C-Chip Technologies Corporation

C-Chip Technologies Corporation

February 24, 2005 12:23 ET

CORRECTION FROM SOURCE/C-Chip Reports its Second Quarter Results: Significant Milestones Achieved




FEBRUARY 24, 2005 - 12:23 ET

CORRECTION FROM SOURCE/C-Chip Reports its Second
Quarter Results: Significant Milestones Achieved

MONTREAL, QUEBEC--(CCNMatthews - Feb. 24, 2005) -

Some errors occurred in the release sent out February 23, 2005 at 4:30
PM ET. The complete and corrected version follows.

C-Chip Technologies Corporation (OTCBB:CCHI) (Frankfurt: CCP-WKN:
255471) is pleased to report its second quarter results for the period
ended December 31, 2004. Significant milestones were achieved during the
period. For the six month period ended December 31, 2004, total revenue
reached $1,188,891 compared to $148,036 in the previous period, whereas
our comprehensive net loss attained $1,570,904 compared to $2,311,732.
For the second quarter ended December, 31, 2004, total revenue increased
to $548,861 from $148,036 in the same period last year. For the same
period, our comprehensive net loss this year was $749,553 compared to
$605,634 last year. As of December 31, 2004, we had a working capital of
$800,324 compared to $1,567,254 at June 30, 2004.

Since our acquisition in January 2003 of a technology designed to enable
users to remotely access, control and manage different types of
equipment, our operations are in the risk management field. In February
2004, to ensure that we would also be able to provide risk management
services to businesses and institutions, we purchased Canadian Security
Agency (2004) Inc. ("CSA"), a private Montreal-based business
established in 1984 that offers security services to large and
medium-sized corporate accounts. Our security services now include
guards, surveillance, investigation, and undercover and electronic
monitoring operations. This is a business segment that provides stable
and recurring revenues and, by having access to an already established
clientele, we believe it offers our company potential cross marketing
opportunities for the security solutions that we have developed and are
now beginning to market. This is a business strategy that we intend to
pursue further.

Currently, the security industry is estimated to be generating $100
billion in revenue in North America alone, growing at an annual rate of
15% per year according to industry experts. With thousands of companies
presently in operations, the security industry is highly fragmented and,
in our view, prone to consolidation. We have already concluded two
acquisitions in 2005, one pertaining to the purchase of certain assets,
essentially a risk management software solution, the other being a
marquee name in the Canadian security industry. We have also identified
different other potential acquisitions in the security sector and we are
currently in discussions with a number of interesting candidates to
conclude a transaction. Any acquisition related announcements will be
made public when, in our opinion, a transaction has been secured.

To that effect, on February 16th 2005, we announced the conclusion of
private placement of $4.675 million with eighteen institutional and
other accredited investors. To complete the financing, we issued to
investors a senior secured convertible debenture carrying an initial
coupon of 9%. The debenture is payable over 24 months in cash or in
shares at a discount of 15% of the market price and, at the option of
holders, can be converted at any time into common shares at a fixed
price of $0.65 per share. As part of the private placement, we also
issued to investors warrants to purchase an aggregate of 5,394,202
shares of our common stock for a period of five years at an exercise
price of $0.75 per share; and warrants to purchase an aggregate of
1,798,042 shares of our common stock for a period of one year at an
exercise price of $0.70 per share. This new capital provides our Company
the initial means to begin implementing our acquisition strategy in the
risk management industry.

In January 2005, this acquisition strategy was initiated with the
purchase of Markus 360, an asset management software solution designed
to control and monitor the movement of assets within one or many
premises. As partial consideration, we paid $125,000 for Markus 360
which was satisfied by the issuance of 164,474 restricted shares of our
common stock and we agreed to pay the seller a royalty of 10% based on
future gross revenue of the software, up to a maximum of $1,000,000 over
a 5 year period. In parallel, we also entered into an agreement with
Multi-Hexa Laval Inc. for the distribution of Markus 360 in Canada.

While not material to our overall operations, we believe the acquisition
of Markus 360 will contribute to accelerating the development and
marketing of another asset management solution using wireless
communications and RFID technology which we are currently developing.
This will provide businesses and institutions a cost-effective solution
to control, manage and monitor in real-time the movement of assets and
personnel within one or many premises. We expect such a risk management
solution will find significant applications in the security industry.

Of potentially more significance in the short term, on February 22nd
2005, we announced the acquisition of Chartrand Laframboise Inc.
("CLI"), one of Canada's leading investigation firms. In consideration
for the acquisition of all businesses related to CLI, including the
Commercial Business Bureau, we agreed to pay a portion in cash and we
issued to the sellers a convertible debenture of US$1,394,000 carrying a
coupon of 9% with a 5 year maturity date. At the option of holders, the
said debenture is convertible into 1,700,000 shares of our common stock
at price of $0.82 per share. In parallel, we also entered into
employment agreements with the principals of CLI. Its President and
Chief Executive Officer, Mr. Jean Talbot, has agreed to a minimum term
of 18 months, whereas its Chairman of the Board and Chief Operating
Officer, Mr. Louis Laframboise has agreed to a minimum term of 36 months.

Founded in 1986, CLI is now considered the standard in the field of
investigative services in Canada. CLI's track record is outstanding and
includes over one thousand satisfied clients. As a leader in the
industry, CLI has an objective to remain the authority in private
investigation and security by providing clients specialized and
customized services to ensure their global protection. CLI's principal
services include investigation, surveillance, undercover agents,
background verification, business intelligence and labor management
conflict. CLI is one of the major partners of Investigations Canada
whose expertise is available throughout Canada, with 9 partners, 25
locations and over 200 private investigation and security professionals.
We plan to draw on CLI and its outstanding management to lead our foray
in the security industry. The mandate of CLI is clear: Growth through
acquisitions starting from East to West and then, from North to South.

To determine suitable candidates, our management is following the
criteria set forth below:

Strength of management

Actual revenues and profitability

Market leadership and reputation

Extent and quality of relationship with customers

Potential synergies and cross-marketing opportunities

Acquisition price representing a minimum discount of 100% to its value
when in a public entity

We are targeting on the one side companies offering well-established
security services for their ability to provide stable and recurring
revenues and profits and, on the other side, companies providing new and
innovative security solutions with a rapidly growing revenue base and
offering the potential for substantial growth in the future. We believe
this strategy is the one most likely to maximize the value to our

Our Security Services

Since 9/11 and its aftermath, world events have reinforced our opinion
that the security industry offers significant opportunity for growth and
our goal is to quickly attain a leading position within this industry,
both from internal growth and through acquisitions.

As a first step, in February 2004, we purchased CSA a private
Montreal-based business established in 1984 that provides security
services to corporations and public institutions. Albeit small, CSA has
built a solid reputation for the quality of its services with clients in
both the private and public sectors. While CSA can offer its clients a
wide range of security services under different agreements with third
parties, most of its business is derived from the provisioning of
security officers.

With our recent acquisition of CLI, we can now offer our clients a wide
portfolio of security services, including security officers,
investigation, surveillance, business intelligence, background
verification and labor management conflict. In all, we currently have
approximately 100 full-time employees, about 50 other available on an as
needed basis and we have access to wide range of resources in North
America and abroad.

Since our acquisition of CSA results have been essentially as expected.
Through a series of measures to lower costs and improve customer
services initiated in the spring of 2004, we are now seeing growth in
revenue and improved profitability. Our security service is a business
segment where we intend to achieve significant growth, both internally
and through acquisitions. Our recent acquisition of CLI was a first step
in that direction and others are likely to follow.

Our Security Solutions

The security solutions that we have developed and that we are currently
introducing to the market on a commercial basis are within the
"telemetric" field. Within this business segment, our focus is on the
development of technological solutions designed to provide business
users risk management tools to monitor, protect and increase the safety
of remote assets. Essentially, we develop solutions which use integrated
wireless communications, RFID technology, transaction processing,
software applications and the Internet, and when location is required,
Global Positioning System (GPS) technology to enable users to
efficiently access, control, manage and monitor remote assets.

Our solutions are designed to be easy-to-use and cost-effective. We
allow our customers to use our website to remotely access, control,
locate and monitor different types of equipment or services, essentially
for increased security. We believe our security solutions provide
significant value to business users by increasing the efficiency of
their operations and lowering their costs.

We have targeted our initial security solutions to the large automotive
sector, but our basic technology has applications to a variety of assets
which span several business sectors including industrial equipment,
office equipment and consumer electronic products. Our R&D team is
currently working on expanding the potential applications of our
technology. In parallel, we are continuously on the look out to acquire
technology and/or product solutions that would be complementary to our
current product offerings, or that we could potentially leverage through
our existing customers.

In terms of actual achievements, our security solution business segment
produced disappointing results in the quarter ended December 31, 2004.
Different reasons accounted for our lack of performance in this segment.
First, it has become apparent that our distribution model which is based
on agreements with third parties does not work as effectively as our
management had anticipated. To rely on third parties whose priorities
and objectives are not necessarily synchronized with ours is not most
effective. Further, decisions concerning sales in this segment are
generally made at high levels and we believe the best way to handle the
process is with direct account executives. Although initially more
expensive, as there is an immediate impact on our direct cost, we
believe that building a small but effective direct sales team will lead
to improved results. In time, as we begin leveraging the existing
clientele of our security service business and developing cross-selling
opportunities, we believe this can only lead to better results.

Second, where we had potentially substantial orders, as our Company was
beginning shipments, we encountered technical difficulties impacting on
the long term reliability of our products. As opposed to delivering
products which may have proven later to be faulty and, given the
difficulty and expenses related with replacing installed units, our
management took the conscientious decision to stop shipments until the
technical issues identified were corrected. This along with
customization requirements from potentially important customers has
seriously limited our capacity to generate meaningful revenue in the
said period. Like other emerging companies, we are finding that our
sales force has a tendency to market solutions in development as opposed
to current and available products, all causing delays in our ability to
deliver actual results.

Definitive measures to improve our sales and marketing approach and our
ability to deliver product solutions of the highest quality are now
being implemented and, although we are now on the right track, we expect
that the above issues will continue to impact our results in the current
quarter. These measures have included last January the appointment of
Mr. Guy Chevrette as Chief Operating Officer of our Company. Mr.
Chevrette brings to us more than 20 years of management and business
development experience in the high-technology sector. He is a seasoned
business executive with a strong technical background in information
technology applied to wireless data communication used to improve
enterprise asset management. Mr. Chevrette now oversees product
development, production and testing, as well as marketing and sales of
our current solutions in the security sector. We believe the addition of
Mr. Chevrette to our management team will be extremely helpful toward
the attainment of our future success.

On the positive side, despite the difficulties we encountered, our
customers have been most comprehensive and have in fact reacted
positively to the way our Company has handled the situation. We can now
safely say that our current solutions geared toward the financial
industry have certainly passed the stage of commercial proof of concept.
This reflected by strong indications of interest towards our solutions
from potentially large customers and, as soon as our Company has
corrected still outstanding issues, substantial revenue is expected to
be achieved from our security solutions.

About C-Chip Technologies Corporation

C-Chip Technologies Corporation operates in the risk management
industry. On the technology side, we are positioned in an emerging and
rapidly growing industry that is about interconnecting machines with IT
infrastructures and mobile assets. We integrate wireless communications,
online transactions, software applications, RFID technology, the
Internet and, when location is required, GPS technology to enable
business users to efficiently access, control, manage and monitor remote
assets at low costs. Through wholly-owned subsidiaries, Canadian
Security Agency (2004) Inc. and Chartrand Laframboise Investigation, we
also provide corporations and institutions security services including
corporate investigation, surveillance, electronic monitoring and
protection of personnel and premises. The Company's goal is to be
recognized as a leading provider of security services and risk
management solutions used by corporations and institutions. Detailed
information on our risk management solutions, their applications and our
security services is available on our web site at www.c-chip.com

FORWARD-LOOKING-STATEMENT: Except for factual statements made herein,
the information contained in this press release consists of
forward-looking statements that involve risks and uncertainties,
including the effect of changing economic conditions, competition within
the credit and security industry, customer acceptance of products and
other risks and uncertainties. Such forward-looking statements are not
guarantees of performance, and C-Chip Technologies Corporation results
could differ materially from those contained in such statements. These
forward-looking statements speak only as of the date of this release and
C-Chip Technologies Corporation undertakes no obligation to publicly
update any forward-looking statements to reflect new information, events
or circumstances after the date of this release.


Contact Information

    C-Chip Technologies Corporation
    Mr. Stephane Solis
    President & CEO
    (514) 337-2447