Shift Networks Inc.
TSX VENTURE : SHF

Shift Networks Inc.

May 30, 2006 08:00 ET

Shift Announces Strong Revenue and Margin Growth in First Quarter 2006

CALGARY, ALBERTA--(CCNMatthews - May 30, 2006) - Shift Networks Inc. (TSX VENTURE:SHF), (Shift, or the Company) a leading provider of hosted IP communications services for small to medium sized businesses today reported strong revenue growth in its first quarter, 2006 financial results.

Revenues for the three-month period ended March 31, 2006 grew over 300% to C$495,460, compared to revenues of $158,371 in the first quarter of 2005. Contracted quarterly recurring revenue for ShiftVoice service grew over 1000% to $154,552 Q1 2006 from $15,104 Q1 2005. Operating margin on contracted recurring VoIP revenue increased to 54% versus previous quarters at 47%. The Company anticipates continued margin improvement as the Shift customer base continues to scale. Sales continued to increase over the last 3 months as a result of Shift's continued investment into distribution and sales capacity and growing customer interest and adoption. Management expects growth to continue to accelerate as additional direct sales personnel, indirect distribution partners, and new markets such as Vancouver continue to gain traction.

"Shift's growth is a function of investment in our sales channels, number of markets, and strength of service offering," stated Shift President and CEO, Trent Johnsen. "Shift is seeing increasing client opportunities with the addition of Vancouver as the third major market from companies with multiple locations. We are also experiencing pent-up demand for service in Toronto and have work in progress to offer service there."

Sales and marketing expenses for the quarter increased in line with sales growth. The Company estimates an approximate six month cycle from addition of sales personnel to consistent subscriber revenue loading, comprised of 60 to 90 days training and lead development for new sales reps and dealers, followed by an average 60 to 90 day sales cycle. As a result of Shift's increased investments in sales and distribution personnel through the fall of 2005, new subscriber loads increased from 365 in the fourth quarter, 2005, to over one thousand new subscribers in the first quarter of 2006. Over 40% of subscriber line activations were the result of independent Shift dealer activity.

During the first quarter the Company completed a fully subscribed $2,000,000 brokered private placement ("Private Placement"). The Corporation issued 20,000,000 Units at $0.10 per Unit. Each Unit consisted of one common share and one share purchase warrant. Each share purchase warrant is exercisable into one common share at a price of $0.14 until January 12, 2008. Proceeds are being utilized to fund acceleration of the Company's sales and marketing initiatives in Calgary, Edmonton and Vancouver as well as for inventory, provisioning, installation and general working capital.

Additional information relating to the Company, as well as the complete First Quarter, 2006, Financial Statements can also be found on SEDAR at www.sedar.com.

Shift Networks is a leader in next generation IP communications services for small to medium-sized businesses. Shift Networks trades on the TSX Venture Exchange under the symbol "SHF". Please visit our website at www.shiftnetworks.com.

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

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