Cantronic Systems Inc.
TSX VENTURE : CTS

Cantronic Systems Inc.

September 14, 2009 08:00 ET

Cantronic's Revenue Up 250% in the Second Quarter

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Sept. 14, 2009) - Cantronic Systems Inc. ("Cantronic") (TSX VENTURE:CTS) is pleased to announce today its financial results for the second quarter of fiscal year 2010, ended July 31st, 2009. (All amounts are expressed in Canadian dollars unless otherwise indicated.)

Financial highlights

- Revenue grew 250% to $4.5 million from $1.3 million

- Adjusted EBITDA increased to $709K from ($117K) in 2008

- R&D spending on new products increased to $403K (8.98% of sales) from $147K in 2008



For The Second Quarter ended July 31, 2009 and 2008

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($000s except amounts per share) Q2 Q2
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F2010 F2009
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Operating results
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Revenues $4,489 $1,283
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Adjusted EBITDA $709 ($117)
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Net earnings $118 ($382)
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Basic and diluted net earnings per share $0.002 ($0.01)
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Financial Position
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Total assets $14,183 $10,984
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Working capital $4,972 $7,470
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Total liability $6,636 $1,179
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Shareholders' equity $5,730 $9,805
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Shareholders' equity per share 0.07 $0.14
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Number of shares outstanding(i) 78,704 69,416
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Number of shares fully diluted(i) 78,899 74,588
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(i)Weighted average


Operational Highlights

During the second quarter ended July 31, 2009, Cantronic continued to execute its growth strategy to:

- Expand core business in North America and Europe

- Implement our China growth strategy by completing our second acquisition and build our security and video surveillance system integration business in China.

- Expand technology and product leadership to enhance its competitive advantage and increase scope of products.

China represents a unique opportunity for Cantronic as the highly-fragmented Chinese surveillance and security market has been growing at an annual rate in excess of 30%. It was estimated to reach $43 billion by 2010, according to China Public Security Guide (published before the current financial crisis by the Chinese Security and Protection Association) due in part to the Chinese government's mandate for nationwide installation of surveillance and security systems. Programs such as the Safe City Initiative cover 666 cities country-wide. Additionally, stimulus packages announced by various levels of Chinese governments during the current recession provide more business opportunities for Cantronic as the stimulus packages significantly boost public spending on infrastructure projects that typically require video surveillance systems.

On November 26, 2008, the Company established its wholly-owned subsidiary, Cantronic Security Systems (China) Co., Ltd. in Shanghai, China. This subsidiary will drive the Company's acquisition strategy as well as provide management, product integration and sales and marketing support for the Company's development in China. On March 6, 2009, the Company completed the acquisition of a 58.6 percent interest in Beijing Advanced Videoinfo Co., Ltd. ("AVINFO") in Beijing, China (See press releases dated March 23, 2009). AVINFO develops digital networked video management platform software for security and surveillance applications. On June 5, 2009, the Company completed the acquisition of a 51 percent interest in Shenzhen Huanghe Digital Technology Co. Ltd. ("Yellow River") in China (See press releases dated June 25, 2009). Yellow River is a designer and manufacturer of IP-based high-definition network cameras for security and surveillance applications. With AVINFO's software and Yellow River's network cameras, Cantronic is now able to offer end to end networked video surveillance solutions to its customers in China.

"We are very pleased that Cantronic achieved strong growth and profitability in the second quarter, after a tough year in 2008. Our strategy of investing in new product development based on our proprietary core infrared sensor technology and expanding in China through acquisitions is starting to generate results on the top and bottom line," commented James Zahn, President & CEO of Cantronic, "We are focusing on complementary acquisitions in China to enable Cantronic to provide a total solution for networked security and surveillance systems in the China market. With platform software from AVINFO and network camera from Yellow River, our wholly-owed subsidiary, Cantronic Security Systems (China) Co., Ltd. is able to bid on Safe City projects as a general contractor with our national level one security and surveillance system installation license. We are currently assessing other acquisition opportunities to add further complementary products and customer relationships to our China business."

Revenues

For the quarter ended July 31, 2009, Cantronic recorded revenues of $4,489,345 compared with $1,283,331 in 2008, representing an increase of $3,206,014 or 250%. The increase is directly linked with the two Chinese acquisitions and volume orders of thermal imaging cameras and detectors.

For the quarter, Cantronic recorded revenues of $2,029,996 (nil - 2008) from its China operations which include two acquisitions as well as our recently established wholly-owned subsidiary - Cantronic Security Systems (China) Co. Ltd.

Adjusted EBITDA

For the second quarter ended July 31, 2009 we are disclosing adjusted EBITDA, a non-GAAP financial measure and supplemental indicator of operating performance. We define adjusted EBITDA as net income before interest, income taxes, depreciation, amortization, stock option compensation expenses, foreign currency loss, as well as minority interest. We use the adjusted EBITDA internally to make strategic decisions, forecast future results and evaluate our performance. We believe our current and potential investors can use this measure to assess our current and future operating results and to make investment decisions. Investors should not consider adjusted EBITDA as an alternative to cash provided by operating activities, nor to any other indicators of performance or liquidity which have been determined under GAAP. Adjusted EBITDA do not have any standardized meaning prescribed by GAAP and may be different from and therefore not comparable to similar measures presented by other companies.

For the second quarter, adjusted EBITDA amounted to $708,837 compared with ($117,164) for the same quarter the previous fiscal year. This increase is due to increased sales and contributions from acquisitions.

Net Earnings

The net profit amounted to $118,133 per share of $0.002 for the quarter ended July 31, 2009 as compared to net loss of $381,934 or loss per share of $0.01 for the same perios last year. The increased profitability in the quarter is directly linked to higher sales and strong margins despite higher SG&A expenses due to additional expenses from two new acquisitions and increases in R&D spending.

The financial statements are available for review on SEDAR at www.sedar.com and on the Company's website at www.cantronics.com.

About Cantronic

Cantronic manufactures, distributes, and provides training and services in the fields of infrared vision and video security surveillance technologies, specializing in passive and active infrared cameras, infrared illuminators, low light infrared sensitive CCD cameras and long-range night vision surveillance systems for demanding homeland security and surveillance application.

Cantronic holds a valid medical device manufacturing license and is a manufacturer and distributor of its fever scan thermal imaging camera systems which has been widely deployed in public facilities such as airports, railway stations, and border crossings worldwide during the SARS (Avian/Bird Flu) outbreak in 2003 as well as during the Swine (H1N1) Flu pandemic in 2009.

Cantronic, through its US subsidiary QWIP Technologies, Inc. ("QWIPTECH"), holds a worldwide, exclusive license from the California Institute of Technology ("Caltech") to produce and sell infrared detectors and sensors based on Caltech's Quantum Well Infrared Photodetector technology.

Cantronic, through its China subsidiaries Cantronic Security Systems (China) Co. Ltd., Beijing Advanced Videoinfo Technology Co. Ltd. ("AVINFO") and Shenzhen Huanghe Digital Technology Co. Ltd. ("Yellow River"), provides digital networked video surveillance solutions to government and corporate customers in China.

Cantronic is a Tier 1 issuer on the TSX-V exchange, trading under the symbol CTS. For further information about Cantronic and QWIPTECH, please visit our websites at www.cantronics.com and www.qwip.com.

Safe Harbor Statement

Forward-looking statements contained in this press release involves known and unknown risks, uncertainties and other factors that may cause actual results, performance and achievements of Cantronic to be materially different from any future results, performance or achievements expressed or implied by the said forward-looking statements.

TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of the contents of this news release.

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