Extreme CCTV Inc.
TSX : EXC

Extreme CCTV Inc.

May 15, 2006 08:00 ET

Extreme CCTV Reports Second Quarter Results

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - May 15, 2006) - Extreme CCTV Inc. ("Extreme" or "the Company") (TSX:EXC), the global leader in active-infrared night vision surveillance equipment, today reported its financial results for the three and six-month periods ended March 31, 2006.

For the second quarter ended March 31, 2006, Extreme reported revenue of $6.3 million as compared to $6.1 million for the quarter ended March 31, 2005. Gross margin for the quarter ended March 31, 2006 improved to 50.6% of revenue from 46.2% of revenue for the comparable quarter in 2005. Net income for the quarter increased to $417,000 or $0.03 per share, from net income of $387,000, or $0.02 per share, for the quarter ended March 31, 2005.

Revenues for the six months ended March 31, 2006 were $12.3 million as compared to $11.6 million for the six months ended March 31, 2005. The Company achieved revenue growth on a six-month comparative basis, despite the continued effects of the weakening US Dollar and British Pound relative to the Canadian dollar. Revenue would have been higher by approximately $1,000,000 for the six months ended March 31, 2006, had the exchange rates held steady compared to the same period last year.

Gross margin for the six months ended March 31, 2006 was 50.7% compared to 48.0% for the same period last year. Despite the weakness of the US dollar the Company continued to experience strong gross margins. Net income for the six months ended March 31, 2006 increased to $ 980,000 from $391,000 for the six months ended March 31, 2005. Basic earnings per share for the six months ended March 31, 2006 were $0.06, compared to $0.02 for the six months ended March 31, 2005.

Expenses for the three and six months ended March 31, 2006 were $2.5 million and $ 4.9 million, up 15% and 1% respectively, over the comparable periods last year. The increase in the current quarter was due to higher sales and marketing and general and administrative expenses. Sales and marketing expense increases related to advertising, promotion and tradeshow expenses. We incurred increases in general and administrative expense for professional fees, additional public company compliance costs, travel, insurance, and office costs, including human resources.

The Company's cash position at March 31, 2006 was $8.4 million compared to $ 7.7 million at December 31, 2005 and $7.3 million at September 30, 2005.

"Despite the challenges of the foreign exchange environment, we continue to expand our revenue model, through investing in new products and technologies, establishing strong alliances and developing our sales channels worldwide," commented Jack Gin, President and CEO of Extreme CCTV. "The Company continues to have good fundamentals, profitable operations and a strong balance sheet. Gross margins remaine strong and the Company continues to generate cash. Extreme experienced positive developments in a number of strategic initiatives and key business areas in the quarter."

Extreme continues to develop sales leadership within key market segments, including Homeland Security, Defense, Intelligent Transportation Systems (ITS), and parking enforcement. In the quarter, Extreme participated in a number of tradeshows to further develop and focus on strategic sales targets and alliances. Through attendance at these events, the Company continues to increase brand and product awareness.

Two new models of the US patented REG® were released in the quarter; REG-M1 and REG-D1. REG-M1 is designed for mounting on vehicles and is ideal for mobile operations. REG-D1 integrates an overview camera, supplementing plate capture with color overview images that help determine vehicle make, color and model. Both models are designed for integration with intelligent license plate reading software, such as REG-ALERT.

We continue to define our new active imaging product, the LX300, with Obzerv Technologies Inc. (Obzerv), a Quebec City-based private company, in which the Company has an investment. Obzerv develops, markets and sells medium and long-range night vision products based upon active imaging technology and the DALIS laser illuminator that is under exclusive license from the INO (National Optics Institute). The LX300 is a range-gated, pulsed laser camera designed for maritime locations that are subject to mist and fog. This new market category product is intended for commercial markets within Extreme's current sales channels and is targeted for completion in late 2006.

Obzerv delivered an ATV 2000i to the French Army Parisian Expertise Centre in the quarter, and recently concluded a sale of a further three ATV 2000i's to a strategic international group.

Extreme remains optimistic regarding the potential for success of Obzerv products and is committed to working with Obzerv on strategic sales and marketing initiatives in North America and internationally.

Conference Call

A conference call to review the results will take place on May 15, 2006 at 2:00pm EDT (11:00am PDT). Jack Gin, President & CEO and Terry Krepiakevich, Chief Financial Officer, will speak on behalf of the Company. A question-and-answer forum will follow a review of the financial results and an update on the Company's growth strategies and progress within its target markets.

To participate, please dial 416-695-7848, or toll-free 1-877-888-4483, approximately 10 minutes before the conference call. A live Webcast of this conference call will also be available on the Extreme CCTV Website at http://www.extremecctv.com. The Webcast will be archived there for later reviewing.

A recording of the conference call will be available through May 22, 2006. Please dial 416-695-5275 or 1-866-509-0081 to listen to the rebroadcast.

Based in Burnaby, British Columbia, Extreme CCTV Inc. (www.ExtremeCCTV.com) specializes in the design, development, and manufacturing of advanced infrared illuminators and precision-engineered video surveillance products. The Company's common shares trade on The Toronto Stock Exchange under the trading symbol "EXC", with approximately 16.2 million outstanding.

Note: Certain of the statements contained in this news release may contain forward-looking statements which involve known and unknown risk, uncertainties and other factors which may cause the actual results, performance or achievements of Extreme, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Extreme does not expect to update forward-looking statements continually as conditions change and you are referred to the full discussion of Extreme's business and the risk factors associated with Extreme's business contained in Extreme's Annual Information Form dated December 16, 2005, filed with the securities regulatory authorities in British Columbia and Alberta.



EXTREME CCTV INC.
Interim Consolidated Statements of Operations and
Retained Earnings
(Unaudited)
--------------------------------------------------------------------
Three months ended Six months ended
March 31, March 31,
-----------------------------------------------------
2006 2005 2006 2005
-----------------------------------------------------

REVENUE $ 6,296,039 $ 6,084,086 $ 12,331,276 $ 11,645,889
COST OF SALES 3,112,463 3,275,210 6,080,247 6,051,173
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GROSS MARGIN 3,183,576 2,808,876 6,251,029 5,594,716
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EXPENSES
Sales and
marketing 1,147,796 922,056 2,188,464 2,070,182
General and
admini-
strative 946,649 824,453 1,794,955 1,823,758
Research and
development 350,823 336,805 721,901 728,220
Amortization
of capital
assets 123,782 114,054 251,025 222,732
Financing (40,853) 1,321 (50,336) 2,136
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2,528,197 2,198,689 4,906,009 4,847,028
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INCOME BEFORE
INCOME TAXES
& NET EQUITY
LOSS 655,379 610,187 1,345,020 747,688
Interest income
on debenture 79,046 73,875 159,847 149,391
Equity in loss
of investment (139,411) (140,956) (257,546) (300,392)
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INCOME BEFORE
INCOME TAXES 595,014 543,106 1,247,321 596,687
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INCOME TAXES
Current 155,624 120,877 345,941 156,389
Future 21,964 35,607 (78,332) 49,781
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177,588 156,484 267,609 206,170
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NET INCOME 417,426 386,622 979,712 390,517
RETAINED
EARNINGS,
BEGINNING
OF PERIOD 6,723,178 5,096,714 6,160,892 5,092,819
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RETAINED
EARNINGS,
END OF
PERIOD $ 7,140,604 $ 5,483,336 $ 7,140,604 $ 5,483,336
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BASIC EARNINGS
PER SHARE $ 0.03 $ 0.02 $ 0.06 $ 0.02
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WEIGHTED
AVERAGE NUMBER
OF SHARES
OUTSTANDING,
BASIC 16,161,299 15,849,245 16,159,266 15,788,560
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DILUTED
EARNINGS PER
SHARE $ 0.02 $ 0.02 $ 0.06 $ 0.02
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WEIGHTED
AVERAGE NUMBER
OF SHARES
OUTSTANDING,
DILUTED 16,719,659 16,450,561 16,654,341 16,411,117
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EXTREME CCTV INC.
Interim Consolidated Balance Sheets
(Unaudited)
--------------------------------------------------------------------

March 31, September 30,
2006 2005
------------ ------------
ASSETS

CURRENT
Cash $ 8,383,131 $ 7,292,340
Accounts receivable 4,620,779 4,347,695
Inventories 2,871,053 2,776,300
Prepaid expenses and other 412,202 198,451
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16,287,165 14,614,786
INVESTMENT IN AND ADVANCES TO
OBZERV TECHNOLOGIES INC. 3,575,257 3,672,956
CAPITAL ASSETS 1,501,793 1,529,476
GOODWILL 723,673 731,965
FUTURE INCOME TAXES 137,840 59,508
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$ 22,225,728 $ 20,608,691
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LIABILITIES
CURRENT
Accounts payable and accrued
liabilities $ 3,393,017 $ 3,106,360
Income taxes payable 689,871 364,207
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4,082,888 3,470,567
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SHAREHOLDERS' EQUITY

SHARE CAPITAL 11,483,790 11,461,820
CONTRIBUTED SURPLUS 440,413 389,718
CUMULATIVE TRANSLATION ADJUSTMENT (921,967) (874,306)
RETAINED EARNINGS 7,140,604 6,160,892
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18,142,840 17,138,124
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$ 22,225,728 $ 20,608,691
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EXTREME CCTV INC.
Interim Consolidated Statements of Cash Flows
(Unaudited)
--------------------------------------------------------------------
Three months ended Six months ended
March 31, March 31,
----------------------------------------------------
2006 2005 2006 2005
----------------------------------------------------

OPERATING
ACTIVITIES
Net income $ 417,426 $ 386,622 $ 979,712 $ 390,517
Items not
affecting cash:
Equity in loss
of investment 139,411 140,956 257,546 300,392
Interest
accrued on
debenture (79,046) (73,875) (159,847) (149,391)
Stock based
compensation 24,453 44,844 50,695 89,688
Amortization
of capital
assets 123,782 114,054 251,025 222,732
Future income
taxes 21,964 35,607 (78,332) 49,781
--------------------------------------------------------------------
647,990 648,208 1,300,799 903,719
Changes in
non-cash
working
capital 219,670 (408,906) (17,095) (211,429)
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867,660 239,302 1,283,704 692,290
--------------------------------------------------------------------

INVESTING
ACTIVITIES
Purchase of
capital assets (139,188) (155,250) (223,342) (228,251)
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FINANCING ACTIVITIES
Shares issued
on exercise
of options 21,970 146,025 21,970 146,025
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CASH INFLOW 750,442 230,077 1,082,332 610,064
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EFFECT OF
FOREIGN
EXCHANGE ON
CASH HELD
IN FOREIGN
CURRENCIES (26,730) (11,941) 8,459 (36,160)
CASH,
BEGINNING
OF PERIOD 7,659,419 4,304,412 7,292,340 3,948,644
--------------------------------------------------------------------
CASH, END OF
PERIOD $ 8,383,131 $ 4,522,548 $ 8,383,131 $ 4,522,548
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--------------------------------------------------------------------

SUPPLEMENTAL
CASH FLOW
INFORMATION:
Interest paid $ 1,098 $ 4,451 $ 2,191 $ 5,266
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Income taxes
paid
(refunded) $ 4,919 $ 12,152 $ 20,277 $ (246,180)
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