MediSolution Ltd.
TSX : MSH

MediSolution Ltd.

August 13, 2007 08:30 ET

MediSolution Announces Results for the First Quarter

Reports Net Income of $0.1 million and EBITDA(1) of $1.2 million

MONTREAL, QUEBEC--(Marketwire - Aug. 13, 2007) - MediSolution Ltd. (TSX:MSH), a Brookfield Asset Management company and a leading healthcare and service sector information technology company, today announced its results for the first quarter ended June 30, 2007.

First Quarter Highlights

For the quarter ended June 30, 2007, the Corporation reported an increase in profits of $1.3 million to $0.1 million, compared to a loss of $1.2 million in the same period in 2006.

The increase in profit is due to an increase in revenue to $12.2 million, 24% over the prior year's comparable quarter. Importantly, revenue from new system sales increased to $5.2 million from $2.5 million in the same quarter last year. $0.6 million of this increase is related to the recognition of revenue on old contracts due to the clarification of certain contract clauses. The Corporation's EBITDA increased by $1.4 million to $1.2 million compared to a $0.2 million loss before interest, taxes, depreciation, and amortization reported in the same quarter in the prior year. Operating efficiencies continued to improve in the Corporation's Professional Services organization, which includes project management and implementation services.



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Three months ended June 30 (in millions $) 2007 2006
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System sales $5.15 $2.53
Support and processing 7.08 7.30
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Total Revenues 12.23 9.83

Cost of revenues 7.33 6.12
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Gross profit 4.90 3.71

Sales and marketing expenses 1.69 1.78
Software development expenses 0.67 0.51
General and administrative expenses 1.32 1.64

EBITDA 1.22 (0.22)

Depreciation of property and equipment 0.15 0.15
Amortization of intangible assets 0.84 0.83
Interest expense 0.03 0.01
Loss on foreign exchange 0.07 0.02
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Net earnings (loss) $0.13 $(1.23)
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"We are encouraged about the results we have achieved in Q1 with significant improvement in our financial performance, efficiency gains within our operations group, and incremental improvements in our cost structure" said Paul Lepage, President and Chief Executive Officer. "We are continuing to focus on enhancing our project execution, customer satisfaction and overall financial performance. These initiatives should enable us to continue to secure new business and improve operational efficiencies."

Strong Results across the Organization

The Corporation continued to deliver on operating efficiencies across all areas of the organization, achieving the following significant improvements as compared to the same quarter in the prior year:

- a 73% increase in professional services margins along with improved implementation performance and higher service levels;

- a 5% reduction in Sales & Marketing expense;

- an 20% reduction in General & Administrative expense, including restructuring charges;

- an increase in Research & Development investment resulting in the continued delivery of integrated product suites, designed to improve the work-flow of our customers and reduce the cost of their operations

- repayment of indebtedness - the company is debt free at quarter end as a result of an increase in cash flow from operations of $2.4 million ($0.6 million in Q1 fiscal 2007), and the collection of a share purchase loan of $0.8 million.

The Corporation also delivered strong results across its two major segments as compared to the same quarter in the prior year:

- Healthcare Information Systems revenue increased by 26% with a 20% increase in gross margins and a 143% increase in earnings

- Resource Management Systems revenue increased by 22% with a 56% increase in gross margins and a $1.0 million improvement in earnings



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Three months ended June 30 (in millions $) 2007 2006
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Total Revenue
Healthcare Information Systems $7.04 $5.58
Resource Management Systems 5.19 4.25
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12.23 9.83

Gross Profit
Healthcare Information Systems 2.96 2.47
Resource Management Systems 1.94 1.24
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4.90 3.71

Earnings (loss) before the undernoted items
Healthcare Information Systems 0.77 0.32
Resource Management Systems 0.45 (0.53)
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1.22 -0.22

Depreciation of property and equipment 0.15 0.15
Amortization of intangible assets 0.84 0.83
Interest expense 0.03 0.01
Loss on foreign exchange 0.07 0.02
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Net earnings (loss) $0.13 $(1.23)
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During the quarter, MediSolution continued to increase confirmed backlog with a total of $3.0 million signed in new business, as compared to $5.5 million in the prior year.

New systems sales orders for the quarter included:

- Patient Management systems in CSSS Jonquiere & CSSS Antoine-Labelle in Quebec; and

- An integration project linking lab and diagnostic imaging results and transcription results to a central provincial repository at Royal Victoria, Ontario.

It is expected that the revenue on these contracts will be recognized over the next twenty four months.

About MediSolution

MediSolution (TSX:MSH), a Brookfield Asset Management company, is a leading healthcare and public sector information technology company, providing software, solutions and services to customers across North America. More than 500 hospitals and other healthcare facilities and close to 200 public sector and related organizations rely on MediSolution's systems to maximize their operational efficiencies, lower their costs, and improve the delivery of services. MediSolution has two operating segments. The Resource Management Systems segment is comprised of Financial Management software such as accounts receivable, budgeting and materials management as well as Human Capital Management tools including human resource management, staff scheduling and payroll processing. The Healthcare Information Systems segment is comprised of clinical solutions such as patient tracking, electronic patient health records, pharmacy, radiology and laboratory software for healthcare organizations.

For more information, visit www.medisolution.com.

This press release contains "forward-looking statements" regarding MediSolution. The words "believe", "expect", "anticipate", "intend", "estimate" and other expressions which are predictions of or indicate future events and trends and which do not relate to historical matters identify forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements because they involve known an unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the company to differ materially from anticipated future results, performance or achievements expressed or implied by such forward-looking statements.

(1) "EBITDA" (earnings before interest expense, income taxes, depreciation of property and equipment and amortization of intangible assets) does not have a standardized meaning prescribed by Canadian Generally Accepted Accounting Principles (GAAP) and may not be comparable to similar measures presented by other publicly traded companies. We use EBITDA amongst other measures, to assess the operating performance of our business.



MediSolution Ltd.
Consolidated Balance Sheets (unaudited)

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As at (in thousands of dollars) June 30, 2007 March 31, 2007
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ASSETS

Current Assets
Cash $1,058 $856
Accounts receivable and accrued
revenue 13,567 21,818
Inventory 635 507
Sundry deposits and prepaid
expenses 1,910 1,071
Deferred expenses 80 91
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17,250 24,343

Property and equipment 1,058 1,151
Intangible assets 8,754 8,808
Goodwill 8,340 8,340
Deferred expenses 3,415 3,537
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$38,817 $46,179
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LIABILITIES
Current Liabilities
Short-term loans $- $2,323
Accounts payable and accrued
liabilities 7,750 10,694
Deferred revenue 15,917 18,899
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23,667 31,916

Deferred revenue 6,021 6,267
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29,688 38,183
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SHAREHOLDERS' EQUITY 9,129 7,996
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$38,817 $46,179
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MediSolution Ltd.
Consolidated Statements of Operations and Comprehensive Income (unaudited)
(in thousands of dollars, except per share amounts)

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Three Months Ended June 30
2007 2006
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REVENUE
System sales $5,152 $2,528
Support and processing 7,080 7,304
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12,232 9,832
Cost of revenue 7,333 6,121
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Gross profit 4,899 3,711
Sales and marketing expenses 1,694 1,781
Software development expenses 666 506
General and administrative expenses 1,440 1,503
Restructuring charges (122) 138
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Earnings (loss) before the
undernoted items: 1,221 (217)

Depreciation of property and
equipment 152 150
Amortization of intangible assets 834 826
Interest expense 31 14
Loss on foreign exchange 73 18
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Net earnings and comprehensive
income (loss) $131 $(1,225)
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Net earning (loss) per share --
basic and diluted 0.00 (0.01)
Weighted average number of common
shares outstanding 157,891,401 154,977,622
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MediSolution Ltd.
Consolidated Statements of Deficit (unaudited)
(in thousands of dollars)

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Three Months Ended June 30
2007 2006
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Deficit, beginning of period $(1,850) $(2,080)
Net earnings (loss) 131 (1,225)
Interest on share purchase financing 9 12
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Deficit, end of period $(1,710) $(3,293)
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MediSolution Ltd.
Consolidated Statements of Cash Flows (unaudited)

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Three months ended June 30 (in thousands of dollars) 2007 2006
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INFLOW (OUTFLOW) RELATED TO THE FOLLOWING ACTIVITIES

Operating
Net earnings (loss) $131 $(1,225)
Items not affecting cash:
Depreciation of property and equipment 152 150
Amortization of intangible assets 834 826
Stock-based compensation 56 80
Non-cash portion of restructuring charges (122) 138
Changes in non-cash operating working capital items 4,463 3,299
Change in deferred revenue (3,228) (2,146)
Change in deferred expenses 133 (489)
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2,419 633
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Investing
Additions to intangible assets, net of tax credits (780) (850)
Additions to property and equipment (59) (247)
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(839) (1,097)
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Financing
Repayment of share purchase plan loan 800 -
Issuance of common shares 136 52
Interest on share purchase financing 9 12
Decrease in short-term loans Trilon (1,999) -
Decrease in short-term loans (324) (415)
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(1,378) (351)
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Increase (decrease) in cash and cash equivalents 202 (815)

Cash, beginning of period 856 966
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Cash, end of period $1,058 $151
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Supplemental cash flow information

Interest paid $31 $14
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