EMRISE Corporation Reports 2007 Fourth Quarter, Year End Financial Results

Record Quarterly Revenue; Loss Narrows on Year-Over-Year Revenue
Growth
RANCHO CUCAMONGA, Calif.--(Business Wire)--
EMRISE CORPORATION (NYSE Arca:ERI), a designer, manufacturer and
marketer of proprietary electronic devices and communications
equipment for aerospace, defense, industrial, and communications
applications, today announced its financial results for the fourth
quarter and year-ended December 31, 2007.

Driven primarily by sales of current in-flight entertainment
(IF&E) and new next generation in-flight entertainment and
communications (IFE&C) equipment and network access products, net
sales for the 2007 fourth quarter increased approximately 14% to a
record quarterly level of $14.5 million, compared to $12.7 million in
the fourth quarter of 2006. Gross profit for the fourth quarter of
2007 increased to $5.4 million, or 37.2% of net sales, from $4.1
million, or 32.5 % of net sales in the fourth quarter of 2006. Net
loss for the fourth quarter of 2007 was $27,000, or $0.00 loss per
share, which included $196,000 of one-time unamortized exit costs
associated with the early extinguishment of previously existing debt
facilities. Also, since reporting its preliminary earnings estimate on
February 7, 2008, the Company recorded additional non cash adjustments
which totaled $293,000, primarily associated with the carrying value
of inventory. Net loss for the fourth quarter of 2006 was $1.6
million, or $0.04 loss per share.

EMRISE Chairman, President and Chief Executive Officer Carmine T.
Oliva said, "While completing our financial statements for 2007, we
determined that we needed to record additional non-cash adjustments of
$293,000, which resulted in a small net loss for the 2007 fourth
quarter, instead of the profit we estimated in early February.
Although we are disappointed with this shortfall due to the year end
adjustments, we are encouraged by the overall progress we achieved
during the year to reduce our loss. We made significant progress in
the development of our new IFE&C and edge networking products. We
entered new and growing markets and continued the 2007 quarterly trend
of increasing revenues and decreasing losses. Because of this progress
and our ongoing focus on growing sales, improving gross margins, and
effectively controlling operating expenses, we believe we are well
positioned for continued growth and improvement in 2008 and beyond."

"Sales growth for the fourth quarter of 2007 reflects higher
sales, primarily from our electronic devices segment." Oliva added,
"The revenue growth in electronic devices was driven primarily by
increasing foreign sales of military power supplies and new IFE&C
products."

For the year ended December 31, 2007, net sales increased 11% to
$51.3 million from $46.4 million in 2006. Gross profit for the year
was $17.4 million, or 33.8% of net sales, compared to $17.0 million,
or 36.6% of net sales, in 2006. Net loss for 2007 narrowed to $1.9
million, or $0.05 loss per share, including extinguishment of debt
charges of $196,000 recorded in the fourth quarter. Net loss for 2006
was $3.6 million, or $0.10 loss per share. Included within 2006 and
2007 results are $1.5 million and a final $300,000, respectively, of
restatement-related auditing and legal costs.

The increase in net sales for 2007 was due primarily to higher
sales by the Company's foreign subsidiaries, and included new
contracts for power supplies and increased sales of existing and new
IFE&C products from its electronic devices segment and higher sales of
network access products from its communications equipment segment.
While year-over-year sales from EMRISE's domestic subsidiaries
declined in 2007, the Company is expecting significant improvement in
domestic sales of power supplies for military applications and
communication products, primarily as a result of its new TiemPo(TM)
edge network timing product.

Gross profit as a percentage of net sales was down during 2007,
due primarily to the impact of the transition of RO Associates'
manufacturing process to a contract manufacturer, lower sales at
EMRISE's U.S. communications subsidiary, and changes in product mix.
The shift in product mix was primarily due to higher sales of new
IFE&C products into commercial markets, which have lower margins than
military markets, but which management believes has significant
long-term revenue growth potential. Higher sales volumes and greater
production efficiency are expected to offset the impact of lower gross
margins in these markets to result in higher operating income in the
future. Communications segment gross margins are also expected to
improve, especially in the second half of 2008 primarily due to
anticipated increases in shipments of TiemPo(TM) timing and
synchronization products, which carry higher gross margins.

As of December 31, 2007, cash and equivalents were $4.8 million,
up $1 million from a year ago. Working capital was $16.1 million, up
$7.0 million or 77% from a year ago and current ratio was 2.5:1 up
from 1.6:1 a year ago. Total assets were $48.2 million, long term debt
was $4.9 million and stockholders' equity was $25.0 million.

Oliva said, "We are encouraged by the current trend in orders and
revenue during the first three months of 2008 and believe they reflect
a growing interest in our new IFE&C, edge networking and military
power supply products. To ensure that we capitalize on these growth
market opportunities, during the first half of this year we plan to
continue to invest in the engineering required to further develop
these new products. While this will increase expenses and impact our
bottom line in the first and second quarters of 2008, we believe that
we will see significant return on these investments as we expect sales
to grow, gross profit to improve and operating income to increase
during the last half of the year. We expect that revenue in the first
quarter of 2008 will be up year over year and we remain confident that
revenue for 2008 will approach $60 million."

Even following record shipments in fourth quarter 2007, backlog
remained at record levels at the end of 2007 at $25.3 million with
approximately 94% of the orders related to the Company's electronic
devices business with the remaining 6% of the orders related to the
communications equipment business. EMRISE estimates that the majority
of its current backlog is shippable within 12 months.

Going forward, EMRISE expects continued growth in sales in foreign
communications markets. Domestic sales are also expected to increase
due to growing demand primarily for TiemPo(TM) edge network products,
especially from anticipated opportunities with public communication
carriers and other large-scale customers, as evidenced by our recently
announced orders from a national communications carrier in the U.S.

Sales of electronic devices are also expected to rise in 2008,
including sales of EMRISE's patented very low profile, or VLP, rotary
switches and ongoing sales growth of IFE&C equipment and subsystems.
New orders for these products during the first quarter of 2008 have
been encouraging, with shipments through March of this year having
been higher as compared to the same period last year.

Not included in EMRISE's expectations for 2008 described above, is
the impact of the Company's business strategy to seek an acquisition
of a U.S.-based radio frequency (RF) device and subsystem manufacturer
to complement the Company's existing line of electronic devices. Such
an acquisition could facilitate the Company's expansion into the
domestic military market, which has been largely unavailable to EMRISE
due to the lack of a U.S.-based manufacturing facility. Oliva said
having a $10 million acquisition credit facility in place would allow
the Company to move quickly on an acquisition opportunity. Oliva
indicated that such an acquisition would not only strengthen its
business but would also provide a source of incremental revenues,
enhanced profitability and additional cash flow and would be accretive
of earnings. There can be no assurances that the Company will be
successful in its attempts to make such an acquisition.

Webcast and Conference Call Information

A conference call with management is scheduled for 8:30 a.m. PDT
(11:30 a.m. EDT) today to discuss the Company's financial results for
2007 and its business strategy and outlook for 2008. To join the call,
dial toll-free (877) 407-8031 five minutes prior to the scheduled
start time. For callers outside the United States, dial (201)
689-8031.

A live web cast of the call may also be accessed at
http://www.investorcalendar.com. An archived replay of the webcast
will be available shortly after the call. The replay may be accessed
through the same web link listed above or for callers in the U.S. via
telephone at (877) 660-6853, or at (201) 612-7415 for callers outside
the U.S. The conference ID is #279429 and the account number 286. The
telephone and webcast replays will be available for 90 days.

About EMRISE Corporation

EMRISE designs, manufactures and markets electronic devices,
sub-systems and equipment for aerospace, defense, industrial and
communications markets. EMRISE products perform key functions such as
power supply and power conversion; RF and microwave transmission;
digital and rotary switching; and network access, including timing and
synchronization of communications networks carrying wireline,
wireless, and cable data, voice, and video. Primary growth driver
applications for EMRISE products include commercial avionic "In-Flight
Entertainment and Communications" products and communications "Network
Timing and Synchronization" equipment. EMRISE serves customers in
North America, Europe and Asia through operations in the United
States, England, France and Japan. The Company has built a worldwide
base of customers including all of the Fortune 100 in the U.S. that do
business in markets served by EMRISE and many similar-size companies
in Europe and Asia. For more information go to www.emrise.com

Safe Harbor Statement under the Private Securities Litigation
Reform Act of 1995

With the exception of historical information, the matters
discussed in this press release, including without limitation EMRISE's
ability to develop sales of its new IFE&C and edge networking
products, ability to successfully enter new and growing markets,
ability to grow sales, improve gross margins, or to control operating
expenses, ability to continue growth and improvement in 2008 and
beyond, ability to significantly improve domestic sales of power
supplies for military applications and communication products,
including sales of its new TiemPo(TM) edge network timing product,
ability to achieve significant long-term revenue growth potential from
higher sales of new IFE&C products, ability to achieve higher
operating income as a result of higher sales volumes and greater
production efficiency to offset the impact of lower gross margins in
IFE&C products, ability to achieve higher communications segment gross
margins, especially in the second half of 2008, ability to achieve
increases in shipments of TiemPo(TM) timing and synchronization
products or to achieve higher gross margins on such shipments, ability
to continue to invest in the engineering required to further develop
new products, ability to achieve a significant return on investments
as a result of expectations for sales to grow, gross profit to improve
and operating income to increase in the last half of 2008 despite
increased expenses and the impact of such expenses to EMRISE's bottom
line in the first and second quarters of 2008, ability to increase
revenue in the first quarter of 2008 year over year, ability to
achieve revenue for 2008 approaching $60 million, ability to ship the
majority of current backlog within the next 12 months, ability to
achieve continued growth in sales to foreign communications markets,
ability to increase domestic sales due to growing demand for
TiemPo(TM) edge-network products, especially from anticipated
opportunities with national public communication carriers and other
large-scale customers, ability to increase sales of patented VLP
rotary switches and ongoing sales growth of IFE&C equipment and
subsystems, ability to successfully complete an acquisition strategy
in the U.S. to complement the Company's existing line of RF devices
and subsystems, that could facilitate EMRISE's expansion into the
domestic military market or the ability for such a possible
acquisition to strengthen EMRISE's business, provide a source of
incremental revenues, enhanced profitability and additional cash flow
are all forward-looking statements that involve a number of risks and
uncertainties. The actual future results of EMRISE CORPORATION could
differ from those statements. Factors that could cause or contribute
to such differences include, but are not limited to, unforeseen
technical issues, failure to successfully market and sell new IFE&C
and edge network products, failure to successfully penetrate new and
growing markets, inability to grow sales, unexpected costs or lack of
expected savings that affect future gross profit, inability to control
operating expenses, failure to successfully improve sales of domestic
power supplies for military applications and communication products,
failure to offset the impact of lower gross margins in IFE&C through
higher sales volume and/or through greater production efficiency,
unexpected cost increases that affect the profitability of products,
inability to support the required development of new or existing
products, failure to achieve expected higher sales levels for
TiemPo(TM) in the second half of 2008, despite investments in the
product line during the first half of the year, unexpected delays by
EMRISE customers, vendors or other circumstances which prevent timely
shipment of current or future orders as expected, failure to develop
opportunities with public communication carriers or other large scale
customers for TiemPo(TM), failure to successfully complete an
acquisition strategy in the U.S., possibility of incurring significant
costs toward such an acquisition with no guarantee of success, and
those factors contained in the "Risk Factors" Section of the Company's
most recently filed Form 10-K, and other EMRISE filings with the
Securities and Exchange Commission.

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EMRISE CORPORATION
Consolidated Balance Sheets
(in thousands, except share and per share amounts)

December 31, December 31,
2007 2006
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 4,764 $ 3,802
Accounts receivable, net of allowances for
doubtful accounts of $345 at December 31,
2007 and $391 at December 31, 2006 9,406 9,220
Inventories 11,664 10,575
Current deferred tax assets 200 171
Prepaid and other current assets 1,617 1,082
------------ ------------
Total current assets 27,651 24,850

Property, plant and equipment, net 2,227 2,245
Goodwill 13,129 12,995
Intangible assets other than goodwill, net 3,269 3,546
Deferred tax assets 617 555
Other assets 1,287 594
------------ ------------
Total assets $ 48,180 $ 44,785
============ ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,440 $ 4,640
Accrued expenses 5,435 5,059
Lines of credit - 4,310
Current portion of long-term debt 71 516
Notes payable to stockholders, current
portion 521 500
Income taxes payable 712 519
Other current liabilities 357 250
------------ ------------
Total current liabilities 11,536 15,794

Long-term line of credit 3,957 -
Long-term debt, net of discount of $1,264
and $0, respectively 4,829 533
Notes payable to stockholders, less current
portion 750 1,250
Deferred income taxes 904 1,053
Other liabilities 1,158 982
------------ ------------
Total liabilities 23,134 19,612

Commitments and contingencies

Stockholders' equity:
Preferred stock,$0.01 par value.
Authorized 10,000,000 shares, zero shares
issued and outstanding - -
Common stock,$0.0033 par value. Authorized
150,000,000 shares; 38,254,000 and
38,082,000 shares issued and outstanding
at December 31, 2007 and December 31,
2006, respectively 126 125
Additional paid-in capital 44,527 43,083
Accumulated deficit (20,661) (18,733)
Accumulated other comprehensive income 1,054 698
------------ ------------
Total stockholders' equity 25,046 25,173
------------ ------------
Total liabilities and stockholders'
equity $ 48,180 $ 44,785
============ ============
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EMRISE CORPORATION
Consolidated Statements of Operations
(in thousands, except per share amounts)

Years Ended
December 31,
-----------------
2007 2006
-------- --------

Net sales $51,345 $46,384
Cost of sales 33,995 29,413
-------- --------
Gross profit 17,350 16,971

Operating expenses:
Selling, general and administrative 15,392 16,117
Engineering and product development 2,792 3,085
-------- --------
Total operating expenses 18,184 19,202
-------- --------
Loss from operations (834) (2,231)

Other income (expense):
Interest income 155 89
Interest expense (848) (490)
Loss on early extinguishment of debt (196) -
Other, net 529 (364)
-------- --------
Total other income (expense), net (360) (765)
-------- --------

Loss before income taxes (1,194) (2,996)
Income tax provision (benefit) 734 619
-------- --------
Net loss $(1,928) $(3,615)
======== ========

Loss per share:
Basic $ (0.05) $ (0.10)
======== ========
Diluted $ (0.05) $ (0.10)
======== ========

Weighted average shares outstanding
Basic 38,176 37,981
======== ========
Diluted 38,176 37,981
======== ========
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EMRISE Corporation
John Donovan, 909-987-9220, x3201
Vice President Finance and Administration
JDonovan@emrise.com
or
Allen & Caron Inc.
Dan Matsui (investors) or Len Hall (media), 949-474-4300
D.Matsui@allencaron.com
Len@allencaron.com

Copyright Business Wire 2008