Cell-Loc Location Technologies Inc.
TSX VENTURE : LTI

Cell-Loc Location Technologies Inc.

August 30, 2005 19:54 ET

Cell-Loc Location Technologies Inc. Announces Financial Results for Period Ended June 30, 2005

CALGARY, ALBERTA--(CCNMatthews - Aug. 30, 2005) - Cell-Loc Location Technologies Inc. (TSX VENTURE:LTI) ("CLTI" or the "Company") today reported its interim financial results for the quarter ended June 30, 2005. The financial statements for the period ending June 30, 2005, will be immediately filed on SEDAR.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's discussion and analysis (MD&A) of Cell-Loc Location Technologies Inc. (the "Company" or "CLTI") for the period ended June 30, 2005 contains forward-looking statements that are not historical in nature and involve risks and uncertainties. Forward-looking statements are not guarantees as to the Company's future results since there are inherent difficulties in predicting future results. Accordingly, actual results could differ from those expressed or implied in the forward-looking statements.

Brazilian Deployment

The Company is deploying a network in Sao Paulo, Brazil under the contract with insurer ITAU Seguros S.A., a subsidiary of Banco ITAU (NYSE), Brazil's biggest bank by market value. The network, when completed, will enable rapid stolen vehicle location, remote disabling, and recovery. The ITAU contract provides for minimum revenue of US$18 million during its term. The Company has licensed its proprietary Beacon technology for the entire country of Brazil to X3 Tecnologia Ltda. ("X3"). CLTI, through a holding company, owns 74% of X3, the Brazilian operating company that is deploying the network. In addition to its ownership interest in X3, CLTI will receive a top line royalty of 5% of the revenue from X3, will receive US$3 million as a license fee, and will sell equipment, currently held in inventory by the Company, to X3 that is required to deploy the network. The estimated cost of the deployment and operation start-up is US$3.5 million in addition to the CLTI equipment.

The Company uses a Brazilian company to manufacture its proprietary Beacon in order to achieve economies of scale and allow CLTI to produce a substantially lower cost Beacon for the project and any existing or subsequent network deployment. The deployment in Sao Paulo is believed to be one of the largest wireless location contracts ever commenced on a global basis. The choice of CLTI's technology was the result of its ability to offer the location based services at price points that would offer significant market depth along with the successful deployment of a test bed in Sao Paulo. It also serves to highlight the competitive and technological advantages that the Company has been able to display to the marketplace.

The Company has completed a significant portion of the network planning and has installed its equipment in a portion of the network in the financial district of old Sao Paulo. This area of the city is being used to test the performance of the network, as it is one of the most challenging areas for signal interference, topography and urban density. The results of the testing in this area are being used in selecting appropriate sites in other areas of the city. CLTI has completed the majority of its procurement activity related to the manufacturing of its base stations for Sao Paulo and is in the process of completing the assembly of the units required for the network. During the quarter, CLTI invested $541,000 in network assets being deployed in Brazil. It is anticipated that the network will be completed during 2005, subject to a technical audit and other requisite approvals.

The Company continues to investigate opportunities in other geographic regions that are of similar scale and magnitude to the Sao Paulo project. The Company is also reviewing various alternatives that would facilitate significant deployment opportunities on a national basis.

Private Placement Financing

During June 2005, the Company announced that it had raised $3,525,505 through a private placement of 21,366,697 units at a price of 16.5 cents/unit. Each unit consists of one common share and one half of one common share purchase warrant. Each Warrant entitles the holder thereof to acquire one common share at an exercise price of 22 cents per common share, subject to adjustment in certain events. Funds from this placement are being used to fund the network deployment in Brazil and to fund the ongoing operations of the Company.

Promissory Note Conversion

On April 15, 2005, Ansen Corporation converted the US$ 2.5 million Convertible Promissory Note (plus related accrued interest) into common shares at a price of US 50 cents per share. As a result of this conversion, the Company no longer has any long-term liabilities.

Calgary Network

During August, CLTI announced that it has entered into a new license agreement for its Calgary wireless location network with Location System Solutions Inc. ("LSSI"), a company controlled by Mr. Keith Bohn (a director of CLTI) and Mr. David Mullen. In addition to the existing Calgary network, LSSI also owns the rights to participate in Austin, TX and any further networks to be developed in Alberta. IQ2 Communications previously held these rights that have now been granted under a new license agreement with LSSI. CLTI also announced that it has sold a license for the Greater Vancouver territory to LSSI for $500,000, with payment due after CLTI successfully completes its network currently under construction in Sao Paulo, Brazil. CLTI is anticipating completion of the Sao Paulo network in Q4 of this year. CLTI and LSSI have agreed that the Vancouver network will be built and operated through a jointly owned entity, which will be owned 51% CLTI and 49% LSSI.

General Presentation

During the three months ended June 30, 2005 the Company incurred a net loss of $581,000 compared to a net loss of $890,000 for the three months ended June 30, 2004.

Overview

Operations

Operations expenses for the three-month period of $68,000 resulted from operating the Calgary network ($58,000) as well as the Saskatoon network ($10,000) through the Company's subsidiary, CityTrac Ltd.

General and Administrative

Expenses for general and administrative costs for the three-month period of $524,000 were incurred to operate and staff the corporate office.

Liquidity and Capital Resources

The Company had a cash balance of $1,681,000 at June 30, 2005. The Company also received an additional $947,000 subsequent to the end of the quarter relative to the closing of the private placement financing discussed above. The Company's monthly use of cash continues to be scrutinized to ensure optimal use of cash resources. As noted above, CLTI has continued to raise necessary funds through private placements of equity.

Business Risks and Prospects

The Company is actively negotiating commercial contracts.

The Company's ability to continue to generate revenue and achieve positive cash flow in the future is dependent upon various factors, including the level of market acceptance of its services, the degree of competition encountered by the Company, the cost of acquiring new partners, technology risks, the ability to fund continued network deployment and operations, general economic conditions and regulatory requirements.

The market for location-based services is just beginning to develop and is subject to rapid technological change. The Company's business plan is focused on attracting and contracting other entities to apply its technology in city, regional or national networks. These third parties will be required to operate the project and invest funds in the infrastructure, working capital and staff to develop the potential of their contracted area. The Company's continuing research, development and testing may cause significant strain on the Company's management, technical, financial and other resources.

To remain competitive the Company must be able to keep pace with the technological developments and change its product lines to meet new demands. The Company will depend on designing and developing products that have not been commercially tested to achieve much of its future growth.

The wireless location solution that the Company plans to offer is an emerging technology, and the application of existing, proposed or future regulation to the Company's offering cannot be reliably determined at this stage of development.

The Company's ability to continue ongoing operations is dependent upon contracting parties to license the Company's technology and then implementing a commercialized service business. The Company's ability to generate net income and positive cash flow in the future is dependent upon various factors, including:

- the level of market acceptance of its technology;

- the ability to enter into license agreements to deploy and operate the Company's proprietary wireless location network technology;

- the degree of competition encountered by the Company; and

- the Company's ability to manage growth.

About Cell-Loc Location Technologies Inc.

Cell Loc Location Technologies Inc. (www.cell-loc.com) is the developer of a family of network-based wireless location products that enable location-based services. Located in Calgary, Alberta, Cell-Loc currently develops, markets and supports its patented wireless location technology in North and South America and Asia, with a view to expanding globally. Cell-Loc is listed on the TSX Venture Exchange under the trading symbol: "LTI."

Forward Looking Statements: This news release contains certain information that may constitute forward-looking statements under applicable securities laws. The reader is cautioned that assumptions used in the preparation of such information, although considered reasonable by the Company at the time of preparation, may prove to be incorrect. Actual results achieved may vary from the results anticipated or implied herein and variations may be material. There is no representation by the Company that actual results achieved will be the same in whole or in part as those implied in any forward looking statements.

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TSX Venture Exchange has neither approved nor disapproved of the contents of this news release.

Contact Information

  • Cell-Loc Location Technologies Inc.
    Dave Guebert
    Chief Financial Officer
    (403) 569-5796
    Website: www.cell-loc.com