Grey Island Systems International Inc.
TSX VENTURE : GIS

Grey Island Systems International Inc.

January 25, 2007 07:00 ET

Grey Island Reports Results for the Year Ended September 30, 2006

Posts Revenue Growth of 82% Generates Net Cash from Operations of $343,927

TORONTO, ONTARIO--(CCNMatthews - Jan. 25, 2007) - Grey Island Systems International Inc. (TSX VENTURE:GIS) a leading supplier of real-time vehicle tracking and telematic applications, reported revenue growth of 82% for the year ended September 30, 2006 relative to the year ended September 30, 2005. Concurrently, the company generated $343,927 net cash from operations. The company expects to report first quarter results of 2007 on or before Wednesday January 31, 2007.

Financial highlights for the year

During the year the Company has achieved significant growth in its revenue while improving bottom-line performance. The following are significant highlights related thereto.

- Revenue for the year increased to $11.85 million, an increase of 82% year over year.

- Revenue arising from US customers for the year increased to $6.40 million compared to $2.37 million an increase of 170%.

- Gross profit for the year increased to $6.17 million an increase of 115% year over year.

- Gross margin for the year was 52.1%, up from 44% for the comparable year.

- Net cash provided by operating activities increased to $0.34 million compared to cash used by operating activities of $2.34 million for the comparable year.

- U.S. revenues now account for 54% of total Company revenue for the year compared to 36% for the comparable prior year.

Operating highlights for the year

During the year the Company announced new contracts exceeding $7.5 million in value. The following are significant highlights related thereto.

- The Company announced that wholly owned subsidiary InterFleet, Inc. has been awarded a contract with the Illinois State Toll Highway Authority (Illinois Tollway) to track and manage its fleet of 340 service vehicles. Total value of the contract is $US 555,840.

- The Company announced that the City of Guelph Transit Services Division has selected its GPS/AVL and NextBus real-time passenger information system (RTPIS). The initial contract is worth $344,650 (excluding recurring monthly service fees) covering equipment for 59 vehicles and three public electronic display signs.

- The Company announced that the Greater Toronto Transit Authority (GO Transit) has selected its wholly owned subsidiary Grey Island Systems, Inc to provide InterFleet® GPS/AVL for the 300 unit bus fleet. The total amount of work valued in the tender is $552,280.

- The Company announced that wholly owned subsidiary InterFleet, Inc. received a purchase order from its reseller Hewlett-Packard Company (HP) for 436 of Grey Island's GPS/AVL Dead Reckoning Mobile Data Units (MDU's) for delivery to the New York City Fire Department. The contract is valued at $US 510,748.

- The Company announced that the Washington Metropolitan Area Transit Authority (WMATA) awarded wholly owned subsidiary NextBus, Inc. a contract worth US $3.8 Million.

- The Company announced that the Alameda-Contra Costa Transit District, Oakland, California, (AC Transit), has awarded wholly owned subsidiary NextBus, Inc. a contract to expand the NextBus Real-Time Passenger Information System worth $US 1,031,079.

- The Company announced that the Town of Chapel Hill, N.C. has awarded wholly owned subsidiary NextBus, Inc. a contract to provide a real-time passenger information system for Chapel Hill Transit. The contract is worth $US 950,000.

- The Company announced that the Port Authority of New York has selected the Company provide InterFleet's real-time GPS automated vehicle location system to the contracted snow removal fleet of over 100 vehicles at LaGuardia (LGA) and John F. Kennedy (JFK) airports in Queens, New York.

- The Company announced that the company has been selected by the City of Tallahassee, Florida to provide InterFleet's real-time GPS automated vehicle location system and wireless internet services. This city-wide implementation of over 200 vehicles will include Water, Gas, Electric, Utilities and Solid Waste.

Overview

During the past year, the Company has been successful in expanding its sales and marketing efforts in both the Canadian and United States ("US") markets. The Company has an office in the State of New York in the USA, operating under the name of Interfleet, providing sales and services for our Interfleet products to our US customers. NextBus Inc., ("NextBus"), an information technology company located in Alameda, California, USA, provides sales and services for our Nextbus products.

Results of Operations

Revenue

Revenue for the year ended September 30, 2006 increased by 82.0% to $11,848,243 from $6,511,683 for the year ended September 30, 2005.

The increase in revenues recorded in the past year was due to the organic growth of the Company, the overall growth of the industry and the acquisition of Nextbus. Nextbus contributed revenues of approximately $4,634,536 for the year ended September 30, 2006 from $1,287,000 for the year ended September 30, 2005. Revenues from its US customer base have increased to $6,399,491 for the year ended September 30, 2006, compared with $2,367,439 for the year ended September 30, 2005. Revenues from its Canadian customer base have increased by 31.5% to $5,448,753 for the year ended September 30, 2006, compared with $4,144,244 for the year ended September 30. The Company continues to increase its revenue through new customer hardware sales, thereby increasing its monthly subscriber base in both Canada and the United States. It has also endeavoured to provide more comprehensive services to existing customers.

Gross Profit

Gross profit for the year ended September 30, 2006, increased by 115.3%% to $6,174,523 from $2,868,392 for the year ended September 30, 2005 due mainly to the growth in sales and the inclusion of Nextbus revenue since acquisition on June 30, 2005. Gross margin for the year was 52.1%. The improved year over year margins can be attributed to an increased proportion of engineering related income as compared to equipment revenue.

Income/Loss from operations

The net loss for the year ended September 30, 2006, was $298,545 or $0.005 per share, compared to a loss of $1,611,232 or $0.03 per share in the year ended September 30, 2005. While gross profits increased by 115.3% year over year for the year ended September 30, 2006, operating expenses increased by only 44.4% over the same period, resulting in operating income of $252,155 versus a loss of $1,231,779 in the comparable year of 2005. However, additional costs were recorded primarily through the substantial amortization of intangible assets expense of $916,136 for the year ended September 30, 2006 which contributed to an overall increase in expenses of 44.1% when compared to the previous year. The Company's future goal is to maintain only moderate increases in operating expenses on a quarter by quarter basis when compared to expected revenue increases.

Liquidity and Capital Resources

At September 30, 2006, Grey Island had cash and cash equivalents of $2,237,827. The Company's working capital was $3,918,379 as at September 30, 2006. The Company intends to use these funds for expanding its marketing efforts in both Canada and the U.S., and for general working capital. As with most growth enterprises, depending on the pace of the anticipated expansion of the Company's operations additional financing may be contemplated in the future.

The Company also maintains a $2 million revolving credit facility with a Canadian chartered bank secured by a cash guarantee of $950,000. This facility can be used for direct advances or through letters of guarantee. The balance of advances outstanding at September 30, 2006 was $nil, while letters of guarantee amounting to $1,556,033 were outstanding against the facility.

The Company's consolidated financial statements, accompanying notes and Management's Discussion and Analysis will be available on the System for Electronic Document Analysis and Retrieval ("SEDAR") website (www.sedar.com) on or before January 25, 2007.

About Grey Island

Grey Island Systems International Inc. (TSX VENTURE:GIS), through its subsidiaries NextBus Inc. in Alameda, California, InterFleet, Inc. in New York, New York and Grey Island Systems, Inc in Toronto, Canada, is a leading provider of custom real-time GPS/AVL, security and Telematics solutions as well as real-time passenger information systems to government and related fleets. To find out more about our products and services, visit our websites at www.interfleet.com or www.nextbus.com.

Forward Looking Statements

This news release contains forward-looking information based on management's best estimates and the current operating environment. These forward-looking statements are related to, but not limited to, Grey Island's operations, anticipated financial performance, business prospects and strategies. Such forward-looking statements are subject to a number of known and unknown risks, uncertainties and other factors which could cause actual results or events to differ materially from those expressed or implied by such forward-looking statements. These risks and uncertainties include, among other things, business risks, changes in market and competition, technological and competitive developments and potential downturns in economic conditions generally. Therefore, there can be no assurance that the expectations of the management of Grey Island will prove to be correct.

THE TSX VENTURE EXCHANGE DOES NOT ACCEPT RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE.

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