OSI Reports 2005 Fourth Quarter and Full Year Results; Offers 2006 Annual Revenue Guidance of $28 Million to $32 Million

VANCOUVER, British Columbia—(BUSINESS WIRE)—Feb. 21, 2006— Offshore Systems International Ltd. (TSX:OSI)(OTCBB: OFSYF) -

Fourth Quarter Revenue Increased 65% from Fourth Quarter of 2004

Company Provides Strategic Goals for 2006

Offshore Systems International Ltd. (OSI) today announced its financial results for the fourth quarter and full year ended November 30, 2005, reported in Canadian dollars and in accordance with U.S. GAAP.

For the fourth quarter of 2005, consolidated revenue increased 64.8 percent to $6.1 million from $3.7 million for the same period in 2004. Revenue improvements were driven by the timing of contract awards, delivery of existing contracts, and the addition of revenue from Mapcon Mapping Consultants Inc. which was acquired in April 2005.

Full year 2005 consolidated revenue of $13.4 million compares to $13.5 million in the prior year. Revenue growth for 2005 was affected by unexpected delays in contracts. These contracts are expected to be secured in 2006.

For the fourth quarter of 2005, the net loss of $1.1 million compares to a net loss of $227,940 for the same quarter in 2004. For 2005, the net loss of $3.4 million compares to net earnings of $248,017 for 2004. The 2005 results include the impact of approximately $790,000 of non-recurring expenses and approximately $1.0 million of one-time non-cash income tax asset adjustments incurred in the fourth quarter of 2005. Lower revenue and gross profit also contributed to the net loss for 2005.

For the fourth quarter of 2005, the net loss attributable to common shareholders was $1.8 million or $0.10 per share (diluted) and includes approximately $650,000 for dividends paid to preferred shareholders. This compares to the net loss of $304,663 or $0.02 per share (diluted) in the prior year's quarter. The net loss attributable to common shareholders was $10.2 million or $0.37 per share for 2005 and includes non-cash charges of approximately $4.8 million related to the one-time accretion of a beneficial conversion feature on the issuance of class B preferred shares series 2 in April 2005. This compares to the net loss of $58,873 or $0.01 per share (diluted) for 2004.

"We achieved important milestones in 2005 that will foster the next stage of growth and development at OSI," said Ken Kirkpatrick, president and chief executive officer of OSI. "While contract delays and one-time expenses hampered our annual financial performance, we continue to execute on our growth strategy. We closed the year having completed two U.S.-based acquisitions, which provide greater access to the U.S. market, and will substantially increase our size in 2006. Looking ahead, it is evident we have a solid foundation upon which to accelerate the growth of our business."

Fiscal 2005 Highlights

- Awarded contracts totaling approximately $15.5 million primarily by existing customers in Australia, Canada, Denmark, New Zealand, Portugal, the United Kingdom, and the United States.

- Completed financing in April for net proceeds of $14.2 million to support growth strategy.

- Acquired Mapcon Mapping in April for approximately $1.3 million in cash; approximately $3.5 million in new U.S. business booked by division following acquisition.

- Partnered with Raytheon Marine GmbH in August to pursue integrated bridge system opportunities.

- Partnered with Terma A/S in November to integrate the company's Common Operational Picture products into Terma's next-generation command and control system.

- Launched advanced submarine navigation product with first installations by Canadian and Royal British navies.

- Acquired CHI Systems Inc., a key technology supplier for the U.S. Department of Defense, for $10.4 million in a combination of cash and stock, subsequent to year-end in December.

Outlook

"For 2006, we remain focused on strengthening our leadership internationally and penetrating the U.S. defense and homeland security markets," said Mr. Kirkpatrick. "We have outlined a number of goals for the year, and we are confident in our ability to achieve our objectives in 2006."

Management offers the following outlook for the fiscal year ending November 30, 2006:

- Revenue in the range of $28 million to $32 million.

Management has outlined the following goals for the fiscal year ending November 30, 2006:

- Demonstrate U.S. market penetration by winning a significant U.S. Navy contract.

- Demonstrate market development in the company's existing customer base by securing a significant prime contract from the Royal British Navy.

- Expand the company's customer base by securing one new customer in each of the three defense domains: air, land, and sea.

- Accelerate U.S. and international market penetration by signing a teaming agreement with a top-tier defense contractor.

- Diversify into new market sectors by leveraging the company's core navigation technology in the development of new products.

Reporting Change in 2006

In 2006, OSI plans to change its revenue and reporting segments to reflect management's analysis of the business following its two recent U.S. acquisitions. Beginning in the first quarter of 2006, the company will report consolidated revenue as Marine systems, Land and air systems, and Mapping (previously Software, Geomatics, Systems and software components, and Other). Segmented results will be reported as Offshore Systems Ltd., CHI Systems Inc., and Mapcon Mapping Inc. (previously Navigation systems, Applications, and Geomatics).

Conference Call

OSI will present the results from the 2005 fourth quarter and year-end at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time), today, February 21, 2006. The conference call may be accessed at www.osil.com/invest.html. To listen to the conference call live by telephone, dial +1-866-400-2280 for participants in North America and +1-416-850-9143 for Toronto area and international participants approximately ten minutes before the start time. A telephone playback will be available after the completion of the call until February 24, 2006 at midnight Eastern Time (9:00 p.m. Pacific Time) and can be accessed at +1-888-214-7699 using the access code 5094477.

About OSI

Offshore Systems International Ltd. (OSI) is the world's leading developer and supplier of military navigation systems. Focused on the commercial, defense, and homeland security markets, OSI delivers advanced systems and software to address the growing need for enhanced situational awareness in command, control, and intelligence applications. By providing essential tactical and geospatial information, the company's systems and software help decision-makers know the precise location of mission operations across all military forces while integrating information with allies. OSI systems are in use by military, government, and commercial customers around the world. The company is publicly traded on the Toronto Stock Exchange (OSI) and the Over the Counter Bulletin Board (OFSYF). For additional information please visit www.osil.com.

Forward-Looking Statements:

This news release contains items that constitute forward-looking statements within the meaning of securities laws including Section 27a of the Securities Act of 1933, as amended, and Section 21e of the Securities Exchange Act of 1934, as amended. These statements are made under the 'safe harbor' provisions of the Private Securities Litigation Reform Act of 1995 and, as such, involve known and unknown risks and uncertainties and other factors that may cause the actual results to be materially different from the results implied herein. Offshore Systems International can give no assurances that its representations will be achieved or that it will update them at any time in the future.

Offshore Systems International Ltd.
Consolidated Balance Sheets (Unaudited)
(in millions of Canadian dollars, U.S. GAAP)

                                         November 30     November 30
                                                2005            2004
--------------------------------------------------------------------

Assets
Current assets
 Cash                                   $  9,599,801    $    251,037
 Restricted cash                             221,264                      -
  Accounts  receivable                                            11,002,470              9,140,478
  Inventory                                                                  1,094,634                  649,427
  Prepaid  expenses  and  deposits                              624,629                  142,752
  Deferred  income  taxes                                                          -                  780,331
                                                                                ----------------------------
                                                                                    22,542,798            10,964,025
  Plant  and  equipment                                              1,015,057                  938,102
  Intangible  and  other  assets                                  732,912                  408,611
  Goodwill                                                                        481,014                              -
                                                                                ----------------------------
                                                                                $  24,771,781        $  12,310,738
                                                                                ----------------------------
                                                                                ----------------------------

Liabilities  and  Stockholders'  Equity

Current  liabilities
  Accounts  payable  and  accrued
    liabilities                                                      $    3,919,534        $    2,596,362
  Income  taxes  payable                                                284,833                              -
  Unearned  revenue                                                        530,321                    79,865
                                                                                ----------------------------
                                                                                      4,734,688              2,676,227
Deferred  income  taxes                                                230,806                              -
                                                                                ----------------------------
                                                                                      4,965,494              2,676,227
                                                                                ----------------------------
Capital  stock
Authorized
Issued  and  outstanding
  30,262  Class  A  preference  shares  -
    Series  A  (2004  -  30,262)                                        30,262                    30,262
  nil  Class  B  preference  shares  -
    Series  1  (2004  -  57,711)                                                  -              2,163,621
  341,240  Class  B  preference  shares  -
    Series  2  (2004  -  nil)                                      11,412,208                              -
  30,367,309  common  shares
    (2004  -  27,488,074)                                          22,832,892            20,047,731
                                                                                ----------------------------
                                                                                    34,275,362            22,241,614
Warrants                                                                      5,207,234                  661,575
Additional  paid  in  capital                                  4,743,012                  928,169
Accumulated  deficit                                            (24,446,827)        (14,196,847)
Accumulated  other
  comprehensive  income                                                  27,506                              -
                                                                                ----------------------------
                                                                                    19,806,287              9,634,511
                                                                                ----------------------------
                                                                                $  24,771,781        $  12,310,738
                                                                                ----------------------------
                                                                                ----------------------------


Offshore  Systems  International  Ltd.
Consolidated  Statements  of  Earnings  (Unaudited)
(in  millions  of  Canadian  dollars  except  per  share  amounts,  U.S.  GAAP)

                                            Three  months  ended                                  Years  ended
                                                          November  30                                  November  30
                                              2005                  2004                    2005                    2004
--------------------------------------------------------------------
Revenue
Systems
  and  system
  components        $    3,512,294    $  1,927,201    $    5,665,590    $    4,328,740
Software                    1,206,140            906,701          3,898,423          5,576,540
Geomatics                  1,292,711            754,829          3,535,907          2,979,728
Other                                79,717            107,406              327,520              566,295
                              -----------------------------------------------------
                                    6,090,862        3,696,137        13,427,440        13,451,303
Cost  of  sales          2,961,569        1,727,488          6,932,421          5,669,324
                              -----------------------------------------------------
Gross  profit            3,129,293        1,968,649          6,495,019          7,781,979
                              -----------------------------------------------------

Expenses
General  and
  administrative      1,631,595            837,022          4,763,190          3,330,119
Research  and
  development                740,462            496,207          2,023,180          2,104,806
Sales  and
  marketing                    941,093            870,230          2,864,282          3,160,359
Depreciation  and
  amortization                70,619              64,376              300,286              231,033
Interest  expense            3,184                    812                28,537                  2,045
Interest  income          (74,343)            (3,929)          (187,751)            (27,707)
Foreign
  exchange  loss                    (67)              6,647              122,310                38,338
Technology
  Partnerships
  Canada  royalty          136,845              42,665              298,289              124,425
Technology
  Partnerships
  Canada
  contribution            (238,205)        (245,875)      (1,337,770)      (1,471,414)
                              -----------------------------------------------------
                                    3,211,183        2,068,155          8,874,553          7,492,004
                              -----------------------------------------------------

Net  earnings
  (loss)  before
  income  taxes              (81,890)          (99,506)      (2,379,534)            289,975
Income  tax
  expense
  (recovery)
Deferred  income
  tax  expense
  (recovery)                  865,944            (98,340)            858,407            (479,446)
Current  income
  tax  expense
  (recovery)                  107,006            226,774              173,253              521,404
                              -----------------------------------------------------
                                        972,950            128,434          1,031,660                41,958
                              -----------------------------------------------------
Net  earnings
  (loss)                $  (1,054,840)  $    (227,940)  $  (3,411,194)  $        248,017
                              -----------------------------------------------------
                              -----------------------------------------------------
Net  earnings
  (loss)
  attributable
  to  common
  shareholders    $  (1,800,609)  $    (304,663)  $(10,249,981)  $        (58,873)
                              -----------------------------------------------------
                              -----------------------------------------------------
Earnings  (loss)
  per  share
  Basic                  $            (0.06)  $          (0.01)  $            (0.37)  $              0.00
                              -----------------------------------------------------
                              -----------------------------------------------------
  Diluted              $            (0.10)  $          (0.02)  $            (0.37)  $            (0.01)
                              -----------------------------------------------------
                              -----------------------------------------------------

 


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