.  This was the highest revenue generating quarter in the Company's history.

Revenue for 2011 was $3,943,794, a decrease of 6% from 2010.  Direct sales contributed 52% of total revenue at $2,032,772 up from $1,620,335 from 2010.  Distribution sales contributed 48% of total revenue $1,909,022 down from $2,589,310 as company strategic focus shifted to more direct customer relationships. The company had expected to show year over year growth consistent with previous performance.

Direct sales were focused largely in UK and Europe, and Smartcool delivered rollouts to a number of Fortune 500 clients which represented 52% of 2011 revenue up 25% from previous year.  Most significantly in 2011, Smartcool was named a Primary Contractor for Sainsbury's to deliver not only its own products but also other energy efficiency solutions to the UK retailer's refrigeration systems.  Smartcool has been re-confirmed in 2012 to continue in this role for Sainsbury's budget year, providing continued visibility to their estate of stores with the expectation that revenue from this account will increase by 125% from 2011.

Installation and successful pilots with other European retailers in 2011 will provide diversification of revenue sources and growth in 2012. As an example, discussions are under way currently for a rollout with a Regional Eastern Europe Retailer whereby export development financing will secure the capital necessary for installation in more than 50 stores. This opportunity alone will increase 2012 revenues by 50% within the European market sector from 2011.

Distribution sales for Smartcool's ECO₃ experienced growth in the USA, up 118% from 2010, as the company identified new, smaller distributors in target states like Florida, California and the mid-West.  This base of dealers is ideally positioned to deliver Smartcool's simpler product to the mass residential and small business market with expectation of continued growth of 100% over 2011.

Smartcool also added two new ESM distributors in Europe and has created infrastructure under the Director of Distributor Support to produce steady, recurring revenue for the company. The minimum contract purchases for 2012 will increase by 35% over 2011.

Net loss for the year for the year was $5,217,928 compared to $1,619,771 for 2010. The increase was attributable to a decrease in gross margin due to higher cost of goods because of acquisition, higher G&A expense due to integration of Smartcool UK and allowance for doubtful accounts (one large receivable past accepted accounting standards for days overdue), increased amortization expense and the impairment of UK intangible assets after management's review of lower than expected operating results.

To ensure that the Company continues to be a going concern with adequate working capital through 2012 steps have been taken to reduce expenses by 25%, secure more predictable revenue generation by continuing to sign distribution contracts with minimum contract purchases, use invoice financing through bank facilities to improve the timing of customer receipts, file Smartcool UK 2011 tax return which provides for a tax loss carry back to recover all taxes paid in 2010 totaling $245,000.

The company has also received confirmation from the holders of purchase obligations that they will not require settlement of outstanding amounts in 2012 totaling $1,650,000 at the end of 2011. This will provide the company the opportunity to build working capital and pay these obligations as cash reserves permit.

Smartcool made progress in the pursuit of its business strategy during the year and expects it will return to year over year growth in revenue during the course of 2012 more consistent with historical percentage increase of 100%. With increased direct sales to large retailers and the addition of new distribution channels around the world, the company expects to become EBITDA positive in 2012.

Financial Statements and the Management Discussion & Analysis for the fourth quarter and fiscal year of 2011 are filed with SEDAR and available on Smartcool's website.

Neither the TSX Venture Exchange nor its Regulation Services Provider accepts responsibility for the adequacy or accuracy of this release.

About Smartcool

Smartcool Systems Inc. (TSX-V: SSC) provides cutting edge energy efficient and energy cost reduction solutions for businesses around the world.  The ESM™ and ECO³™ are Smartcool's unique retrofit technologies that reduce the energy consumption of compressors in air conditioning, refrigeration and heat pump systems, with no risk to existing equipment performance.  www.smartcool.net 

George Burnes TEL [phone]

CEO of Smartcool TEL [phone]

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