Municipal Solutions Group, Inc.
TSX VENTURE : MSZ

Municipal Solutions Group, Inc.

August 22, 2007 16:02 ET

Municipal Solutions Announces Results for Second Quarter 2007

VICTORIA, BRITISH COLUMBIA--(Marketwire - Aug. 22, 2007) - Municipal Solutions Group, Inc. ("Municipal Solutions") (TSX VENTURE:MSZ), a provider of business process automation solutions for local government, today announced its unaudited financial results for the quarter ending June 30th, 2007.

Total revenue for the second quarter in 2007 was $1,258,758 as compared to $817,009 in the second quarter of 2006, an increase of 54%. Total revenue for the six months ended June 30, 2007 was $2,397,735 as compared to $1,970,134 in the six months ended June 30, 2006, an increase of 22%. The increase in the second quarter and the six month period was predominantly related to Services revenue. The Company's overall sales backlog (the amount of services and license revenue contracted for but not yet recognized as revenue) exceeded US$4.5M at June 30, 2007.

The Company's operating expenses for the three months ended June 30, 2007 were $1,977,201, an increase of $619,388 or 46% over the three months ended June 30, 2006. Operating expenses for the six months ended June 30, 2007 were $3,595,925 as compared to $2,507,222 for the six months ended June 30, 2006, an increase of 43%.

The increase in operating costs for the second quarter and the six month period was largely the result of one-time severance costs associated with the rationalization of a number of staff as part of an on-going effort to keep operating costs at an efficient level. This increase was also the result of additional costs for staff and travel related to the implementation of customer projects and labour and marketing costs related to the Company's web-based product offering.

Other Costs totaled $143,852, a decrease of $70,422 over the second quarter in 2006.

The loss for the quarter was $862,295 or ($0.05) per share compared to a loss for the same quarter in 2006 of $755,078 or ($0.06) per share.

Iain McLean, Chief Executive Officer of Municipal Solutions, commented, "The second quarter saw substantial progress in our Client Services division with five clients going live on their CityView solution and several projects advancing forward. In addition, our new web-based initiative, Local Government Manager, completed its first five sales during the quarter." He continued adding that, "During the quarter it was necessary to restructure the Company and make changes in staffing levels to bring costs in line with projected revenues for the balance of the year. The Company is focused on our project deliveries for our local government community and on expanding our customer base."

The following is the Consolidated Statements of Operations and Deficit (unaudited) for the three and six months ended June 30, 2007 and June 30, 2006. A complete set of financial statements and analysis is available at www.MunicipalSoftware.com.



--------------------------------------------------------------------------
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Three months ended Six months ended
June 30 June 30 June 30 June 30
2007 2006 2007 2006
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Revenue $ 1,258,758 $ 817,009 $ 2,397,735 $ 1,970,134
Expenses:
Customer service 480,355 303,185 911,742 599,478
Sales and marketing 223,235 188,265 492,291 413,156
Research and
development 529,664 403,961 1,070,495 683,639
General and
administrative 426,873 462,402 804,323 810,949
Restructuring costs 317,074 - 317,074 -
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1,977,201 1,357,813 3,595,925 2,507,222
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Loss before the
following (718,443) (540,804) (1,198,190) (537,088)

Amortization 65,921 52,967 130,833 103,491
Interest 30,362 22,175 53,261 54,241
Loss on foreign
exchange 47,569 47,342 105,591 24,715
Non-cash interest - 91,790 - 295,277
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Net loss and
comprehensive
loss for the period (862,295) (755,078) (1,487,875) (1,014,812)

Deficit,
beginning of period (7,783,551) (4,284,149) (7,157,971) (4,024,415)
Early conversion
premium - convertible
debentures - (604,870) - (604,870)

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Deficit, end of period $(8,645,846) $(5,644,097) $(8,645,846) $ (5,644,097)
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Loss per share:
Basic and diluted $ (0.05) $ (0.06) $ (0.09) $ (0.12)
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Weighted average
number of shares
outstanding:
Basic and diluted 16,045,823 12,594,932 16,045,823 8,503,995
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About Municipal Solutions Group, Inc.

Municipal Solutions Group, Inc. was formed in January 2002 as the public financing arm for Municipal Software Corporation.

About Municipal Software Corporation

Municipal Software Corporation (TSX VENTURE:MSZ) provides easily installed, packaged software solutions that manage the everyday business processes of local governments. The solutions are based on 25 years of experience with a product platform that easily adapts to the changing practices of clients. Branded under the CityView name, the company provides a number of highly configurable solutions to automate practices in Property Information, Permits and Inspections, Planning, Code Enforcement, Licensing and Cashiering. CityView Application Builder is a set of application development tools that allows the client to develop unique applications to match specific needs. The company recently launched web-based services under the Local Government Manager™ name for jurisdictions looking for the convenience and cost effectiveness of a hosted application. Municipal Software offers a complete range of services from training and customer support of its suite of products to custom development for unique applications.

Forward-Looking Statements

Certain statements in this news release are not historical and may constitute forward-looking statements reflecting Municipal Solutions Group Inc.'s current expectation in the local government sector. These statements are subject to important risks, uncertainties and assumptions concerning future conditions that may ultimately prove to be inaccurate and may differ materially from actual events or results.

Contacts

If you would like to be included on our regular distribution please email us at Press@MunicipalSoftware.com.

The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this press release.

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