OnX Enterprise Solutions Inc.
TSX : ON

OnX Enterprise Solutions Inc.

September 14, 2005 17:01 ET

OnX Enterprise Solutions Announces First Quarter Results

TORONTO, ONTARIO--(CCNMatthews - Sept. 14, 2005) - OnX Enterprise Solutions Inc. (TSX:ON), "OnX", a leading provider of IT services and mid-market outsourcing solutions, today announced its financial results for the first quarter ended July 31, 2005.

Q1 FY'06 Summary

- 47% decrease in Hardware/Software revenue over Q1 FY'05

- 8% increase in Professional Services revenue over Q1 FY'05

- 51% increase in Managed Services revenue over Q1 FY'05

- 19% decrease in Selling and Administrative expenses over Q1 FY'05

- Net loss of $0.7 million or ($0.01) per share vs net loss of $0.3 million or ($0.01) per share in Q1 FY'05

Total revenue for the first quarter of fiscal 2006 decreased by 33% to $10.7 million from the $16.1 million recorded in the same period of FY'05. Total gross profit decreased by 30% to $2.4 million from the $3.4 million recorded in Q1 FY'05. This decrease was attributable to a reduction in Hardware/Software revenue. Specifically, a few significant Hardware/Software transactions were delayed and are now expected to close in the coming quarters. In particular, one large transaction is expected to close in the second quarter. Management believes that should this transaction ship in the second quarter, it would likely offset the revenue and profit shortfall experienced in the first quarter.

Selling and administrative expenses decreased by 19% to $2.7 million in the first quarter compared with $3.3 million recorded in the same quarter of the prior year due to reductions in commissions and facility lease costs.

The above resulted in an operating loss (1) of $0.3 million for the first quarter down from $0.1 million of operating earnings recorded in Q1 FY'05.

Amortization and interest for the first quarter was $0.4 million, down from $0.5 million recorded in the same period of FY'05. As a result, the net loss for the quarter was $0.7 million or ($0.01) per share down from the net loss of $0.4 million or ($0.01) per share recorded in the first quarter of FY'05.



Financial Highlights
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(in 000's of CDN Dollars except per share amounts)

Q1 Q4 Q1
FY'06 FY'05 FY'05
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Sales
Hardware and Software $6,485 $9,532 $12,342
Professional Services 3,480 3,783 3,221
Managed Services 767 670 508
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Total Sales $10,732 $13,985 $16,071

Cost of sales 8,350 10,573 12,648

Gross Profit
Hardware and Software 967 1,728 1,853
14.9% 18.1% 15.0%
Professional Services 1,103 1,474 1,355
31.7% 39.0% 42.1%
Managed Services 312 210 215
40.7% 31.3% 42.3%
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Gross profit 2,382 3,412 3,423
Gross profit percentage 22.2% 24.4% 21.3%

Selling and administrative expenses 2,682 2,734 3,303
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Operating earnings (loss) ($300) $678 $120

Amortization 365 429 413
Interest 66 51 48
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Net income (loss) ($731) $198 ($341)
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Basic and diluted earnings
(loss) per share ($0.01) $0.00 ($0.01)
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1) Operating earnings (loss) is comprised of gross profit less selling and administrative expenses and therefore reflects income before amortization, interest and exchange gains. The Company uses operating earnings amongst other measures to assess the operating performance of its ongoing business. Similarly, investors may find this non-GAAP financial measure useful although the term operating earnings does not have a recognized meaning under Canadian generally accepted accounting principles and therefore may not be comparable to similarly titled measures presented by other companies. Operating earnings should not be construed as the equivalent to cash flow from operations. The most comparable GAAP measurement for operating earnings is net income (loss) which is comprised of operating earnings less amortization, interest and exchange gains. Net income (loss) is referenced elsewhere in this document.

Liquidity and Capital Resources

At July 31, 2005, the Company was $0.4 million below its tangible net worth covenant required under its bank facility agreement. The bank has indicated their intention to waive compliance with this covenant as at July 31, 2005 based on receipt of satisfactory information supporting the $1.1 million warrant exercise described below and an updated forecast for the second quarter.

Subsequent Event

On August 31 and September 2, 2005, the company received $1.1 million related to the exercise of 5,515,625 warrants into an equivalent number of common shares at $0.20 per share. These warrants were part of a total of 7,265,625 warrants that were issued in connection with a private placement of units in September 2002. The balance of 1,750,000 warrants from this private placement were not exercised and expired on September 3, 2005. After this exercise, the Company has 65,008,537 common shares outstanding.

Forward Looking Statement

Investors should take note that certain statements in this press release are forward-looking and may not give full weight to all of the potential risks and uncertainties. These forward-looking statements include statements that are subject to risks and uncertainties. Forward-looking statements are subject by their nature to risks and uncertainties, and actual results, actions or events could differ materially from those set forth in the forward-looking statements. Any forward-looking statements speak only as of the date made. The company is not undertaking to update any information in the foregoing reports until the effective date of its future reports required by the securities laws.

About OnX Enterprise Solutions Inc.

OnX Enterprise Solutions is a leading IT services organization focused on delivering superior customer value by way of our proven consulting, integration and outsourcing solutions. For over two decades, OnX has been helping organizations grow revenues, reduce costs and, overall, manage the complexity and risks associated with information technology. Headquartered in Thornhill, Ontario the Company has offices in Ottawa, Windsor and Toronto. OnX Enterprise Solutions is publicly traded on the Toronto Stock Exchange.

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