Incentra Solutions Report 2006 Second Quarter, Six-Month Results

Total Revenues from Continuing Operations Increase Year Over Year 34% and 58%, Respectively

August 16, 2006

Boulder, CO, August 16, 2006 – Incentra Solutions, Inc. (OTCBB: ICNS), a provider of complete IT and storage management solutions to enterprises and managed service providers in North America and Europe, today announced results for its second quarter and first six months ended June 30, 2006.  Total revenues from continuing operations in the 2006 second quarter increased 34 percent to $18.1 million, from $13.5 million in the 2005 second quarter, and for the first six months of this year, total revenues from continuing operations rose 58 percent to $26.5 million, up from $16.7 million in the first six months of 2005.

The results from continuing operations for the 2006 second quarter and first six months exclude results of the Front Porch Digital Broadcast and Media Division, which Incentra sold in late July to Toronto-based Genuity Capital Partners in an all-cash transaction valued at $38 million.
 
Chairman and CEO Thomas P. Sweeney said that in addition to the year over year increases in revenue, the key accomplishments in this year’s second quarter include closing an insider and management led financing, with investments from three institutional investors; signing a major, multi-year agreement for the resale in Europe of Incentra’s managed storage solutions and services with COLT, one of the largest European providers of business communications and services; and the completion of the purchase of Lombard, IL-based NST, Inc., a leading solutions provider in the greater Chicago area and in the central region.  NST markets storage, networking and security solutions, as well as professional services to customers in the financial services, healthcare, education, non-profit and manufacturing verticals.  

“We remain committed to achieving our goal of becoming the most comprehensive provider of complete IT solutions for enterprise customers in North America and Europe,” Sweeney added.  “As previously announced, we will continue to focus on four key initiatives:  Reaching cash flow break even by the end of 2006; increasing sales of our higher margin managed services and professional services; investing in organically growing our current operations; and considering strategic acquisitions that are accretive to our business and that will expand our market penetration.  Additionally, we believe we will exit this year with 2006 revenues increasing 40 percent to 50 percent over 2005 levels.

Sweeney said that with the recently concluded sale of Front Porch Digital, Incentra now has additional resources to invest in the growth of its Enterprise business, both organically and through acquisitions. 

Following the sale of Front Porch Digital in late July, and paying off virtually all of its secured long term and revolving debt, Incentra now has approximately $11 million in cash and cash equivalents, a substantially increased working capital balance, positive net tangible assets, and access to a $10 million revolving line of credit.  Sweeney noted that the Company would record a gain on the sale of Front Porch Digital in this year’s third quarter. 

For 2006 second quarter, the loss from continuing operations was $3.7 million, compared to a loss from continuing operations of $2.1 million in the prior year period.  This year’s second quarter results included $468,000 of non-cash, stock based compensation expense due to the adoption of SFAS 123R, compared to $108,000 recorded in the 2005 second quarter.  The loss from discontinued operations in this year’s second quarter was $466,000, compared to a $273,000 loss from discontinued operations in the 2005 second quarter.
 
Net loss applicable to common shareholders for the 2006 second quarter was $4.8 million, or a loss per basic and diluted share of $0.34, compared to a net loss applicable to common shareholders of $3.0 million, or a loss of $0.24 per basic and diluted share in the prior year period. 

For the first six months of 2006, the loss from continuing operations was $8.2 million, compared to a loss from continuing operations of $4.0 million in the prior year period.  Included in the results for the first six months of 2006 was $835,000 of non-cash, stock based compensation expense, compared to $169,000 recorded in the first six months of 2005.   Income from discontinued operations for this year’s first six months was $399,000, compared to a loss from discontinued operations of $669,000 in the prior year period. 
Net loss applicable to common shareholders for this year’s first six months was $9.1 million, or a loss of $0.66 per basic and diluted share, compared to a net loss applicable to common shareholders of $6.0 million, or a loss of $0.51 per basic and diluted share in the prior year period.

The Company reported an EBITDA1  loss, as adjusted, for the second quarter and first six months ended June 30, 2006, of approximately $1.6 million and $3.4 million respectively.

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Contacts:
Allen & Caron, Inc. 
Rene Caron (investors)
rene@allencaron.com

Len Hall (financial media)
len@allencaron.com
949-474-4300 

Incentra Solutions, Inc.
Paul McKnight, Chief Financial Officer
pmcknight@incentrasolutions.com
303-449-8279