Grey Island Systems International Inc.
TSX VENTURE : GIS

Grey Island Systems International Inc.

August 14, 2006 07:00 ET

Grey Island Reports Results for the Third Quarter Ended June 30, 2006

POSTS RECORDS FOR REVENUE, REVENUE GROWTH AND INCOME

TORONTO, ONTARIO--(CCNMatthews - Aug. 14, 2006) - Grey Island Systems International Inc. (TSX VENTURE:GIS) has released its consolidated results for the third quarter ending June 30, 2006. The company posted revenue growth of 202 per cent year over year for the three months ended June 30, 2006, net earnings of $241,605, and net operating income (before interest income, amortization and stock-based compensation expenses) of $535,067 for the quarter ending June 30, 2006. "The third quarter results reflect continued sales initiatives, normalized expenditure outlays and a proven recurring revenue model which culminated in record revenue and growth, record earnings and record operating cash flows," said Andrew Moore, chief executive officer, Grey Island.

The Company had an active third quarter and has achieved significant growth in its revenue and earnings. The current results are a reflection of the Company's previously stated objectives to grow organically and through acquisition with a goal to increase the Company's share of the U.S. market place. The following are significant highlights related thereto.

Revenue for the third quarter increased to $3,427,052, an increase of 202.48% over the comparable period a year ago.

Gross profit for the third quarter increased $1, 895,101, an increase of 331.0% over the comparable period a year ago.

The Company achieved net income of $241,605 for the third quarter compared to a loss of $526,946 for comparable quarter a year ago.

The Company achieved operating income of $535,067 for the third quarter compared to a loss of $513,427 in the comparable quarter of 2005.

Net cash provided by operating activities increased to $824,858 compared to cash used by operating activities of $33,548 for the comparable period a year ago.

U.S. revenues now account for 63.9% of total Company revenue for the third quarter compared to 34.8% for the comparable period a year ago.

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.

Revenue

Revenue for the quarter ended June 30, 2006 increased by 202.48% to $3,427,052 from $1,132,996 for the quarter ended June 30, 2005. For the nine month period ended June 30, 2006, the revenue increased by 118.0% to $8,740,800 from $4,009,451.

The increase in revenues recorded in the past quarter was due to the continued organic growth of the Company's Interfleet product, the overall growth of the industry and the acquisition of NextBus. While the major portion of the Company's revenue had historically been generated in Canada, revenues from its US customer base have increased to $2,190,019 for the quarter ended June 30, 2006, compared with $393,856 for the quarter ended June 30, 2005 and to $4,618,448 for the nine months ended June 30, 2006, compared to $869,490 for the nine months ended June 30, 2005. Revenues from its Canadian customer base have increased by 67.4% to $1,237,033 for the quarter ended June 30, 2006, compared with $739,140 for the quarter ended June 30, 2005 and by 31.3% to $4,122,352 for the nine months ended June 30, 2006, compared to $3,139,961 for the nine months ended June 30, 2005.

Income/loss from operations

The net income for the quarter ended June 30, 2006, was $241,605 or $0.0041 per share, compared to a loss of $526,946 or ($0.0089) per share in the quarter ended June 30, 2005. For the nine month period ended June 30, 2006 the net loss was $346,146 or $0.0058 compared to a loss of $1,171,809 or $0.0238. While gross profits increased by 331.0% year over year for the three months ended June 30, 2006 and by 164.1% year over year for the nine months ended June 30, 2006, operating expenses increased by only 42.7% for the quarter ended June 30, 2006 and by 44.6% over the nine month period ended June 30, 2006, resulting in operating income of $535,067 versus a loss of $513,427 in the comparable quarter of 2005.

Liquidity and Capital Resources

At June 30, 2006, Grey Island had cash and cash equivalents of $2,476,925. The Company's working capital was $4,147,612 as at June 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 $1 million revolving credit facility with a Canadian chartered bank. This facility can be used for direct advances or through letters of guarantee. The balance of advances outstanding at June 30, 2006 was $nil, while letters of guarantee amounting to $285,815 were outstanding against the facility.



GREY ISLAND SYSTEMS INTERNATIONAL INC.
Interim Consolidated Statement of Operations and Deficit
Unaudited


Three months ended Nine months ended
June 30 June 30
Note 2006 2005 2006 2005

Revenue $ 3,427,052 $ 1,132,996 $ 8,740,800 $ 4,009,451
Cost of
revenue 1,531,951 693,252 4,048,620 2,232,930
-------------------------------------------------------
Gross
profit 1,895,101 439,744 4,692,180 1,776,521

Expenses
General and
adminis-
trative 3 595,150 550,530 1,902,245 1,837,976
Sales and
marketing 241,727 221,660 655,572 535,191
Research
and
development 450,089 125,067 1,363,551 346,379
Datacentre
operations 73,068 55,914 210,261 138,804
-------------------------------------------------------
1,360,034 953,171 4,131,629 2,858,350
-------------------------------------------------------

Income/
(loss)
before the
following 535,067 (513,427) 560,551 (1,081,829)

Other
income and
expenses
Other
(income)/
expenses (7,433) (18,512) (21,512) (31,231)
Amortiza-
tion of
intangible
assets 229,046 1,029 687,136 3,070
Amortiza-
tion of
tangible
assets 52,845 31,002 183,512 93,612
Stock-based
compensa-
tion 19,004 - 57,561 24,529
-------------------------------------------------------
293,462 13,519 906,697 89,980
-------------------------------------------------------

Net income/
(loss) 241,605 (526,946) (346,146) (1,171,809)
Deficit,
beginning
of period (5,126,516) (3,572,396) (4,538,765) (2,927,533)
-------------------------------------------------------
Deficit,
end of
period $ (4,884,911) $ (4,099,342) $ (4,884,911) $ (4,099,342)
-------------------------------------------------------
-------------------------------------------------------
Basic and
diluted
earnings/
(loss) per
share $ 0.0041 $ (0.0089) $ (0.0058) $ (0.0238)
-------------------------------------------------------
-------------------------------------------------------

Weighted
average
number of
shares
outstanding 59,312,969 59,312,969 59,312,969 49,278,080


See accompanying notes to the financial statements


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.

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.

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