World Surveillance Group Announces Second Quarter 2011 Financial Results

KENNEDY SPACE CENTER, FL, Aug 15, 2011 — World Surveillance Group Inc.  , a developer of lighter-than-air unmanned aerial vehicles (“UAVs”) and related technologies announced financial results for its quarter ended June 30, 2011. WSGI filed its Quarterly Report on Form 10-Q with the U.S. Securities and Exchange Commission for the three months ended June 30, 2011. The Company’s Form 10-Q containing its unaudited financial statements for the quarter ended June 30, 2011 can be accessed online at www.wsgi.com or can also be obtained through the SEC’s website at www.sec.gov .

WSGI reported revenue of $26,093 in the three and six months ended June 30, 2011, which represents revenue earned by GTC for satellite airtime and usage during June 2011 following the Company’s acquisition of GTC, compared to $250,000 of revenue related to the sale of a 50% interest in a SkySat airship in the comparable periods in 2010. The Company reported a net loss of $2.5 million, or $0.01 per share, for the three months ending June 30, 2011, compared to a net loss of $4.1 million, or $0.01 per share, for the comparable period in 2010, a decrease of $1.6 million or 38%. The Company reported a net loss of $111,632, or $0.00 per share, for the six months ending June 30, 2011, compared to a net loss of $4.8 million, or $0.02 per share, for the comparable period in 2010. The net loss in the six months ended June 30, 2011 was largely reduced by a $2.5 million gain from the extinguishment of liabilities to our former joint venture partner in connection with the settlement agreement reached with TAO Technologies GmbH in the first three months of 2011.

WSGI had operating expenses of $1.4 million for the three months ended June 30, 2011, compared to $2.4 million for the prior year period, a decrease of 40%. For the six months ended June 30, 2011, we had operating expenses of $2.1 million compared to $3.6 million for the comparable period in 2010, a decrease of 41%. These decreases were primarily due to reductions in stock based compensation, professional fees for accounting and legal services, and discontinued amortization due to the impairment and write-off of the related intellectual property during the last quarter of 2010. The reductions were partially offset by an increase in compensation expense, general and administrative expenses and acquisition costs.

WSGI’s total assets at June 30, 2011 were $3.7 million compared to $36,247 at December 31, 2010, reflecting both several equity financings completed in the second quarter of 2011 and the acquisition of GTC. Cash and cash equivalents increased to $709,857 at June 30, 2011 from $29,491 at December 31, 2010 due to the above factors. Property and equipment, net of depreciation, increased from $0 at December 31, 2010 to $2.6 million at June 30, 2011 reflecting the allocation of the purchase price paid for GTC to the fair value of the acquired assets and assumed liabilities. At June 30, 2011, we had total liabilities of $17.9 million compared to $19.4 million at December 31, 2010, a decrease of 8% principally due to the write-off of accounts payable and accrued liabilities due to our former joint venture partner, offset in part by deferred revenues from our Space Florida contract, accrued legal fees related to the Hudson Bay settlement and liabilities related to the GTC acquisition. Due largely to the factors discussed above, the Company’s accumulated deficit increased slightly to $144.6 million at June 30, 2011 from $144.5 million at December 31, 2010.

WSGI’s Chairman Michael K. Clark stated, “We are pleased to have completed the acquisition of GTC and are excited by the potential of the combined company. The GTC acquisition was a significant step in the Company’s strategic plan which we continue to execute upon to build shareholder value.”

Glenn D. Estrella, WSGI’s President and Chief Executive Officer, added, “Since the beginning of the year, we have been able to strengthen our balance sheet through the closing of significant financings, our debt reduction plans, and the acquisition of GTC. We are also looking forward to the upcoming flight testing and demonstrations of our new Argus One UAV at Yuma as an additional step towards commercializing our airships.”