WellPoint Systems reports record revenue, EBITDA and net income for the
quarter and nine months ended September 30, 2009

CALGARY, Nov. 23 /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 nine months ended September 30, 2009. All monetary values are in Canadian dollars unless otherwise indicated.

    
    Third Quarter and Nine Month Financial Highlights

    -------------------------------------------------------------------------
                  Three Months Ended  $ Change    Six Months Ended  $ Change
                        September 30                  September 30
    In thousands
     (CDN$)           2009      2008 2008-2009      2009      2008 2008-2009
    -------------------------------------------------------------------------

    Revenue          9,921     7,826     2,095    29,038    27,615     1,423
    Gross Profit     7,373     3,953     3,420    20,619    15,399     5,220
    Adjusted EBITDA  2,947    (2,289)    5,236     7,562    (3,338)   10,900
    Net Income       2,660    (8,955)   11,615     3,690   (13,652)   17,342
    Adjusted EBITDA
     per share        0.06     (0.05)     0.11      0.16     (0.07)     0.23
    Net Income
     per share        0.05     (0.19)     0.24      0.08     (0.30)     0.38

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

"Our third quarter results are further evidence that WellPoint's products are continuing to gain traction in key markets," said Mr. Richard Slack, President and CEO of WellPoint Systems. "Even through a difficult year in which unstable commodity prices and slow economic recovery negatively impacted many of our customers, we are seeing strong opportunity build for the Company's new and existing products. I am pleased with the progress we have made during an especially difficult year, and look forward to continued growth in 2010."

    
    Third Quarter Business Highlights

    -  Increased net income for the third quarter of 2009 by $11.6 million
       ($0.23 per share) to $2.7 million ($0.05 per share), compared with a
       net loss of ($9.0) million ($0.19 per share) in the third quarter of
       2008;
    -  Net income for the nine months ended September 30, 2009 increased by
       $17.3 million ($0.38 per share) to $3.7 million ($0.08 per share),
       compared with a net loss of ($17.5) million ($0.30 share) for the same
       period in 2008;
    -  Increased Adjusted EBITDA for the third quarter of 2009 by
       $5.2 million to $2.9 million, compared with an Adjusted EBITDA loss of
       ($2.3) million in the third quarter of 2008;
    -  Received a US$3.3 million (CDN$3.6 million) indemnity payment from
       Export Development Canada ("EDC");
    -  Redeemed $1.3 million (net) of convertible debentures that came due;
    -  Grew customer base by 12 companies, including five sales of
       WellPoint's Dynamics AX EAM and EFM products;
    -  Sold additional licenses to 13 current customers;
    -  Released WellPoint Integrated Suite (WIS) 5.2 which included
       enhancements to Energy Broker and Energy Financial Management such as
       data integration; improved budgetary processing enhanced reporting,
       enhanced tariff functionality and revised production forecasting. This
       release series also blends the Enterprise Asset Management product
       line with the WIS products such that a customer can purchase a
       fully-integrated system on the AX 2009 platform;
    -  Released BOLO 9.3 which included enhancements to BOLO's Multicurrency,
       Asset Tracking, Revenue, Land, and Production Accounting features. As
       a part of WellPoint's continuing support of this product line, there
       were more than 250 small enhancements across the full suite of
       capabilities; and
    -  Ranked 28th among the Deloitte Technology Fast 50(TM), a ranking of
       the 50 fastest growing technology companies in Canada.
    

Third Quarter Financial Review

Overall revenues for the third quarter of 2009 increased by $2.1 million as compared with the third quarter of 2008. License revenue increased to $4.8 million from $1.4 million in 2008. License revenue for the third quarter of 2009 includes $3.6 million of revenue from the Company's previously announced insurance indemnity payment from EDC. The EDC insurance indemnity payment was received pursuant to the terms of an accounts receivable insurance policy taken by WellPoint to minimize commercial risks associated with a contract for an existing customer in South America. Excluding this insurance indemnity payment, license revenue decreased by $0.3 million due to general economic conditions. Maintenance revenue grew to $2.6 million in 2009 from $2.5 million in 2008, an increase of 5%, due to expansion of the Company's customer base. WellPoint now provides maintenance to 447 customers worldwide and continues to achieve maintenance and support customer retention rates of approximately 99%. Professional services revenue decreased by $1.4 million in the third quarter of 2009 as compared with the same period of the prior year. In 2008, the Company was working on a large implementation in South America. This implementation was predominately complete in the third quarter of 2008 which contributed to the drop in the 2009 third quarter professional services revenue. Further impacting the professional services revenue was the continued instability in general economic climate with customers choosing to preserve cash and defer implementations and software enhancements until conditions improve.

Revenues from international operations increased to 43% in the third quarter of 2009 from 19% in the third quarter of 2008. The increase in international operational revenue is attributed to the EDC insurance indemnity payment received in the third quarter of 2009.

Gross profit was $7.4 million (74% of total revenue) compared with $4.0 million (51% of total revenue) for the third quarter of 2008. The $3.4 million increase in gross profit is attributed to the Company's changing revenue mix and the EDC insurance indemnity payment discussed above. During the third quarter of 2009 compared with the same period of the prior year, the Company increased its sales of higher margin license and maintenance revenue by $3.5 million and decreased its lower margin professional services revenue by $1.4 million. This shift in revenue mix resulted in an increase in both gross profit and gross margin.

SG&A decreased to $2.8 million (28% of revenue) compared with $3.9 million (50% of revenue) in the third quarter of 2008. The 2008 SG&A costs were negatively impacted by severance costs and high bad debt expenses. The decrease in 2009 SG&A costs is a result of various cost reduction efforts implemented during the latter half of 2008. In addition, 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%. Partially offsetting the salary decrease was a onetime bonus payment of $0.2 million in 2009. Further impacting the comparison between the Company's 2008 and 2009 SG&A costs is the decision by the Company to stop capitalizing research and development costs in 2009 as projects no longer meet the criteria for capitalization. In 2008, a portion of the Company's SG&A costs were allocated to research and development and capitalized. Had these costs not been capitalized in 2008, the comparative change in SG&A would have been even greater.

Facilities expenses decreased to $0.35 million compared with $0.43 million in the third quarter of 2008. The decrease primarily relates to consolidation of the Company's offices in Calgary.

In the third quarter of 2009, the Company incurred research and development expenses of $1.3 million (13% of revenue) compared with $1.7 million (21% of revenue) for the comparable period in 2008. The decrease in current research and development is related to a decision to stop capitalizing research and development expenses as they no longer meet the criteria for capitalization. When compared with development expenditures capitalized in the 2008, the Company's investment in research and development appears to have decreased by $0.7 million. However, this decrease is primarily attributable to various cost reduction efforts implemented during the latter half of 2008. Further, due to the negative general economic climate, the Company took additional steps in 2009 to reduce research and development expenses by rolling back salaries at its North American operations by 10%. Partially offsetting the decrease in costs was a onetime bonus payment of $0.1 million in 2009. In 2008, a portion of the Company's SG&A costs were allocated to research and development and capitalized. Had these costs not been capitalized in 2008, the comparative change in research and development costs would have been significantly smaller. For greater clarity, the Company is continuing to invest in research and development projects with the same vigor as in 2008, however the reduction in the current year expenditure is related entirely to cost optimizations and a reallocation of costs between research and development expenditures and SG&A.

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 continues to increase its investment in the development of new and innovative products utilizing the Microsoft AX Dynamics architecture. This investment in R&D is a fundamental requirement as WellPoint Systems continues to build products that meet the evolving needs of its customers.

Depreciation and amortization expenses decreased to $0.8 million compared with $1.1 million for the third quarter of 2008. 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 include the cash and interest accretion on the Company's interest-bearing obligations. In addition, interest costs include the interest payable on convertible debentures. Interest accretion is a result of the allocation of proceeds received from the issuance of convertible debt to their component parts, measured at their respective fair values at the time of issue or renegotiation. The debt component has been calculated as the present value of the required interest and principal payments, discounted at a rate approximating the interest rate that would have been applicable to non-convertible debt at the time the debenture was issued or reduced, when the fair value of the conversion option increases following a change in the conversion price or conversion period. Interest expense is determined on the debt component. The difference between the debt component and the face value of the debenture is classified as shareholders' equity-convertible debentures, net of issue costs, and adjusted for income taxes. The debentures are accreted to their face value over their term with a charge to operations included in interest expense.

Interest expenses increased to $1.6 million as compared with $1.0 million for the third quarter of 2008. The increase primarily stems from the new financings in 2008. As of September 30, 2009, the Company had notes payable, capital leases and convertible debt with a carrying value of approximately $31.8 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 due to 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 foreign exchange gain for the three months ended September 30, 2009 was $1.7 million compared to a $0.7 million loss in 2008.

For the third quarter of 2009 the tax recovery was ($0.5) million compared with a tax recovery of ($0.3) 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 income for the third quarter of 2009 was $2.7 million compared to a net loss of ($9.0) million for the third quarter of 2008. Basic and diluted net income per share was $0.05 compared with a net loss per share of ($0.19) for the third quarter of 2008.

Adjusted EBITDA was $3.0 million compared to an Adjusted EBITDA loss of ($2.3) million for the third quarter of 2008. The $5.3 million increase in Adjusted EBITDA was the result of the reduced operating costs as discussed above and the EDC insurance indemnity payment received in the third quarter of 2009. Basic and fully diluted Adjusted EBITDA per share was $0.06 compared with an Adjusted EBITDA loss per share of ($0.05) for the third quarter of 2008.

First Nine Months of 2009 Financial Review

Revenues increased by 5% to $29.0 million in the first nine months of 2009 compared with $27.6 million in the same period in 2008. Revenue from outside of Canada increased by $2.5 million compared with the same period in the prior year. This was primarily due to the growth in other international revenue from the QMENA license sale and the EDC insurance indemnity payment which, were partially offset by decreases in South American revenue due to the completion of the South American contract in Q3 of 2008.

License revenue increased to $11.3 million from $7.4 million in 2008. The increase is the result of license revenues from the US$2.0 QMENA sale in the first half of 2009 and the US$3.3 million EDC insurance indemnity payment, offset by a decline in BOLO license sales as compared with 2008. Maintenance revenue increased to $8.4 million in 2009 from $7.2 million in 2008, an increase of 17%, with a substantial portion of the increase attributed to the South American customer whose implementation was completed in the third quarter of 2008. Revenue from professional services decreased to $9.4 million from $13.1 million in 2008, a decrease of 28%. The substantial decrease in professional services revenue is attributed primarily to the completion of the 2007 South American contract in Q3 of 2008. Further impacting the professional services revenue is the continued instability in the general economic climate with customers choosing to preserve cash and defer implementations and software enhancements until conditions improve.

Gross profit was $20.6 million (71% of total revenue) compared with $15.4 million (56% of total revenue) for 2008. The $5.2 million (34%) increase in gross profit is attributable to the increase in higher margin license and maintenance revenue and a decrease in lower margin professional services revenue.

SG&A expenses decreased by $3.5 million (31%) to $7.9 million (27% of revenue) compared with $11.4 million (41% of revenue) in the first nine months of 2008. The decrease primarily relates to the various cost optimizations implemented in the autumn of 2008 along with higher expenses relating to bad debts and restructuring charges in 2008. Further impacting the comparison between the Company's 2008 and 2009 SG&A costs is the decision by the Company to stop capitalizing research and development costs in 2009 as the projects no longer meet the criteria for capitalization. In 2008, a portion of the Company's SG&A costs were allocated to research and development and capitalized. Had these costs not been capitalized in 2008, the comparative change in SG&A would have been even greater.

Facilities expenses decreased to $1.1 million compared with $1.3 million in 2008. The decrease primarily relates to consolidation of the Company's offices in Calgary.

In the first nine months of 2009, the Company incurred research and development expenses of $4.2 million (14% of revenue) compared with $3.8 million (14% of revenue) for the comparable period in 2008. The increase in current research and development is related to a decision to stop capitalizing research and development expenses as they no longer meet the criteria for capitalization. When compared with development expenditures capitalized in the 2008, the Company's investment in research and development appears to have decreased by $2.0 million. However, this decrease is primarily attributable to various cost reduction efforts implemented during the latter half of 2008. Further, due to the negative general economic climate, the Company took additional steps in 2009 to reduce research and development expenses by rolling back salaries at its North American operations by 10%. In 2008, a portion of the Company's SG&A costs were allocated to research and development and capitalized. Had these costs not been capitalized in 2008, the comparative change in research and development costs would have been significantly smaller. For greater clarity, the Company is continuing to invest in research and development projects with the same vigor as in 2008, however the reduction in the current year expenditure is related entirely to cost optimizations and a reallocation of costs between research and development expenditures and SG&A.

Depreciation and amortization expenses decreased to $2.5 million compared with $3.4 million in 2008. 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 $4.5 million as compared with $2.8 million for the first half of 2008. The increase primarily stems from the new financings in 2008 and the refinancing of the Company's debentures at the end of 2008. As at September 30, 2009, the Company had notes payable and convertible debt with a carrying value of approximately $31.8 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. The Company has not entered into any forward hedging contracts and therefore may experience gains and losses relating to foreign exchange. The foreign exchange gain for the first nine months of 2009 was $2.5 million (2008 - $1.0 million loss).

For the nine months ended September 30, 2009 the tax recovery was ($1.0) million compared to a tax expense of $42,000 for the same period in 2008. The tax recovery is primarily as a result of the Company's operations in the US.

The net income for the nine months ended September 30, 2009 was $3.7 million compared to a net loss of $13.7 million for the same period in 2008. Basic and diluted net income per share was $0.08 compared to a loss per share of ($0.30) in 2008. The net income and increased earnings per share are attributed to the factors discussed above.

Adjusted EBITDA increased by $10.9 million to $7.6 million compared with an Adjusted EBITDA loss of ($3.3) million for the first nine months of 2008. Basic and fully diluted EBITDA per share was $0.16 compared to an Adjusted EBITDA loss per share of ($0.07). The significant increase in 2009 Adjusted EBITDA and Adjusted EBITDA per share is a result of the increased gross profit and reduced operating expenses as discussed above.

Outlook

During 2008, the Company 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 has and will continue to 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 2010, the
        Company particularly intends to focus its activities on increasing
        market share and driving revenue from opportunities primarily in the
        North American, Middle Eastern and other international markets;

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

    -   Continuing development and marketing of BOLO and IDEAS in their
        target markets to increase market share;

    -   Continuing development and marketing of the WellPoint Energy Suite
        solutions to expand functionality and better conform with best
        practices in the computer software industry; and

    -   Increasing sales and marketing of the WellPoint EAM solution to
        broad-based manufacturers through partner channels.
    

In the first nine months of 2009, the Company recorded US$2.0 million in revenue from the agreement the Company signed on December 24, 2008 with Quorum MENA Limited ("QMENA") and US$3.3 million from the EDC insurance indemnity payment. The Company is also anticipating increased activity for its Microsoft Dynamics AX (ENB, EFM and AX EAM) based products. As a result of the factors outlined above and lower operating costs the Company anticipates posting record revenue, net income and Adjusted EBITDA in 2009.

Commodity prices appeared to have stabilized with oil trading in the US$70 - US$80 per barrel range and natural gas in the US$4.0 - US$5.0 per MMBtu range. Management believes that this stability in commodity prices will increase demand for the Company's products due to higher levels of mergers and acquisitions activity and increased capital spending by customers. However, there is continued instability in the general economy and credit markets have still not returned to normal. Given these conflicting economic indicators, the Company's visibility into 2010 is limited at this point. However, the Company is seeing robust sales pipeline for its products. As such, management is optimistic about the future growth of all products, especially the Dynamics AX product line and as such is anticipating growth in 2010 revenues as compared with 2009. The Company also anticipates that it will need to expand its infrastructure, especially in the sales and marketing areas to support the Company's international expansion plans. As such, the Company expects SG&A costs to increase in 2010.

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 and three and nine months ended September 30, 2009. 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.
    

The Company announces that Mr. Donald Wilson has resigned from the board of directors for personal reasons. Mr. Wilson's resignation will be effective immediately. WellPoint, its board of directors and executive team are grateful to Mr. Wilson for his significant contributions to the Company.

WellPoint also announced that effective November 26, 2009 the Company's board of directors has authorized the grant of 341,667 stock options for directors of the Company. The options will vest on the date of issue and expire five years from that date. Each option entitles the holder to purchase one common share of the corporation at a price of to be determined based on the Company's closing share price on the TSX Venture exchange on November 25, 2009.

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 (Unaudited)
    (in thousands of dollars)

    -------------------------------------------------------------------------
                                                   September 30  December 31
                                                           2009         2008
    -------------------------------------------------------------------------
    Assets
    Current assets:
      Cash                                            $   1,228    $     406
      Accounts receivable                                 3,002        3,532
      Prepaid expenses                                      597          746
      -----------------------------------------------------------------------
                                                          4,827        4,684
    Property and equipment                                  949        1,106
    Deferred development costs                            1,540        2,119
    Intangible assets                                    11,764       15,384
    Goodwill                                             21,487       24,442
    Future income taxes                                   1,194          132
    -------------------------------------------------------------------------
                                                      $  41,761    $  47,867
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and Shareholders' Equity
    Current liabilities:
      Accounts payable and accrued liabilities `      $   4,668    $   5,718
      Current income tax liability                           92          106
      Deferred revenue                                    2,361        4,876
      Other deferred credits                                 55           55
      Notes payable                                         225            -
      Current portion of long term notes payable          5,347           99
      Current portion of capital lease obligations           57           46
      Convertible debentures                              1,519        1,358
      -----------------------------------------------------------------------
                                                         14,324       12,258

    Long term notes payable                                   -        6,005
    Capital lease obligations                                51           58
    Other deferred credits                                   36           77
    Convertible debentures                               24,598       26,476
    -------------------------------------------------------------------------
                                                         39,009       44,874
    Shareholders' equity:
      Share capital                                      14,620       14,497
      Contributed surplus                                 1,733        1,624
      Convertible debentures                              8,996        8,996

      Accumulated other comprehensive income               (418)       3,744
      Deficit                                           (22,179)     (25,868)
    -------------------------------------------------------------------------
                                                        (22,597)     (22,124)
    -------------------------------------------------------------------------
      Total shareholders' equity                          2,752        2,993
    -------------------------------------------------------------------------
                                                      $  41,761    $  47,867
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    WELLPOINT SYSTEMS INC.
    Consolidated Statements of Operations and Retained Earnings (deficit)
    (unaudited)
    (in thousands of dollars, except per share amounts)

    -------------------------------------------------------------------------
                                Three months ended          Six months ended
                                    September 30              September 30
                                 2009         2008         2009         2008
    -------------------------------------------------------------------------

    Revenue
      License               $   4,771    $   1,411    $  11,330    $   7,384
      Maintenance               2,570        2,459        8,351        7,157
      Professional services     2,580        3,955        9,357       13,074
    -------------------------------------------------------------------------
                                9,921        7,825       29,038       27,615

    Direct costs                2,548        3,873        8,419       12,216
    -------------------------------------------------------------------------
    Gross profit                7,373        3,952       20,619       15,399

    Expenses:
      Sales, general and
       administrative           2,794        3,935        7,867       11,394
      Interest                  1,580          959        4,498        2,821
      Research and development  1,324        1,674        4,181        3,780
      Depreciation and
       amortization               805        1,121        2,549        3,416
      Facilities                  354          429        1,118        1,327
      Financing and
       amortization of debt and
       note payable issue costs    59          137          203          390
      Foreign exchange loss
       (gain)                  (1,689)         739       (2,517)       1,039
      Fees and expenses on
       settlement of long term
       note payable                 -            -            -          615
      Writedown of deferred
       development costs            -        4,227            -        4,227
    -------------------------------------------------------------------------
                                5,227       13,221       17,899       29,009
    -------------------------------------------------------------------------
    Net income (loss) before
     income taxes               2,146       (9,269)       2,720      (13,610)
    -------------------------------------------------------------------------

    Income taxes
      Current expense              92          166           92          299
      Future expense
       (reduction)               (606)        (479)      (1,062)        (257)
    -------------------------------------------------------------------------
                                 (514)        (313)        (970)          42
    -------------------------------------------------------------------------
    Net income (loss)           2,660       (8,956)       3,690      (13,652)

    Deficit, beginning of
     period                   (24,839)      (8,562)     (25,869)      (3,866)

    -------------------------------------------------------------------------
    Deficit, end of period  $ (22,179)   $ (17,518)   $ (22,179)   $ (17,518)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net income (loss) per
     share
      Basic and diluted     $    0.05    $   (0.19)   $    0.08    $   (0.30)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

SOURCE WELLPOINT SYSTEMS INC.

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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