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EMRISE'S Subsidiary, CXR Larus, Releases Initial Production Orders for the New StarClock™ 200 Timing Products to Hitachi Oklahoma Manufacturing Division (OMD) RANCHO CUCAMONGA, Calif.- January 10, 2006--EMRISE CORPORATION (PCX: ERI), a multi-national manufacturer of defense and aerospace electronic components and communication equipment, today announced that its subsidiary, CXR Larus Corporation, has released the initial pilot and follow-on production orders for its StarClock™ 200 line of products to its turnkey contract manufacturer, Hitachi OMD of Norman, Okla. Delivery of these orders in the first quarter will service the requirements of CXR Larus’ customers for late first quarter and second quarter. Next in the process of moving all manufacturing to Hitachi will be the release of orders for the new StarSync™ synchronization products and CXR Larus’ Network Access and Transmission products to Hitachi later in the first quarter. Finally, the CXR Halcyon line of test instruments will be released in the second quarter, bringing all products under Hitachi OMD contract manufacturing. It is expected that all domestic products will be in full production at Hitachi OMD in the third quarter of 2006. Once fully online, the transition from in-house manufacturing to outsourcing to Hitachi is expected to result in improved gross margins from the lower 40 percent level to the mid 50 percent level. Larry Taillie, President of CXR Larus Corporation, commented, “We have been working hard to prepare for the far reaching transition from in-house manufacturing to full turnkey outsourcing of CXR Larus products. We believe the thoroughness and professional process that Hitachi has applied to the production transfer will enable a smooth, seamless transition, allowing CXR Larus to service our customers with high quality and lower-cost products. We expect Hitachi to be in full production on all our domestic product lines in the third quarter. The milestone of releasing our initial production orders for our carrier class StarClock™ 200 timing product line is the first step in the cost reduction strategy that should allow CXR Larus to improve its margins from the low 40 percent level to the mid 50 percent level in the second half of 2006.” Graham Jefferies, chief operating officer of EMRISE Corporation, commented, “During 2005 the CXR Larus team did an outstanding job in researching, developing, and engaging Hitachi OMD as a truly world-class manufacturer to produce its products. Outsourcing has been a key strategy in our overall telecommunication business plan to improve our margins, better service our customers, improve our quality and provide a new platform to expand our business. Outsourcing to Hitachi will allow us to focus on engineering, marketing and selling our telecommunications products. During 2006, we expect to bring all of our telecommunications products from both CXR Larus in the US and our CXR Anderson Jacobson subsidiary in France under Hitachi manufacturing. Additionally we are considering the possibility of producing some of our commercial power supply products as well at Hitachi.” Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995 With the exception of historical information, the matters discussed in this press release are forward-looking statements that involve a number of risks and uncertainties. The actual future results of EMRISE CORPORATION could differ from those statements. Factors that could cause or contribute to such differences include, but are not limited to, the delivery of StarClock™ 200 pilot units in Q1, the ability of Hitachi to make expected deliveries of StarClock™ 200 in late Q1 and Q2 to meet customer demand, the expectation that all domestic communications products will be in full production at Hitachi in Q3 of 2006, that the conversion to Hitachi manufacturing will be a seamless, smooth transition to allow CXR Larus to service our customers with high quality and lower cost products, the ability of Hitachi to be in full production for all CXR Larus’ product lines in Q3, to improve gross margins from the low 40% level to the mid 50% level in the second half of 2006, the ability to outsource CXR Anderson Jacobson’s products to Hitachi during 2006 and those factors contained in the “Risk Factors” Section of the company’s Form 10-K for the year ended December 31, 2005.
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