Atlantis Systems Corp.
TSX : AIQ

Atlantis Systems Corp.

August 14, 2009 08:00 ET

Atlantis Reports Second Quarter 2009 Financial Results

New Strategy Continues to Show Results with approximately $8.8 million in New Business Year to Date

TORONTO, ONTARIO--(Marketwire - Aug. 14, 2009) - Atlantis Systems Corp. (TSX:AIQ) -

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.

Atlantis Systems Corp. (TSX:AIQ), a globally recognized training integrator in the military, commercial aviation and energy markets, today announced its financial and operating results for the second quarter.

Second Quarter 2009 Operational & Financial Summary

- ASI signed a contract with CAE to design and manufacture a C-130J flight training device as part of the Government of Canada C-130J aircrew training program. ASI is part of the pan-Canadian team led by CAE that won a contract to provide systems and services for Canada's tactical airlift, medium-to-heavy helicopter, and potentially other aircraft fleets.

- ASE was awarded a contract for approximately $2.0 million by L-3 Communications MAPPS Inc. ("L-3 MAPPS") of Montreal for the supply of courseware development and training for the Halifax Class Integrated Platform Management System ("IPMS") Project. The IPMS Project is an upgrade program that will modernize the Canadian Navy's twelve Halifax Class frigates.

- Atlantis has secured approximately $8.8 million in new orders in the first six months of 2009, and in addition has been awarded renewals and increases on existing contracts.

- Order backlog at June 30, 2009, for continuing operations was $32.6 million, an increase of $4.3 million from the order backlog at December 31, 2008. The June 30, 2009 backlog includes $19.1 million for CFTS program, including $17.7 million for support services to be recognized over the next 18 years, and $5.7 million for the SMHP.

- We previously disclosed that the future of our US operations (ASA) was under review. After careful consideration by our Board of Directors the Company's US operations have been discontinued effective June 30th, 2009. Subsequently, certain assets including our qualification rights to bid as a contractor within the US Army under Stoc II, were sold to third parties.

- Canadian operation continues to streamline and focus the business to improve effectiveness and strengthen Atlantis' ability to execute current contracts and pursue identified new opportunities.

- During the second quarter the Company received payment from the Ontario Media Development Corporation ("OMDC") for the tax credit it was eligible to receive, totaling approximately $1.5 million net of applicable fees.

"This past quarter we were pleased to secure additional new business across several of our key areas of focus" said Henrik Noesgaard, CEO of Atlantis Systems. "This incremental business in addition to the business awarded in the first quarter puts Atlantis on track to achieving its objective of restoring both top line growth and profitability even though sales and profitability declined in the quarter".

"We have come a long way in the last twelve months", said Mark Rivers, Chairman of Atlantis Systems Corp. "Our Shareholders and Stakeholders should be encouraged that Atlantis is moving in the right direction. The additional new business secured in the last quarter is further validation of this".

Second Quarter 2009 Results

Revenue from continuing operations for the three months ended June 30, 2009 was $2.0 million, a 48% decrease from revenue from continuing operations of $3.8 million in the second quarter of the prior year. The second quarter of 2009 also includes a decrease of $0.5 million in revenue from the SMHP due to a decrease during the quarter in the value of the U.S. dollar as compared to the Canadian dollar. Excluding the effect of these adjustments to revenue for both quarters, revenue for continuing operations in the second quarter of 2009 would have decreased by 42% to $3.0 million, as compared to the second quarter of 2008.

Gross profit from continuing operations for the quarter was $0.325 million or 16% of sales versus $0.438 million or 11% of sales for the prior year. The increase in profit margin is due to a change in business mix including a reduction in CFTS program revenues.

Net loss from continuing operations for the three months ended June 30, 2009 and 2008 was $2.6 and $2.0 million.

Additional Information

For more information about the Company's second quarter results, please refer to the Second Quarter 2009 Management's Discussion and Analysis filed on SEDAR (www.sedar.com).

About Atlantis Systems Corp.

Atlantis Systems (TSX:AIQ) uses its core capabilities in simulation-aided design and engineering and e-learning, combined with various technology tools, to help customers in military aviation, civil aviation and nuclear energy ensure the feasibility, capability, and effective utilization of their complex assets. In more than 30 years of operation, Atlantis has developed a solid reputation for its creative workforce and innovative solutions in supporting global OEM customers and defence organizations. 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: our ability to obtain financing to fund our losses and continue to operate as a going concern; our ability to retain our current banking relationship; our ability to win new projects and to successfully complete ongoing negotiations with new and existing customers for new work and to accurately forecast the timing of such wins; our current order backlog and the timing of its recognition; our ability to secure spinoff programs to the CFTS program; the stability and growth of military markets and expenditures worldwide and expected developments in the energy and aerospace industries; the stability and growth of markets for simulation-based training products; the availability of skilled personnel and that our cost reduction plan will not affect this availability; our ability to meet contractual obligations under the CFTS and SMHP programs or any other major program; our ability to complete new and existing projects on time and on budget; the performance of subcontractors; our ability to protect and exploit our intellectual property; the value of the Canadian dollar relative to foreign currencies, in particular, the U.S. dollar; the level of capital programs to be completed and the accuracy of our projections of infrastructure spending at our facilities; 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 meet debt obligations as required by our lending arrangements or secure waivers; our ability to source capital to fund our operations; our ability to continue to operate as a going concern; our ability to convert sales, negotiations and marketing pursuits into actual awards and order backlog; our inability to repay bank debt on demand; the current global financial crisis; the level of military expenditures and developments in the energy and aerospace industries; our continued reliance on key customers for existing and new work including our ability to leverage off the CFTS program; the availability of skilled personnel to ramp up new programs and complete existing programs; our reliance on subcontractors; our ability to protect the ownership of our technology and intellectual property; and the volatility of foreign exchange rates. 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 Statements of Operations, Comprehensive Loss and Deficit
For the three and six months ended June 30
(Expressed in thousands of Canadian dollars except per share amounts)
(unaudited)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

For the three months For the six months
ended June 30 ended June 30
--------------------- ----------------------
2009 2008 2009 2008
----------------------------------------------------------------------------
Revenue
(notes 6, 7, 18
and 19) $ 1,992 $ 3,835 $ 5,454 $ 7,815
Cost of revenue
(note 6) 1,667 3,397 2,833 6,860
----------------------------------------------------------------------------
Gross margin 325 438 2,621 955
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Expenses
General and
administrative 1,120 1,216 2,167 2,441
Selling and marketing 260 395 670 736
Stock options 43 36 96 72
----------------------------------------------------------------------------
1,423 1,647 2,933 3,249
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Operating income loss
before the undernoted
items (1,098) (1,209) (312) (2,294)
Depreciation and
amortization 359 480 715 961
Write-off of mortgage
receivable (note 8) 167 - 167 -
Interest and financing
costs, net (note 11) 1,018 309 1,372 387
----------------------------------------------------------------------------
Net loss from
continuing operations (2,642) (1,998) (2,566) (3,642)
----------------------------------------------------------------------------
Net loss from
discontinued
operations (note 6) (293) (339) (480) (997)
----------------------------------------------------------------------------
Net loss and
comprehensive loss (2,935) (2,337) (3,046) (4,639)

Deficit, beginning
of period (102,491) (81,265) (102,380) (78,963)
----------------------------------------------------------------------------
Deficit, end
of period $ (105,426) $ (83,602) $ (105,426) $ (83,602)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Net loss per
share (note 16)
Basic and diluted:
Continuing
operations $ (0.05) $ (0.04) $ (0.05) $ (0.07)
Discontinued
operations (0.01) (0.01) (0.01) (0.02)
Net loss (0.05) (0.04) (0.05) (0.08)

Weighted average
number of shares
Basic and diluted 55,993,929 55,993,929 55,993,929 55,993,929



ATLANTIS SYSTEMS CORP.
Consolidated Balance Sheets
As at June 30, 2009 and December 31, 2008
(Expressed in thousands of Canadian dollars)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

2009 2008
----------------------------------------------------------------------------
(unaudited) (audited)

ASSETS
Current assets
Cash $ 50 $ 1,041
Trade receivables (note 7) 1,612 503
Unbilled revenue (note 7) 2,416 1,571
Inventory 443 315
Prepaid expenses 211 242
Current assets of discontinued
operations (note 6) 271 191
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5,003 3,863
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Capital assets, net 826 976
Long-term prepaid expenses 66 57
Other long-term assets 77 77
Mortgage receivable (note 8) - 164
Deferred development costs and core technology,
net (note 10) 1,328 1,859
Capital assets of discontinued operations (note 6) - 168
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2,297 3,301
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$ 7,300 $ 7,164
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LIABILITIES
Current liabilities
Operating line of credit (note 12) $ 5,700 $ 3,258
Accounts payable and accrued liabilities 3,686 3,238
Accrued costs on percentage completion 507 424
Deferred revenue 1,273 990
Term debt (notes 11, 12, 14 and 16) 2,318 2,197
Current liabilities of discontinued operations 39 347
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13,523 10,454
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SHAREHOLDERS' DEFICIENCY
Share capital and warrants (notes 13 and 14) 89,907 89,890
Contributed surplus 9,296 9,200
Deficit (105,426) (102,380)
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(6,223) (3,290)
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$ 7,300 $ 7,164
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The accompanying notes are an integral part of these consolidated
statements.



ATLANTIS SYSTEMS CORP.
Consolidated Statements of Cash Flows
For the three and months ended June 30, 2009 and 2008
(Expressed in thousands of Canadian dollars)
(unaudited)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

For the three months For the six months
ended June 30 ended June 30
------- ------- ------- -------
2009 2008 2009 2008
------- ------- ------- -------
Cash flows provided
by (used in):

Operating activities:
Net loss $ (2,935) $ (2,337) $ (3,046) $ (4,639)
Net loss from
discontinued
operations (293) $ (339) (480) (997)
----------------------------------------------------------------------------
Net loss from
continuing operations (2,642) (1,998) (2,566) (3,642)
Items not affecting
cash:
Depreciation and
amortization 359 480 715 961
Write-off of
mortgage receivable 167 - 167 -
Stock options
expensed 43 36 96 72
Accretion on term
debt 113 70 238 70
Write-off of
un-accreted
financing costs 594 - 594 -
Financing costs
related to
re-pricing of
common share
purchase warrants - - 16 -
----------------------------------------------------------------------------
(1,366) (1,412) (740) (2,539)

Interest on mortgage
receivable (1) (4) (3) (8)
Long-term prepaid
expenses (10) 1 (9) (1)
Net change in
non-cash working
capital (note 20) 1,520 1,359 (1,237) (483)
Cash provided by
(used in)
discontinued
operations (409) (719) (787) (1,366)
----------------------------------------------------------------------------
(265) (775) (2,775) (4,397)
----------------------------------------------------------------------------

Investing activities:
Investment in capital
assets (10) - (24) (20)
Cash provided by
discontinued
operations 21 (16) 21 (16)
----------------------------------------------------------------------------
11 (16) (3) (36)
----------------------------------------------------------------------------

Financing activities:
Term debt repayment - (2,520) - (2,660)
Term debt proceeds - 2,257 - 2,257
Principal payment
on term debt (314) (635) -
----------------------------------------------------------------------------
(314) (263) (635) (403)
----------------------------------------------------------------------------
Net cash provided by
foreign exchange
loss on term debt (149) - (76) -
----------------------------------------------------------------------------
Net decrease in cash (717) (1,054) (3,489) (4,836)

Bank indebtedness,
net, beginning of
period - continuing
operations (4,946) (217) (2,217) 3,605

Cash, beginning of
period - discontinued
operations 16 155 59 115
----------------------------------------------------------------------------
Bank indebtedness,
net, end of period $ (5,647) $ (1,116) $ (5,647) $ (1,116)
----------------------------------------------------------------------------

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Bank indebtedness,
net, end of period
- continuing
operations (5,650) (1,156) (5,650) (1,156)

Cash, end of period
- discontinued
operations 3 40 3 40
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----------------------------------------------------------------------------

SUPPLEMENTAL INFORMATION

Bank indebtedness,
net for continuing
operations is
comprised of:
Cash $ 50 $ 883 $ 50 $ 883
Bank operating line
of credit (5,700) (2,039) (5,700) (2,039)

Cash equivalents 3 40 3 40
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$ (5,647) $ (1,116) $ (5,647) $ (1,116)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Interest paid $ 296 $ 124 $ 507 $ 172
Income taxes paid $ - $ - $ - $ -

The accompanying notes are an integral part of these consolidated
statements.


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