SOURCE: Computer Software Innovations, Inc.

May 16, 2007 09:00 ET

Computer Software Innovations, Inc. Announces First Quarter 2007 Financial Results

First Quarter 2007 Consolidated Revenues of Approximately $11.7 Million, up 141% From First Quarter 2006; Operating Income of $580,000, up From a Loss of $(527,000) From the Previous Year; Net Income of $285,000 in Q1 2007, Compared With a Loss of $(430,000) for Q1 2006

EASLEY, SC -- (MARKET WIRE) -- May 16, 2007 -- Computer Software Innovations, Inc. (OTCBB: CSWI), CSI Technology Outfitters™ ("CSI"), today announced its financial results for the first quarter ended March 31, 2007.

CSI posted revenue of approximately $11.7 million for the first quarter ended March 31, 2007, up approximately $6.8 million or 141% compared to the first quarter of 2006. CSI ended the prior year with orders on hand for an additional $3.5 million of product due to backordered components from its suppliers, and postponed software installations. CSI added an additional $2.1 million in business generated from its ongoing operations and an additional $1.2 million from its acquisition of McAleer Computer Associates, Inc.

Gross profit for the first quarter 2007 was approximately $2.5 million, an increase of approximately $1.0 million or 68% compared to the first quarter 2006. The increase in gross profit can be attributed primarily to the increase in software sales and the higher volume in sales of interactive whiteboard solutions and related services. As a percentage, gross margin was lower due to higher sales of higher margin internet telephony and engineering services in the prior year's quarter. Operating income for the quarter was approximately $580,000, versus a loss of approximately $(527,000) in the prior year's comparable quarter.

CSI posted net income for the quarter ended March 31, 2007 of approximately $285,000 or $0.08 earnings per basic share and $0.02 earnings per diluted share, an increase of approximately $715,000 compared to a net loss of approximately $(430,000) or $(0.15) loss per basic and diluted share for the same period last year.

Nancy Hedrick, CEO of CSI, stated, "We are pleased with the success we experienced in the first quarter, which traditionally is a lower earnings quarter for us. Our results were positively affected, in part, because of $3.5 million in technology and software revenue, which we did not finalize in the fourth quarter of 2006. Additionally, the recent acquisition of McAleer Computer Associates, Inc. helped us achieve higher software margins, driving down our operating expenses as a percent of sales and increasing net income, despite continued pressure on hardware margins. We are excited about the impact of the McAleer acquisition, and the continued increases in revenues from both our ongoing hardware and software operations. Both segments experienced double digit growth in the first quarter of 2007 over the prior year's quarter."

Ms. Hedrick continued, "During 2006 we saw a decrease in E-Rate related revenues, which impacted both our top and bottom lines and our margins in the prior year. We were recently notified that we received funding approvals of approximately $5 million or 29% of the $17 million awarded E-Rate contracts for the 2005/2006 E-Rate filing season for which funding was requested. While we cannot estimate which projects will be completed in 2007, we are optimistic that the increase in funding awards, nearly double the E-Rate related billings for 2006, will result in an increase in 2007 related revenues. We are pleased with the first quarter results and look forward to providing investors with an update on our conference call as we continue making good progress in our second quarter."

Conference Call Reminder:

The conference call will take place at 4:15 p.m. Eastern, on Wednesday, May 16, 2007. Anyone interested in participating should call (888) 562-3356 if calling within the United States or (973) 582-2700 if calling internationally, approximately 5 to 10 minutes prior to the 4:15 p.m. call. There will be a playback available until May 23, 2007. To listen to the playback, please call (877) 519-4471 if calling within the United States or (973) 341-3080 if calling internationally. Please use replay pass code 8799720.

The call is also being webcast and may be accessed at CSI's website at www.csioutfitters.com. The webcast will be archived and accessible until September 30, 2007 on the Company website.

About Computer Software Innovations, Inc.

Computer Software Innovations, Inc. (OTCBB: CSWI), CSI Technology Outfitters™, is a full service Company providing software and technology solutions primarily to public sector organizations. The software solutions include financial management, billing and revenue management, school activity accounting, lesson planning and automated workflow. The technology solutions include IP telephony, IP video surveillance, visual communications, interactive classrooms, network security and traffic monitoring, infrastructure design, wireless solutions, network management, engineering services and hardware solutions. CSI's client base includes school districts, higher education, municipalities, county governments, and other non-profit organizations. Currently, more than 400 public sector organizations utilize CSI's software systems and network integration services. Additional information on CSI can be obtained through its website at www.csioutfitters.com.

Forward-Looking and Cautionary Statements

Certain information contained in this news release includes forward-looking statements that involve substantial risk and uncertainties. Any statement in this news release that is not a statement of an historical fact constitutes a "forward-looking statement." Among other things, these statements often address our expected future business and financial performance, financial condition and results of operations. These forward-looking statements often contain words or phrases such as "may," "could," "should," "expect," "anticipate," "plan," "believe," "seek," "estimate," "predict," "project" or words of similar import. Forward-looking statements by their nature address matters that are, to different degrees, uncertain. For us, particular uncertainties arise from the economic health of the software and technology industry, demand for CSI's products and engineering services, competitive pricing pressures and the availability of necessary financing. In addition, other risks are more fully described in CSI's 2006 Form 10-KSB and other filings with the Securities and Exchange Commission. These uncertainties may cause our actual results to be materially different from those expressed in our forward-looking statements. We do not undertake to update our forward-looking statements.


                                                    For the Three Months
Computer Software Innovations, Inc.                         Ended
Statements of Operations                                  March 31,
                                                  ------------------------
                                                      2007         2006
                                                  -----------  -----------
REVENUES
  Software applications segment                   $ 2,739,436  $ 1,104,072
  Technology solutions segment                      8,912,296    3,738,332
                                                  ===========  ===========
    Net sales and service revenue                  11,651,732    4,842,404

COST OF SALES
  Cost of Sales excluding depreciation,
   amortization, and capitalization                 1,418,727      474,255
  Depreciation                                         14,310       18,400
  Amortization of capitalized software costs          239,197      151,009
  Capitalized software costs                         (226,973)    (181,775)
                                                  -----------  -----------
    Software applications segment cost of sales     1,445,261      461,889
                                                  ===========  ===========

  Cost of Sales excluding depreciation              7,651,606    2,855,308
  Depreciation                                         21,464       21,600
                                                  -----------  -----------
    Technology solutions segment cost of sales      7,673,070    2,876,908
                                                  ===========  ===========
    Total cost of sales                             9,118,331    3,338,797
                                                  ===========  ===========
Gross profit                                        2,533,401    1,503,607

OPERATING EXPENSES
  Salaries, wages and benefits excluding
   stock-based compensation                         1,072,307      771,215
  Stock-based compensation                             85,786      613,954
  Acquisition expenses                                 69,655            -
  Professional and legal compliance costs             219,871      342,680
  Marketing expenses                                   43,649       89,904
  Travel and mobile costs                             153,421       82,445
  Depreciation                                         90,247       35,111
  Other selling, general and administrative
    expenses                                          218,660       95,710
                                                  -----------  -----------
    Total operating expenses                        1,953,596    2,031,019
                                                  ===========  ===========
Operating income (loss)                               579,805     (527,412)

OTHER INCOME (EXPENSE)
  Interest income                                       2,705        2,181
  Interest expense                                   (134,019)     (92,385)
  Amortization of loan fees                                 -      (17,458)
  Loss on disposal of property and equipment           (1,218)           -
                                                  -----------  -----------
    Net other income (expense)                       (132,532)    (107,662)
                                                  ===========  ===========
    Income (loss) before income taxes                 447,273     (635,074)
INCOME TAX EXPENSE (BENEFIT)                          162,490     (205,544)
                                                  -----------  -----------
    Net income (loss)                             $   284,783  $  (429,530)
                                                  ===========  ===========
BASIC EARNINGS (LOSS) PER SHARE                   $      0.08  $     (0.15)
                                                  ===========  ===========
DILUTED EARNINGS (LOSS) PER SHARE                 $      0.02  $     (0.15)
                                                  ===========  ===========
WEIGHTED AVERAGE SHARES OUTSTANDING
   - Basic                                          3,489,015    2,891,556
                                                  ===========  ===========
   - Diluted                                       13,675,910    2,891,556
                                                  ===========  ===========



Computer Software Innovations, Inc.
Balance Sheet Data                                March 31,
                                                    2007      December 31,
                                                (Unaudited)       2006
                                                ------------  ------------
                     ASSETS
CURRENT ASSETS
  Cash and cash equivalents                     $          -  $          -
  Accounts receivable                              5,493,438     3,828,190
  Inventories                                         52,160     2,569,382
  Prepaid expenses                                   107,965        56,174
  Income tax receivable                               43,651        43,651
                                                ------------  ------------

    Total current assets                           5,697,214     6,497,397
                                                ============  ============
PROPERTY AND EQUIPMENT, net                        1,372,345       771,472
COMPUTER SOFTWARE COSTS, net                       2,124,835     1,505,458
DEFERRED TAX ASSET                                   205,125       366,476
GOODWILL                                           1,480,587             -
OTHER ASSETS                                       1,662,308       318,884
                                                ============  ============
                                                $ 12,542,414  $  9,459,687
                                                ============  ============
  LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
  Accounts payable                              $  3,176,868  $  3,995,021
  Deferred revenue                                 3,847,621     2,079,492
  Deferred tax liability                             407,500       373,960
  Bank line of credit                              1,341,000       551,000
  Current portion of notes payable                   238,007       109,274
  Subordinated notes payable to shareholders       2,250,400     2,250,400
                                                ------------  ------------
    Total current liabilities                     11,261,396     9,359,147
                                                ============  ============
NOTES PAYABLE, less current portion                1,007,960       204,680
    Total Liabilities                           $ 12,269,356  $  9,563,827
                                                ============  ============
SHAREHOLDERS' EQUITY (DEFICIT)
  Preferred stock - $0.001 par value;
   15,000,000 shares authorized; 6,944,736
   and 7,012,736 shares issued and outstanding,
   respectively                                        6,945         7,013
  Common stock - $0.001 par value; 40,000,000
   shares authorized; 3,544,385 and 3,429,030
   shares issued and outstanding, respectively         3,544         3,429
  Additional paid-in capital                       6,634,624     6,473,342
  Retained earnings (Accumulated deficit)         (6,240,990)   (6,525,773)
  Unearned stock compensation                       (131,065)      (62,151)
                                                ------------  ------------
    Total shareholders' equity (deficit)             273,058      (104,140)
                                                ============  ============
                                                $ 12,542,414  $  9,459,687
                                                ============  ============



Computer Software Innovations, Inc.
Statement of Cash Flows                         For the Three Months Ended
                                                         March 31,
                                                --------------------------
                                                    2007          2006
                                                ------------  ------------
OPERATING ACTIVITIES
    Net income (loss)                           $    284,783  $   (429,530)
    Adjustments to reconcile net income (loss)
     to net cash provided by (used for)
     operating activities
        Depreciation and amortization                365,218       243,578
        Stock-based compensation expense, net         85,786       613,954
        Deferred income taxes                        161,141        13,705
        Loss on disposal of fixed assets               1,218             -
    Changes in deferred and accrued amounts
        Accounts receivable                       (1,665,248)    2,422,825
        Inventories                                2,517,222       (14,506)
        Prepaid expenses and other assets             51,994       (24,621)
        Accounts payable                            (818,153)      173,876
        Deferred revenue                           1,768,129      (273,730)
        Taxes payable (receivable)                         -      (225,568)
                                                ============  ============
          Net cash provided by operating
           activities                              2,752,090     2,499,983
                                                ------------  ------------
INVESTING ACTIVITIES
    Purchase of property and equipment               (82,639)     (351,484)
    Capitalization of computer software             (226,973)     (181,775)
    Purchase of computer software                    (21,601)      (10,000)
    Trademarks                                             -        (4,354)
    Purchase of McAleer Computer Associates, Inc. (4,149,519)            -
                                                ============  ============
    Net cash used for investing activities        (4,480,732)     (547,613)
                                                ------------  ------------
FINANCING ACTIVITIES
    Net borrowings (repayments) under line
     of credit                                       790,000    (1,701,000)
    Borrowings under long-term notes payable         972,046       400,000
    Repayments of long-term notes payable            (40,033)       (8,245)
    Exercise of stock options                          6,629             -
                                                ============  ============
          Net cash provided by (used for)
           financing activities                    1,728,642    (1,309,245)
                                                ============  ============
          Net increase in cash and cash
           equivalents                                     -       643,125

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD             -             -
                                                ============  ============
CASH AND CASH EQUIVALENTS, END OF PERIOD        $          -  $    643,125
                                                ============  ============

SUPPLEMENTAL DISCLOSURES OF CASH FLOW
 INFORMATION:
Cash paid during the period for:
        Interest                                $     47,636  $    222,882
        Income Taxes                            $      1,350  $      6,318

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