SOUTH PLAINFIELD, N.J., Sept. 22 /PRNewswire-FirstCall/ -- CAPE Systems Group, Inc., (Pink Sheets: CYSG) a leading provider of software technology for packaging design, pallet optimization, RFID Asset Tracking, inventory and warehouse management, supply chain execution and order fulfillment, today announced preliminary unaudited financial results for the fiscal years ending September 30, 2007 and 2008, and the three months and nine months ended June 30, 2009.

Cape Systems Group, Inc. reported revenues of $0.5 million and $1.6 million for the three and nine month periods ended June 30, 2009, respectively. The Company also reported a $15.3 million non-cash profit (unaudited) for its third quarter ending June 30, 2009 based on anticipated settlements within the next 60 days of $8 million in liabilities related to the closing of its European operations back in 2003 and $8.4 million in liabilities related to the closing of three domestic operations in 2004. Existing operations during the same quarter had a $1.1 million loss after a $0.7 million beneficial conversion charge for the conversion of accrued interest into notes to its bondholders. The same period for the prior year had a $0.8 million loss after a $0.5 million beneficial conversion charge also for the conversion of accrued interest into notes to its bondholders. Excluding the beneficial conversion charges each year, the net operating loss for the third quarter was $0.4 million vs. $0.3 million in 2008 caused by a $0.3 million decrease in gross profit that was offset by $0.2 million in reduced S, G & A expenses based on a cost savings strategy initiated in FY2009.

Based on the third quarter's $16.4 million gain in settlement the profit for the nine months ending June 30, 2009 was $14.5 million after absorbing an operating loss of $1.9 million that included $1.2 million in beneficial conversion charges. This compares to a $1.4 million loss for the nine months ending June 30, 2008 that included $0.5 million in beneficial conversion charges. Excluding the beneficial conversion charges each year 2009's net operating loss for the nine months ending June 30 was $0.7 million vs. a $0.9 million loss in 2008. This $0.2 million improvement is the result of $0.6 million in reduced S, G & A expenses offset by a $.4 million decrease in gross profit.

For the fiscal year ended September 30, 2008, the Company reported preliminary unaudited revenues of $3.5 million. The unaudited net loss for the last fiscal year ending September 30, 2008 was $1.7 million that included $0.7 million in beneficial conversion charges vs. the prior year's unaudited net loss that ended September 30, 2007 of $3.0 million (including $1.3 million in beneficial conversion charges). Excluding the beneficial conversion charges each year 2008's net operating loss for the twelve months ending September 30, 2008 was $1.0 million vs. a $1.7 million loss in 2007. This $0.7 million improvement is the result of $1.0 million in reduced S, G & A expenses (mainly intangible amortization that finished in 2007) plus a $0.3 million increase in gross profit, which was offset by a $0.6 million decrease in gains on settlement that were realized in 2007.

About CAPE Systems

CAPE Systems is an international provider of supply chain management technologies. CAPE Systems offers a comprehensive range of software systems and tools, from packaging and pallet optimization software, RFID asset tracking, to integrated warehouse and inventory management solutions, pick-to-light systems, and transportation management systems for enterprise wide and collaborative supply chain optimization. For more information about CAPE visit: www.capesystems.com.

Safe Harbor

Statements about the company's future expectations, including future revenue and earnings and all other statements in this press release, other than historical facts, are "forward-looking" statements and are made pursuant to safe harbor provisions of the Securities Litigation Reform Act of 1995. Such forward-looking statements involve risks and uncertainties and are subject to change at any time. The company's actual results could differ materially from expected results. In reflecting subsequent events or circumstances, the company undertakes no obligation to update forward-looking statements.

                             Cape Systems Group, Inc.
                        CONDENSED COMBINED BALANCE SHEET
                                                                  Nine Months
                                 F/Y Ending     F/Y Ending        Ending June
                                Sept 30 2007   Sept 30 2008         30 2009
    ASSETS
    Cash                            $174,112       $217,741        $173,505
    Accounts receivable, net         376,381        375,872         290,305
    Allowance for Bad Debt            (2,147)        (2,704)         (1,793)
    Inventories, net                 174,410            937          21,792
    Prepaid expenses                  49,218         35,596          38,646
      Total Current Assets           771,974        627,441         522,455

    Equip Gross                      778,535        737,072         695,919
    Accum Depr/Amort                (756,423)      (728,230)       (683,775)
    Equipment and fixtures, net       22,112          8,842          12,144

    Deferred Financing Costs, net     86,146         27,621           8,934
    Goodwill - Cape                  341,685        285,173         285,173
    Other Intangibles - Cape       1,545,785      1,666,025       1,666,025
    Amortization                  (1,497,478)    (1,666,025)     (1,666,025)
    Other Assets                     132,075        133,951         262,745
      Total Assets                $1,402,299     $1,083,028      $1,091,451


    LIABILITIES AND STOCKHOLDERS' EQUITY/(DEFICIT)

    CURRENT LIABILITIES
    Mandatorily redeemable
     preferred stock                $504,713       $504,713        $504,713
    Notes payable                  1,227,500      1,227,500       1,227,500
    Accounts payable               3,097,363      2,957,780         184,113
    Net liabilities -
     subsidiaries in Liquidation   8,407,512      8,207,583         250,000
    Payroll and related benefits
     accrual                       1,146,032      1,154,612         742,462
    Accrued litigation             2,655,322      2,655,322          25,000
    Other accrued expenses and
     liabilities                   3,802,122      4,196,918       1,819,604
    Customer Deposits                357,460        112,100          19,821
    Deferred revenue                 612,759        533,688         557,909
      Total current liabilities   21,810,783     21,550,216       5,331,122

    Convertible notes payable      6,360,053      7,036,336       7,915,623
      Total liabilities           28,170,836     28,586,552      13,246,745


    STOCKHOLDERS' EQUITY (DEFICIT)
    Common stock                   4,973,741      4,991,831       4,991,831
    Preferred stock                   13,657         13,657          13,657
    Subscriptions receivable         (66,000)       (66,000)        (66,000)
    Additional paid-in capital   169,211,898    169,887,060     170,778,800
    Accumulated equity
     (deficit)                  (195,002,427)  (197,954,211)   (199,634,644)
    Accum. other comprehensive
     inc/( loss)                  (2,816,653)    (2,628,187)     (2,683,347)
    Treasury stock                   (67,240)       (67,240)        (67,240)
    YTD net income/(loss)         (3,015,513)    (1,680,433)     14,511,650
    Total Stockholders' deficit  (26,768,537)   (27,503,524)    (12,155,293)

      Total liabilities and
       stockholders' equity       $1,402,299     $1,083,029      $1,091,452

                                    Cape Systems, Inc.
                        CONDENSED COMBINED STATEMENT OF OPERATIONS

                                                          For the   For the
                                   For the Twelve         Three    Nine Months
                                   Months Ending     Months Ending    Ending
                                Sept 30    Sept 30       June 30     June 30
                                  2007       2008          2009        2009
    REVENUE                    $3,224,333  $3,504,895    $548,604  $1,697,146
    COST OF SALES               1,416,908   1,356,433     223,228     755,487
    GROSS PROFIT                1,807,424   2,148,461     325,376     941,659
                GM                     56%         61%         59%         55%
    OPERATING EXPENSES
    Selling and administrative  3,411,878   2,898,228     558,754   1,782,197
    Depreciation and
     amortization                 692,960     229,784       1,528       3,848
    Total operating expenses    4,104,838   3,128,012     560,282   1,786,045

      Operating income/(loss)  (2,297,413)   (979,551)   (234,906)   (844,386)

    OTHER INCOME (EXPENSE)

    Interest income                 2,613       3,263           0           0
    Interest expense             (726,424)   (936,481)   (210,275)   (490,166)
    Beneficial Conversion Costs(1,330,967)   (676,283)   (696,125) (1,196,834)
    Gain on settlement of
     Liabilities                  830,368     190,242  16,454,134  16,454,134
    Other                          (4,388)          0       3,846       3,846
      Net other income(expense)(1,228,798) (1,419,259) 15,551,580  14,770,980

    INCOME/(LOSS) BEFORE
     PROVISION FOR INCOME
     TAXES                     (3,526,211) (2,398,810) 15,316,674  13,926,594

    Provision for income taxes          0       2,500       1,842       1,842
    Credit for sale of state tax
     Benefits                    (510,698)   (720,877)          0    (586,898)
       Net income tax credit     (510,698)   (718,377)      1,842    (585,056)

      NET INCOME (LOSS)       ($3,015,513)($1,680,433)$15,314,832 $14,511,650

SOURCE CAPE Systems Group, Inc.