DataLogic International - Press Release

Monday May 22, 2006

News Release

DataLogic International Reports 25% Revenue Increase for Q1

IRVINE, CA, May 22, 2006 – DataLogic International, Inc., (OTC Bulletin Board: DLGI; Berlin, Frankfurt Stock Exchange: 779612), a provider of consulting services, GPS-based mobile resource management, secured mobile communications and network security, today announced financial results for the fiscal 2006 first quarter ended March 31, 2006.

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Net sales for the first quarter ended March 31, 2006 were $4,224,302 as compared to net sales of $3,368,268 for the quarter ended March 31, 2005. The 25% increase in revenue was primarily attributable to the Communications segment sales growth of 1,200% to $1,096,000 as compared to net revenues of $83,000 for the same period in 2005.

Gross profit for the quarter ended March 31, 2006 was $438,989, or 10% of net revenue, as compared to gross profit of $434,768, or 13% of net revenue, for the same period in the prior year. The decrease in the Company’s gross profit margin was primarily due to an increase in workers compensation and unemployment tax rate in the Consulting Services segment.

Operating expenses for the quarter ended March 31, 2006 were $1,680,141 as compared to $674,561 for the same period in the prior year. The 149% increase in operating expenses were primarily attributable to an increase in compensation costs associated with the expensing of stock options pursuant to SFAS 123(R), an increase in employee benefits, workers compensation, unemployment insurance, professional fees, bad debt and other one time costs associated with the restatement of the companies financial statements in the Consulting segment and acquisition cost of CBSi, as well as increases in sales and marketing costs in the Communications segment.

Interest expense for the quarter ended March 31, 2006 was $87,470 as compared to $235,364 for the same period in the prior year. The 63% decrease in interest expense was primarily due to a decrease in interest expense associated with the amortization of the debt discount on the convertible term note issued to Laurus which was paid in January 2006. Loss from debt extinguishment was $1,337,859 as a result of the repayment of the Laurus convertible term note. The change in the fair value of derivative and warrant liabilities was ($218,868) as compared to $680,976 for the quarter ended March 31, 2005. The increase was due to the write-off of the derivative warrant liabilities as a result of the repayment of the Laurus convertible term note. Realized gain from the sale of property and equipment was $9,962 due to a sale of property.

As a result of the above, the net loss for the quarter ended March 31, 2006 was $2,876,187, or a loss of $0.06 per share, as compared to the net profit of $202,619, or a profit of $0.01 per share, for the same period in the prior year.

“The majority of the loss for the quarter was attributable to costs related to the CBSi acquisition, including (non-cash) amortization of intangibles, an increase in sales and marketing expenses related to our Communications segment and several one time costs, including the costs related to the redemption of the Laurus convertible note and costs and professional fees related to the re-statement of our financial statements. Securing a term note to redeem the convertible note was an important strategic step to position our company to execute our growth initiatives going forward” stated Keith Moore, CEO. “We’re seeing healthy results in the Communications segment and confident that the trend will improve as we’re now bidding for more wireless projects as well as receiving more market acceptance of our BounceGPS product. We have also re-aligned our operating segments and reduced redundancy and other expenses and will see the benefit of those changes in the later half of this year.” Said Moore.

About DataLogic International, Inc.
DataLogic International, Inc. provides communications solutions and consulting services to a wide range of U.S. and international commercial enterprises and governmental agencies. DataLogic provides complete GPS and location based services to rapidly growing markets such as vehicle and asset tracking, public safety and homeland security. DataLogic also provides secure mobile communications, network security, video communications as well as Information Technology and consulting services. For more information about DataLogic International, Inc. please visit www.dlgi.com.

This news release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended, regarding, among other things, our plans, strategies and prospects, both business and financial. Although we believe that our plans, intentions and expectations reflected in or suggested by these forward-looking statements are reasonable, we cannot assure you that we will achieve or realize these plans, intentions or expectations. Forward-looking statements are inherently subject to risks, uncertainties and assumptions. Many of the forward-looking statements contained in this news release may be identified by the use of forward-looking words such as: believe, expect, anticipate, should, planned, will, may, intend, estimated, and potential, among others. Important factors that could cause actual results to differ materially from the forward-looking statements we make in this news release include market conditions and those set forth in reports or documents that we file from time to time with the United States Securities and Exchange Commission. All forward-looking statements attributable to DataLogic International or a person acting on its behalf are expressly qualified in their entirety by this cautionary language.

ISIN: US23804Q1022