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30º - 15' - 43"N 97º - 44' - 43"W (Austin TX) 51º - 03' - 20"N 113º - 59' - 26"W (Calgary AB)

Cell-Loc reports FY 2001 Q4 results for the three months ended June 30, 2001

Significant progress made during a time of market challenges

CALGARY AB, August 23, 2001 - Cell-Loc Inc. (TSE: CLQ) today reported its financial results for the fourth quarter of fiscal year 2001 ended June 30, 2001. The net loss for the quarter was $3.8 million reflecting the Company's continued focus on cost controls. During the year ended June 30, 2001 the Company incurred a loss of $22.3 million, prior to business restructuring and related asset impairment charges of $18.1 million, resulting in a total loss of $40.4 million.

"The restructuring plan is working," said Cell-Loc's president & CEO, Dr. Michel Fattouche. "Both capital and operating costs have been significantly reduced and our focus on generating revenue has been rewarded with revenue from licensing fees. While we are pursuing a number of opportunities, it is taking longer than hoped to conclude deals in this difficult economic environment. I remain confident that Cell-Loc has both the technology and the business strategy to create significant value in the long term.

During the quarter the Company recognized $200,000 of licensing revenue representing the initial installment on the Asset Trax licensing agreement, a significant milestone in the Company's growth as an operating company. The Company also signed memorandums of understanding with Amapri Telecom and IQ2 Communications.

Total operating costs of $3.8 million in the quarter continued to show improvement from previous quarters ($4.1 million in Q3, $7.9 million in Q2, and $7.2 million in Q1). Costs were down in all areas except research & development where the Company invested additional funds in the development of the Cellocate Beacon^TM. Cost control measures were also demonstrated by significant reduction in capital expenditures for the quarter to only $97,000.

Subsequent to quarter end the Company concluded a private placement of 588,235 Units at $1.70 per unit for total proceeds of $1 million. Each Unit consists of one common share and one share purchase warrant at $2.04. The Company had a cash balance at the end of the quarter of $3.6 million and accounts payable of $3.8 million.

CORPORATE HIGHLIGHTS

Restructuring Progress
The restructuring plan implemented in early January 2001 has dramatically reduced operating costs and has focused the resources of the Company on critical projects directed at revenue generation. Due to this focus, the Company was successful at improving operational performance, generating commercial revenue from licensing fees and signing two memorandums of understanding.

Revenue
The company was successful in generating revenue in the fourth quarter and received $200,000 in licensing fees. Asset Trax of Calgary, Alberta, made this first installment following the execution of the $2 million license agreement for the asset tracking markets in Calgary, Alberta and Austin, Texas.

Contracts/MoU
Memorandums of understanding (MoU) were signed with Amapri Telecom and IQ2 Communications during the quarter. Amapri Telecom, a telecommunications system integrator based in Sao Paulo, Brazil signed an MoU valued at US$60 million over five years for the rights to offer location-based services such as asset tracking in the South American market. IQ2 Communications, a management and service company based in Calgary, Alberta, signed an MoU valued at $1 million for the sole rights of the fleet tracking market in Calgary.

Cellocate Beacon^TM
Cell-Loc announced the completion of the Cellocate Beacon I, a low-cost wireless device that enables numerous location services using Cell-Loc's existing networks in Calgary, Alberta and Austin, Texas. A key element in Cell-Loc's long-term wireless location strategy, future generations of this wireless device will be miniaturized to a size that can be resident in almost any device (consumer electronics, laptops, PDA's, cell phones).

Cellocate^TM Network
Third parties validated the Cellocate system's technical abilities and accuracy as the Company participated in the first ever demonstration of location-based messaging in the U.S. The Cellocate system delivered emergency alert messages to groups of cellular handsets in targeted geographical locations in Austin, Texas. Cell-Loc was invited to participate in this demonstration by the Cellular Emergency Alert Services association.

MANAGEMENT DISCUSSION AND ANALYSIS

During the year ended June 30, 2001 the Company incurred a loss of $22.3 million, prior to business restructuring and related asset impairment charges of $18.1 million for a total loss of $40.4 million. The increase of the loss from $8.9 million in the year ended June 30, 2000 reflects the increased staffing levels and costs related to initial network deployment and business development and marketing activities.

Prior to the fourth quarter of fiscal 2000 (the three months ended March 31, 2000), the Company's principal activities were focused on research and development of the Cellocate System. In the fourth quarter of fiscal 2000 the Company started the deployment of a network in Austin, Texas and began major marketing and business development efforts. This increased activity is reflected in the Company's quarterly operating costs, which increased from $2.5 million in the three months ended March 31, 2000 to $5.3 million, $7.2 million and $7.9 million in each of the next three quarters respectively.

In December 2000 the Company conducted a review of its operations and as a result narrowed its focus to a limited number of critical projects and implemented a restructuring which included staff reductions, cancellation of non-core projects, capital expenditure reductions, office consolidations and reduced discretionary expenditures. As a result, operating costs in the three months ended March 31, 2001 were reduced by 49% to $4.1 million from $7.9 million in the previous quarter. Operating costs were further reduced to $3.8 million for the three months ended June 30, 2001.

The business restructuring also resulted in a $18.1 million charge to earnings. This charge included severances, future lease costs, cancellation and restocking charges and provisions for impairment to asset values.

Revenues

The Company earned $200,000 from license fees in fiscal 2001 and $136,000 from a contract for a traffic study. In the fourth quarter of fiscal 2001, Asset Trax, a wireless location-based systems integration company based in Calgary, Alberta, signed a licensing agreement for the sole rights to the asset tracking business sector in Austin, Texas and Calgary, Alberta.

In February 2001, the Company was contracted by the federal government to study the collection and dissemination of real-time traffic information in Calgary, Alberta for traffic monitoring purposes. Due to the success of the first phase of this trial, the Company is proposing phase II of this study, which would result in additional consulting fees.

Operations Expenses

Operations expenses were $7.5 million in the year ended June 30, 2001, as compared to $0.8 million for the prior year. Operations expenses were minimal in the prior year as the Company did not commence network deployment until the fourth quarter of fiscal 2000. The costs for the year ended June 30, 2001 are comprised largely of employee costs, tower lease costs and telecommunications and power costs for each tower installation. These costs were as high as $2.8 million in the quarter ending December 31, 2000, but were reduced to $1.6 million and $1.4 million in the quarters ending March 31, 2001 and June 30, 2001 respectively primarily due to the reduction in staffing levels. Research and Development Research and development costs of $4.9 million in the year ended June 30, 2001 increased 18% from $4.1 million in the previous year. The increase in costs reflects increased staffing during the period from July 2000 to December 2000 to support several ongoing research and development projects. Subsequent to December 2000 staffing levels were reduced with the cancellation of a number of non-core projects. As a result, research and development costs in the six months ended June 30, 2001 decreased to $1.7 million compared to $3.2 million in the six months ended December 30, 2000.

Marketing

Marketing and business development expenses increased 31% to $4.4 million in the year ended June 30, 2001 from $3.3 million in the previous year. The increase reflects increased staffing, advertising and promotion, trade show activities and costs related to business development. This increase began in the fourth quarter of fiscal 2000 in conjunction with the Company's commencement of deployment of its Austin network. The high level of marketing and business activities continued through to the second quarter of fiscal 2001 as reflected by quarterly costs of $2.2 million in the three months ended June 30, 2000, $2.5 million in the three months ended September 31, 2000 and $1.4 million in the three months ended December 31, 2000. In the three months ended March 31, 2001 these costs were reduced to $0.3 million through staff cuts and reduced promotional activities as the Company focused on direct revenue generating opportunities. Costs were further reduced to $0.2 million in the three months ended June 30, 2001.

General and Administrative

General and administrative costs increased to $5.0 million in the year ended June 30, 2001 from $1.8 million in the previous year. The increase reflects increased staffing and related costs, expanded office space, and professional fees in the first six months of the year due to additional activity related to network deployment and business development. As with other cost categories, general and administrative costs were reduced in the quarter ended March 31, 2001 as compared to the prior quarter through staff reductions, office consolidation and reduced discretionary expenditures. As a result of expense reductions commencing in January 2001, general and administrative expenditures of $3.0 million for the six months ended December 31, 2000 were reduced by 33% to $2.0 million for the six months ended June 30, 2001.

BUSINESS RISKS AND PROSPECTS

Location-based services can be divided into two distinct groups: markets existing today and emerging markets that have future potential. As part of Cell-Loc's January restructuring plan, the company has targeted existing tracking markets that have the potential to generate immediate revenue. The need for asset and fleet tracking services is well established, however the Company's business plan depends on the adoption rate for such services. Additionally the Company's business plan for the development of city, regional and ultimately national networks and related service offerings will require significant marketing efforts, working capital and increased staff. The resources required for development of the national networks and related service offerings, in addition to the Company's continuing research, development and testing operations, may cause significant strain on the Company's management, technical, financial and other resources.

With proven wireless location technology the existing tracking market and the emerging wireless Internet market offer the Company significant revenue potential. The Company's ability to continue ongoing operations is dependent upon obtaining financing to expand its network, and develop and commercialize its business and service offering to the point that it achieves profitable operations and positive cash flows on a commercial scale. The Company's ability to generate net income and positive cash flow in the future is dependent upon various factors, including:

• the level of market acceptance of its services;
• the degree of competition encountered by the Company;
• the cost of acquiring new customers;
• the ability to manage growth;
• general economic conditions.

Please direct all Cell-Loc investor inquiries to:

Tim McNulty
Manager, Investor Relations
Tel:403-569-7073
tmcnulty@cell-loc.com