Optimal Geomatics Inc.
TSX VENTURE : OPG

Optimal Geomatics Inc.

January 18, 2007 20:05 ET

Optimal Geomatics Reports Fourth Quarter and Fiscal Year 2006 Financial Results

Annual Revenue up 64% over 2005 Quarter over Quarter Revenue up 22%

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Jan. 18, 2007) - Optimal Geomatics Inc. (TSX VENTURE:OPG) ("Optimal") announces its financial results for the fourth quarter and fiscal year ending October 31, 2006.

The results include the Civil Infrastructure operations, acquired from MD Atlantic Technologies, Inc., commencing December 1st, 2005. Financial information for the fourth quarter and fiscal year 2006 and comparatives is reported in Canadian dollars.

Business Highlights include:

- Growth in revenue from our core North American utility market of 21% in 2006 over fiscal 2005.

- Growth in total annual revenue of 64% to $16.5 million in 2006 from $10.0 million in fiscal 2005.

- Ranked #50 in the 18th annual PROFIT 100 ranking of Canada's Fastest-Growing Companies.

- Expanded our linear corridor product offerings into the transportation market.

"The delay in signing new contracts in our North American and UK markets, coupled with a strong Canadian dollar, has adversely impacted our results for the fourth quarter as well as our fiscal year targets. We continued to experience a slow down in new contract wins in the fourth quarter," stated Colum Caldwell, President & CEO of Optimal Geomatics. "Our revenue and financial targets for 2006 were not achieved due to these delays in customer contract signings. Despite the delays in signings, Optimal remains of the view that these results are a part of the normal volatility in our business and do not reflect a change in our future prospects. We are obviously disappointed in our financial results for 2006 in what was otherwise an excellent year for strategic progress."

Financial Results

Revenue for the fourth quarter ended October 31, 2006 was $3.4 million, a 22% increase when compared to revenue of $2.8 million for the comparable period in 2005, and a 12% decrease when compared to the prior quarter. Gross margin for the three month period ending October 31, 2006 was 22%, which is a decrease as compared to the gross margin of 39% for the comparable three month period in 2005. The operating loss was $762 thousand, for the fourth quarter of 2006 as compared to operating income of $413 thousand, for the comparable quarter of 2005. The net loss for the quarter ended October 31, 2006 was $750 thousand or $(0.01) per common share, compared with net income of $327 thousand or $0.01 per common share (basic and diluted) for the three months ended October 31, 2005.

Revenue for the year ended October 31, 2006 was $16.5 million, a 64% increase over $10.0 million for 2005. The operating loss for the twelve months ended October 31, 2006 was $921 thousand, down from operating income of $1.4 million for the same period of the last fiscal year. The net loss for the year ended October 31, 2006 was $1.3 million, compared with net income of $1.3 million for fiscal 2005. The decrease in net earnings was primarily due to a decrease in gross margin, a change in revenue mix, an increase in operating expenses, the foreign exchange loss and interest expense incurred during the current year.

Gross margins of 22% and 28% were recorded for the three and twelve month period ended October 31, 2006 respectively, down from 39% and 37% for the comparable periods in 2005. The decrease in gross margin was attributable to several factors including margin compression due to the weakness of the US dollar, our primary revenue currency, reduced margins on certain contracts and an increase in indirect operating costs due to the integration of the Civil Infrastructure operations.

As at October 31, 2006, Optimal had cash and cash equivalents of $4.1 million with net working capital of $3.7 million, compared to cash and cash equivalents of $3.3 million with net working capital of $2.9 million as at October 31, 2005. The increase in working capital was primarily due to the increase in cash and cash equivalents resulting from the public offering of common shares completed on May 31, 2006, partially offset by the inclusion of the notes payable of $3.4 million as current liabilities. Subsequent to the fiscal year-end, Optimal has re-negotiated the payment and interest rate terms of the notes payable. The revised payment terms provide for a US$500,000 payment at each of February 28 and October 31, 2007 and February 28, 2008 with the balance to be repaid on October 31, 2008. Accrued interest is to be paid at each payment date and an 8% interest rate is applicable from March 1, 2007.

Financial Outlook

The market for our energy products continues to provide us with strong growth opportunities. In 2007, we will focus our attention on progressively rolling back our operating loss and balancing our cash book. Our attention will also be directed to selling our enhanced product offering across our key vertical markets.

Quarterly Teleconference Call:

Optimal will hold its quarter and fiscal year end teleconference call on Friday, January 19, 2007 at 8:00am PST (11:00am EST). To participate dial 604-899-1159 for Vancouver participants and 416-883-0139 outside Vancouver, then dial pass code 66491#. Alternatively, you can listen to the playback by visiting our website after the call at www.optimalgeo.com.

About Optimal Geomatics Inc.:

Optimal Geomatics specializes in the science and technology of gathering, analyzing, interpreting, distributing and using geographic information. Optimal applies the disciplines of surveying, mapping, remote sensing, geographic information systems (GIS), and global positioning system (GPS) to provide solutions for engineering and geospatial professionals.



Summary of Financial Information

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Consolidated Balance Sheets October 31, 2006 October 31, 2005
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Assets
Cash $ 4,144,999 $ 3,290,484
Accounts Receivable 5,020,917 2,447,457
Inventory 12,476 -
Work in Progress 366,659 298,244
Prepaid Expense 246,876 74,505
Property & Equipment 2,548,887 223,240
Deferred acquisition costs - 87,356
Other assets 43,412 -
Intangible assets 465,170 -
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Total Assets $ 12,849,396 $ 6,421,286
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Liabilities & Shareholders Equity
Current Liabilities $ 2,067,271 $ 1,740,425
Deferred Revenue 591,671 1,497,116
Notes payable (current) 3,428,803 -
Share Capital & Subscriptions 23,231,543 18,813,664
Contributed Surplus 706,835 294,031
Cumulative Translation Adjustment 99,150 95,703
Deficit (17,275,877) (16,019,653)
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Total Liabilities & Shareholders Equity $ 12,849,396 $ 6,421,286

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3 months 3 months Year Year
ending ending ending ending
Consolidated Statements Oct 31, Oct 31, Oct 31, Oct 31,
of Operations 2006 2005 2006 2005
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Revenues $ 3,393,455 $ 2,774,296 $16,489,960 $10,039,577
Cost of Sales 2,630,795 1,689,052 11,871,452 6,299,327
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Gross Profit 762,660 1,085,244 4,618,508 3,740,250
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Expenses
Administration 639,322 312,528 2,550,155 1,151,789
Marketing & Sales 649,017 308,574 1,988,843 1,117,877
Research &
Development 73,758 20,054 190,728 2,954
Amortization 162,950 31,187 809,767 107,544
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1,525,047 672,343 5,539,493 2,380,164
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Operating (loss) income (762,387) 412,901 (920,985) 1,360,086

Other expenses (income)
Foreign Exchange Loss 8,218 102,560 169,402 119,775
Interest expense
(income) (3,720) (16,590) 157,805 (37,821)
Income tax expense
(recovery) (24,617) - - -
Loss on property/
equipment disposal 8,032 - 8,032 -
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(12,087) 85,970 335,239 81,954
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Net (Loss) Income
for the Period $ (750,300) $ 326,931 $(1,256,224) $ 1,278,132

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Net Earnings per share:
Basic $ (0.01) $ 0.01 $ (0.02) $ 0.03
Diluted $ (0.01) $ 0.01 $ (0.02) $ 0.03

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Weighted Average
Common Shares
Outstanding
Basic 61,387,398 46,043,794 52,512,123 43,444,113
Diluted 61,387,398 47,565,655 52,512,123 44,681,009
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Forward-Looking Statements:

This document may contain forward-looking statements. These statements present management's expectations, beliefs, plans and objectives regarding future events and conditions and, as such, involve inherent risks and uncertainties. Actual results could be significantly different from those projected.

These forward-looking statements are not guarantees of future performance and actual results could differ materially as a result of changes to Optimal's plans and the impact of factors, risks and uncertainties, known and unknown, to which Optimal's business is subject. The forward-looking statements in this news release speak only as the date hereof. Readers are also referred to risk factors and uncertainties described in filings made by Optimal from time to time with securities regulators.

For additional financial information: http://www.optimalgeo.com/financials.html.

The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy of this news release.

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