Patron Announces Second Quarter Revenue of $319 Thousand up 278% from prior year and First Half Revenue of $581 Thousand

BOULDER, Colo., Aug. 14  /PRNewswire-FirstCall/ -- Patron Systems, Inc. (OTC:PTRN) (BULLETIN BOARD: PTRN) , a leading provider of enterprise software to create, manage and share electronic forms and messages, announced today its second quarter 2006 financial results. Revenue for the second quarter ended June 30, 2006 was $318,960 compared to $84,413 in the same period in 2005. For the six months ended June 30, 2006, Patron reported revenue of $580,745 compared to $90,843 in the same period in 2005.

The net loss available to common stockholders for the three months ended June 30, 2006 was $1,621,017 or $0.75 per share on 2,170,653 weighted average shares outstanding compared to $5,028,505 or $2.47 per share on 2,032,823 weighted average shares outstanding in the three months ended June 20, 2005. For the six months ended June 30, 2006, the net loss available to common stockholders was $6,021,091 or $2.83 per share on 2,127,543 weighted average shares outstanding compared to $7,232,300 or $3.93 per share on 1,838,106 weighted average shares outstanding for the six months ended June 30, 2005.

"The results of the second quarter of 2006 have been very significant for the future of Patron Systems," noted CEO Robert Cross. "During this quarter, we received a record amount of new customer contracts and purchase orders ($1,235,000) and we disposed of our LucidLine business unit after changing our business focus to Active Message Management. Combined with our first quarter results, we have generated during 2006 nearly 140% of the revenue generated in all of 2005 when measured on a continuing operations basis. Additionally, we continued to add additional creditors and claimants to the amounts settled under the Creditor and Claimant Liabilities Restructuring, bringing the total amount of debts, claims and other liabilities settled to $29.1 million as of June 30, 2006."

"In addition to these results, since June 30, 2006, our stockholders approved the reverse split of Patron's common stock on a 1-for-30 basis and as of August 4, 2006, the reverse split became effective. We also announced that the Creditor and Claimant Liabilities Restructuring program has been completed. With the completion of this program, we have settled debts, claims and other liabilities totaling $29.6 million for Series A-1 Preferred Stock which has now been converted into 12,330,355 shares of Patron common stock upon the August 4, 2006 effective date of the reverse stock split. Additionally, Patron has settled $383,000 of liabilities for $12,140 in cash payments. The total of all debts, claims and other liabilities settled is nearly $30 million," continued Cross.

The improvement in the Company's net loss available to common stockholders includes the increased revenues described above, improved operating expenses, reduced interest expense and the sale of the Company's discontinued LucidLine business unit. For the three months ended June 30, 2006, operating expenses were reduced $909,000 to $1,625,000. This reduction includes an increase of $159,000 associated with increased staffing levels, a $64,000 increase associated with employee stock option compensation expense and an increase of $263,000 in general and administrative expense. These were offset by a $444,000 reduction in expense associated with the amortization of stock-based compensation arrangements, a reduction of $284,000 associated with work performed in 2005 to bring the Company's SEC filings into compliance and expenses associated with the 2005 acquisitions and a reduction of $686,000 associated with 2005 penalties under stock-based accommodation agreements and penalties under a collateralized financing arrangement.

Interest expense during the three months ended June 30, 2006 was $88,000 which is compared to $1,702,000 for the three months ended June 30, 2005. This reduction is principally related to the issuance, in the three months ended June 30, 2005, of the Bridge II Notes and the associated amortization of deferred financing costs and the accretion of debt discounts incurred with that financing not being incurred in the three months ended June 30, 2006. Additionally the interest expense associated with the outstanding Acquisition Notes and Bridge I Notes in the three months ended June 30, 2005 was reduced with the exchange of a substantial portion of these notes for Series A-1 Preferred stock as of March 31, 2006.

On April 18, 2006, the Company entered into an agreement to sell, effective April 1, 2006, its LucidLine, Inc. business unit to Walnut Valley, Inc. During the three months ended June 30, 2006, the Company reported a net loss on discontinued operations of $0 compared to $748,000 in the three months ended June 30, 2005.

About Patron Systems

Founded in 2002, Patron Systems was established to develop products and technologies that close gaps in the management of an organization's messaging environment. Patron's suite of Active Message Management(TM) products addresses eform creation, capture and sharing, and manages data in an industry standard format (GJXDM) as well as provides solutions for email policy management, email retention policies, archiving and eDiscovery, proactive email supervision, and protection of messages and their attachments in motion and at rest. Patron serves customers in highly regulated industries such as financial services, legal, public safety and law enforcement, healthcare, and pharmaceuticals. Further information is available at http://www.patronsystems.com/ .

Forward-Looking Statements

This release may contain statements that are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on current estimates and projections about Patron Systems' business, which are derived in part on assumptions of its management, and are not guarantees of future performance, as such performance is difficult to predict. Actual outcomes and results may differ materially from what is expressed or forecasted in forward-looking statements due to numerous factors. Such factors include, but are not limited to, the Company's ability to execute effectively its business plan and acquisition strategy, changes in the market for electronic message management solutions, changes in market activity, the development of new products and services, the enhancement of existing products and services, competitive pressures (including price competition), system failures, economic and political conditions, changes in consumer behavior and the introduction of competing products having technological and/or other advantages. These and other risks are described in the Company's filings with the Securities and Exchange Commission, which should be read in conjunction herewith for a further discussion of important factors that could cause actual results to differ materially from those in the forward-looking statements. The Company assumes no obligation to update information concerning its expectations.

Patron Systems, and FormStream, are registered trademarks of Patron Systems Incorporated. All other company and product names belong to their respective owners.

                  PATRON SYSTEMS, INC. AND SUBSIDIARIES
             CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                               (unaudited)


                       Six Months Ended June 30, Three Months Ended June 30,
                              2006         2005         2006         2005

  Revenue                   $580,745      $90,843     $318,960      $84,413

  Cost of Sales
    Cost of products/
     services                 29,897        2,003            -            -
    Amortization of
     technology               55,044      147,731       27,522      128,501
       Total cost of sales    84,941      149,734       27,522      128,501
    Gross profit (loss)      495,804      (58,891)     291,438      (44,088)

  Operating Expenses
    Salaries and related
     expenses              2,448,188    1,076,437    1,438,065    1,214,588
    Consulting expense
     (non-employee
     stock-based
     compensation)                 -      952,875            -      444,375
    Professional fees        885,897      653,383      227,782      511,982
    General and
     administrative          621,575      757,486      297,666       35,422
    Amortization of
     intangibles              61,627       38,877       30,813       30,814
    Stock based
     penalties under
     accommodation
     agreements                    -      689,102            -      320,102
    Stock based penalty
     under
     collateralized
     financing
     arrangement               5,246            -        2,394            -
    Loss on
     collateralized
     financing
     arrangement                   -      366,193            -      366,193
    Loss/(gain)
     associated with
     settlement
     agreements              486,597     (389,103)    (371,616)    (389,103)
       Total operating
        expenses           4,509,130    4,145,250    1,625,104    2,534,373
  Operating loss          (4,013,326)  (4,204,141)  (1,333,666)  (2,578,461)

  Other Income (Expense)
    Interest income            1,961       19,250        1,961            -
    Loss on sale of
     property and
     equipment                  (125)           -         (187)           -
    Interest expense      (1,703,935)  (2,196,535)     (88,421)  (1,701,547)
      Total other
       income (expense)   (1,702,099)  (2,177,285)     (86,647)  (1,701,547)
  Loss from continuing
   operations before
   income taxes           (5,715,425)  (6,381,426)  (1,420,313)  (4,280,008)

    Income taxes                   -            -            -            -
  Loss from continuing
   operations             (5,715,425)  (6,381,426)  (1,420,313)  (4,280,008)

  Loss from discontinued
   operations               (104,962)    (850,874)           -     (748,497)
  Loss on disposal of
   discontinued
   operations                (75,920)           -      (75,920)           -
                            (180,882)    (850,874)     (75,920)    (748,497)
  Net loss                (5,896,307)  (7,232,300)  (1,496,233)  (5,028,505)

  Preferred stock
   dividend                 (124,784)           -     (124,784)           -
  Net loss available to
   common stockholders   $(6,021,091) $(7,232,300) $(1,621,017) $(5,028,505)

  Net Loss Per Share -
   Basic and Diluted
     - Continuing
        operations            $(2.75)      $(3.47)      $(0.71)      $(2.11)
     - Discontinued
        operations             (0.08)       (0.46)       (0.04)       (0.36)
     - Total Net Loss per
        share available to
        common stockholders   $(2.83)      $(3.93)      $(0.75)      $(2.47)

  Weighted Average
   Number of Shares
   Outstanding
     - Basic and diluted   2,127,543    1,838,106    2,170,653    2,032,823


DATASOURCE: Patron Systems, Inc.



CONTACT:  Sales, Martin "Tork" Johnson, cell: [phone], or

Press, Victor Cruz, [phone],  , both for Patron

Systems, Inc.



Web site:  http://www.patronsystems.com/ 

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