Tranzeo Wireless Technologies Inc.
TSX : TZT

Tranzeo Wireless Technologies Inc.

November 15, 2007 18:17 ET

Tranzeo's Third Quarter 2007 Results Show Revenue Up and Gross Profit Up Over Q3 2006

PITT MEADOWS, BRITISH COLUMBIA--(Marketwire - Nov. 15, 2007) - Tranzeo Wireless Technologies Inc. (TSX:TZT), a leading producer of high-speed wireless broadband communication systems, reports results for the third quarter ended September 30, 2007.

Financial Highlights for the Quarter

- Revenue increased 2% to 4.6 million, year over year

- Gross profit improved 9% year over year to $1.8 million

- Gross margin percentage improved 7% year over year to 39.1% of sales

- Earnings after tax decreased 50% to $0.2 million, from Q2 2007

Revenues Increased

Revenue for the third quarter of 2007 increased to $4.6 million from $4.5 million for the same period in 2006, representing a 2% increase. Year to date revenue increased to $14.7 from $13.8 million for the same period in 2006, representing a 6% increase.

Tranzeo attributes the increase to ongoing growth in demand for its wireless products, new products being offered, competitive pricing and accelerating expansion of its dealer and distributor base.

Gross Profit Improved

Gross profit increased to $1.8 million for the third quarter of 2007 from $1.6 million for the same period in 2006, representing a 9% increase. Gross margins were 39.1% for the third quarter of 2007, compared to 36.4% for the same period in 2006.Year to date gross margin increased to $5.8 million from $4.8 million for the same period in 2006, representing a 19% increase. The continual increase in gross margins is attributable to lower manufacturing costs, achieved by bringing additional manufacturing processes in house away from third party supplier manufacturing. Larger component purchases - fuelled by increased sales - have brought further cost savings. Management expects further cost saving improvements will be achieved.

Earnings Decreased

Earnings after tax for the third quarter of 2007 decreased by 50% to $0.2 million from $0.4 million for the previous three months ended June 30 2007. As a percentage of revenue after tax earnings represented 4.4% in the third quarter of 2007 compared to 7.6% for the second quarter in 2007. EBITDA for the third quarter of 2007 decreased to $0.52 million from EBITDA of $0.78 million for the second quarter of 2007. As a percentage of revenue, EBITDA represented 11.4% in the third quarter of 2007 and 14.8% in the second quarter of 2007. The impact of foreign exchange movement in regards to US$ sales is significantly reduced as the company has natural foreign exchange hedging through the incurrence of US$ expenses.

Forward-Looking Statements

This press release contains forward-looking statements that involve risks and uncertainties. We use words such as "anticipate", "plan", "expect", "believe", "intend" and similar expressions to identify forward-looking statements that relate to our business, management, operating results and financial condition. These statements are not historical facts, but reflect our current expectations regarding future results or events. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from current expectations, including the matters discussed under "Risk Factors" and other sections of our prospectus which may be found on SEDAR at www.sedar.com.

About Tranzeo

At the forefront of the growing fixed wireless industry, Tranzeo Wireless Technologies Inc. (TSX:TZT) designs, builds and distributes a full range of high-bandwidth wireless data network and WiMax products. Our innovative approach and in-house expertise ensures our products are reliable yet affordable, offer state-of-the-art features, and are easy to install, operate and deploy. We are continually adding products and features to provide our customers with the latest available innovations and end-to-end fixed wireless solutions, through a growing global network of distributors. For more information about our company and our products, visit www.tranzeo.com.

TRANZEO WIRELESS TECHNOLOGIES INC.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

QUARTER ENDED SEPTEMBER 30 2007

(Unaudited)

(IN CANADIAN DOLLARS)

INTERIM CONSOLIDATED BALANCE SHEETS

INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS



TRANZEO WIRELESS TECHNOLOGIES INC.

Interim Consolidated Balance Sheet

--------------------------------------------------------------------------
Sept 30, 2007 Dec. 31, 2006
(Unaudited)
------------------------------

Assets
Current assets:
Cash and cash equivalents $ 1,054,244 $ 389,249
Accounts receivable 3,180,889 1,472,965
Current portion of future income taxes 253,504 412,729
Prepaid expenses 470,887 268,454
Inventories (Note 3) 6,034,264 4,208,724
------------ ------------
10,993,788 6,752,121

Property plant, and equipment 10,682,031 5,824,907
Deferred development costs 1,542,531 236,041
Future income taxes 218,540 -
------------ ------------
$ 23,436,890 $ 12,813,069
------------ ------------
------------ ------------

Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable and accrued liabilities $ 1,782,247 $ 2,253,781
Current portion of capital lease
obligation (Note 8) 476,723 513,843
------------ ------------
2,258,970 2,767,624
Future income taxes - 5,201
Capital lease obligation (Note 8) 641,504 971,668
------------ ------------
2,900,474 3,744,493
------------ ------------

Shareholders' equity:
Share Capital (Note 6) 17,491,824 7,343,319
Contributed Surplus 668,634 292,566
Retained Earnings 2,375,958 1,432,691
------------ ------------
20,536,416 9,068,576
------------ ------------
$ 23,436,890 $ 12,813,069
------------ ------------
------------ ------------

Commitments and Contingencies (Note 8)

The accompanying notes are an integral part of these consolidated financial
statements


TRANZEO WIRELESS TECHNOLOGIES INC.

Interim Consolidated Statements of Operations and Deficit
(Unaudited)

Three Months Ended Nine Months Ended
September 30 September 30
2007 2006 2007 2006
-----------------------------------------------------

Sales $ 4,601,415 $ 4,523,692 $ 14,661,941 $ 13,803,901
Cost of goods sold 2,800,785 2,877,051 8,900,363 8,968,955
------------ ------------ ------------ ------------
Gross Profit 1,800,630 1,646,641 5,761,578 4,834,946
------------ ------------ ------------ ------------
Expenses
Sales and marketing 446,554 250,899 1,198,784 916,303
Research and
development
(Note 4) 147,506 37,456 666,886 187,129
General and
administrative 624,550 593,408 1,804,430 1,512,183
Amortization 177,217 101,152 459,159 317,790
------------ ------------ ------------ ------------
1,395,827 982,915 4,129,259 2,933,405
------------ ------------ ------------ ------------

Earnings from
operations 404,803 663,726 1,632,319 1,901,541

Other expenses
(income)
Interest Income (12,774) - (71,814) -
Interest on long
term debt 34,832 28,130 114,688 68,392
Foreign exchange
loss 57,564 10,237 76,245 21,330
------------ ------------ ------------ ------------
79,622 38,367 119,119 89,722
------------ ------------ ------------ ------------

Earnings before
income taxes 325,181 625,359 1,513,200 1,811,819

Income taxes (Note 4) 124,080 213,364 569,934 515,247
------------ ------------ ------------ ------------

Net earnings 201,101 411,995 943,266 1,296,572

Retained Earnings
(deficit), beginning
of period 2,174,857 767,170 1,432,692 (117,407)
------------ ------------ ------------ ------------

Retained earnings,
end of period $ 2,375,958 $ 1,179,165 $ 2,375,958 $ 1,179,165
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------

Earnings per share
for the period
(Note 6)
Basic $ .01 $ .02 $ .04 $ .06
Diluted $ .01 $ .02 $ .04 $ .06
------------ ------------ ------------ ------------

Weighted average
number of shares -
basic 26,278,405 21,927,485 25,550,908 21,927,485

The accompanying notes are an integral part of these consolidated
financial statements


TRANZEO WIRELESS TECHNOLOGIES INC.

Interim Consolidated Statements of Cash Flows
(Unaudited)

Three Months Ended Nine Months Ended
September 30 September 30
2007 2006 2007 2006
----------------------------------------------------
Cash flows from
operating activities:
Net income for the
period $ 201,101 $ 411,995 $ 943,266 $ 1,296,572
Adjustments to
reconcile net loss
to net cash from
operating activities:
Amortization 177,217 101,153 459,159 317,790
Amortization of
deferred developments
costs 23,850 - 43,500 -
Interest on capital
leases 34,832 28,500 114,688 68,984
Future income
taxes (35,920) 7,350 (64,516) 172,183
Stock based
compensation 38,497 - 158,135 -
------------ ---------- ------------ ------------
439,577 548,998 1,654,232 1,855,529

Changes in working
capital assets and
liabilities:
Prepaid expenses 15,965 (38,923) (202,433) (13,644)
Accounts
receivable (228,651) 408,224 (1,707,924) (836,149)
Accounts payable
and accrued
liabilities (804,919) (214,385) (471,533) 295,916
Inventories (486,437) (44,479) (1,825,540) 211,195
------------ ---------- ------------ ------------
Net cash flows used
in operating
activities (1,064,465) 659,435 (2,553,198) 1,512,847
------------ ---------- ------------ ------------

Cash flows from
investing activities
Additions to
property, plant
and equipment (734,589) (371,606) (5,316,283) (1,525,627)
Deferred development
expenses (664,539) - (1,289,052) -
------------ ---------- ------------ ------------
Net cash flows from
investing activities (1,399,128) (371,606) (6,605,335) (1,525,627)
------------ ---------- ------------ ------------

Cash flows from
financing activities:
Capital lease
obligation (163,936) (86,926) (481,972) (346,043)
Issuance of common
shares net - - 10,305,500 -
------------ ---------- ------------ ------------
Net cash flows from
financing activities (163,936) (86,926) 9,823,528 (346,043)
------------ ---------- ------------ ------------

Net increase
(decrease) in cash (2,627,529) 200,903 664,995 (358,823)

Cash, beginning of
period 3,681,773 602,213 389,249 1,161,939
------------ ---------- ------------ ------------

Cash, end of period $ 1,054,244 $ 803,116 $ 1,054,244 $ 803,116
------------ ---------- ------------ ------------

Supplementary cash
information
Cash paid for
interest $ 34,832 $ 28,130 $ 114,688 $ 68,392

The accompanying notes are an integral part of these consolidated
financial statements


TRANZEO WIRELESS TECHNOLOGIES INC.

Notes to Interim Consolidated Financial Statements

(Unaudited)

September 30, 2007

1. OPERATIONS

Tranzeo Wireless Technologies Inc. (the "Company") was incorporated on December 6, 2000 under the Company Act, British Columbia, and was continued as a Canadian Federal Corporation on April 1, 2004 under the Canada Business Corporations Act. The Company was formed for the purpose of developing and selling wireless internet connectivity solutions.

On October 4, 2005, the Company's common shares were listed and called for trading on the Toronto Stock Exchange ("TSX") under the symbol TZT after completing an initial public offering.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of Presentation

These financial statements are expressed in Canadian dollars and have been prepared in accordance with Canadian generally accepted accounting principles.

Certain comparative figures have been reclassified to conform with the current year's method of presentation.

(b) Interim financial statements

These interim financial statements should be read in conjunction with the annual consolidated financial statements for the year ended December 31, 2006. The disclosure in these interim consolidated financial statements do not meet all disclosure requirements of Canadian generally accepted accounting principles for annual financial statements.

(c) Principles of Consolidation

These financial statements have been prepared on a consolidated basis and include the accounts of the Company and its wholly owned subsidiaries, Tranzeo EMC Laboratories Inc, Tranzeo Wireless Technologies USA Inc and Tranzeo Wireless Technologies Ireland Limited. All significant inter-company balances, revenues and expenditures have been eliminated.

(d) Use of Estimates

The preparation of financial statements in conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant areas requiring the use of management estimates relate to the determination of impairment of assets and useful lives for depreciation and amortization, fair values of financial instruments, the future income tax valuation allowance, and the determination of fair value for stock-based awards and compensation. Where estimates have been used financial results as determined by actual events could differ from those estimates.

3. INVENTORIES



September 30 December 31
2007 2006
--------------------------------------------------------------------------
Raw materials 5,234,636 3,412,758
--------------------------------------------------------------------------
Finished goods 799,428 795,966
--------------------------------------------------------------------------
6,034,264 4,208,724
--------------------------------------------------------------------------


4. INCOME TAXES

A reconciliation of current income taxes at statutory rates with the reported taxes is as follows:



--------------------------------------------------------------------------
Quarter Ended Quarter Ended
September 30 September 30
2007 2006
--------------------------------------------------------------------------
$ $
Income before income taxes 325,181 625,359
Stock based compensation - non deductible 38,497
---------------------------
Income for tax purposes 363,678 625,539
--------------------------------------------------------------------------
Current income taxes at statutory rates-34.12% 124,080 213,364
--------------------------------------------------------------------------
--------------------------------------------------------------------------


Tax Credits:

The Company is entitled to claim certain tax credits from the federal and provincial governments in respect of qualifying expenditures incurred in carrying out Scientific Research and Experimental Development (SR&ED) in Canada. The Company recorded $80,000 (2006 - $326,780)of tax credits which was applied to reduce research and development expenses in the current quarter and $100,992 (2006 - $122,000) of refundable tax credits in the first quarter of 2007 and $150,000 (2006 - $237,000) of refundable tax credits in the second quarter of 2007.

5. SHARE CAPITAL

On May 19, 2005, the Company amended its authorized share capital from 100,000,000 common shares to an unlimited number of common shares without par value and an unlimited number of preferred shares without par value. Preferred shares are entitled to priority over the common shares with respect to priority in the payment of dividends and the distribution of assets in the event of the liquidation, dissolution or winding-up of the Company.



Authorized:
Unlimited voting common shares, no par value
Unlimited preferred shares, no par value
Issued:
---------------------------
Common $

Balance at December 31, 2006 21,927,485 7,343,319

Issued for asset acquisition 840,337 2,000,000
Public Equity Financing 3,200,000 8,000,000
Agents Warrants from IPO exercised 2,333 5,133
Stock Options exercised 25,500 25,500
Share Warrants from IPO exercised 282,750 706,875
Agency fees (480,000)
Agency warrant - stock based
compensation to Contributed Surplus (143,241)
Equity Financing - stock based
compensation to Contributed Surplus (13,754)
Financing costs (175,749)
---------------------------
Balance at Sept 30, 2007 26,278,405 17,268,083

Tax benefit recognized on
share financing charges 223,741
---------------------------
Balance at Sept 30, 2007 26,278,405 17,491,824
---------------------------
---------------------------


Stock Options

The following table summarizes stock option transactions that occurred during the period:



--------------------------------------------------------------------------
Weighted
Number of Average
Common Shares Exercise
subject to Price per
Options Share
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Balance, December 31, 2006 1,708,000 1.18
Granted 520,110 1.60
Exercised (25,500) 1.00
Expired - -
Cancelled (165,162) 2.47
--------------------------------------------------------------------------

Balance, Sept 30, 2007 2,037,448 1.18
--------------------------------------------------------------------------
--------------------------------------------------------------------------


The weighted average remaining life of the options as at December 31, 2006 was 9.75.

Share Purchase Warrants

The following table summarizes outstanding warrants:



--------------------------------------------------------------------------
Weighted Weighted
Average Average
Exercise Remaining
Price Life
Warrants $ (Years)
--------------------------------------------------------------------------
Breakdown at December 31, 2006

Warrants from initial public
offering (Note a) 1,196,412 $ 2.50 -
Agent warrants 298,503 $ 2.20 0.01
-------------------------------------
Balance as at December 31, 2006 1,494,915 $ 2.44 0.01
Current Year Activity
IPO Warrants exercised (282,750) $ 2.50
IPO Warrants expired (913,662) $ 2.50
Agents warrants from Feb 14 share
offering 192,000 $ 2.50 0.38
Agents Warrants from IPO exercised (2,333) $ 2.20
--------------------------------------------------------------------------
Balance at Sept 30, 2007 488,170 $ 2.32 0.15
--------------------------------------------------------------------------
--------------------------------------------------------------------------


7. EARNINGS PER SHARE

The following is a reconciliation of basic and diluted net earnings per share:



--------------------------------------------------------------------------
Sept 30, 2007 Sept 30, 2006
--------------------------------------------------------------------------
$ $
Net income available to shareholders 201,101 411,995

Weighted average shares outstanding 26,278,405 21,927,485
Effect of dilutive securities, stock
options and warrants 446,434 388,101
--------------------------------------------------------------------------
26,724,839 22,315,586
--------------------------------------------------------------------------
--------------------------------------------------------------------------

Basic earnings per share $ 0.01 $ 0.02
Diluted earnings per share $ 0.01 $ 0.02
--------------------------------------------------------------------------
--------------------------------------------------------------------------


8. COMMITMENTS AND CONTINGENCIES

Lease Commitments

The Company has operating lease commitments for office premises, office equipment, and vehicles, requiring payments in each of the five years as follows (see Note 9 - Related Party Transactions):



$
------------
2007 422,760
2008 357,543
2009 318,730
2010 257,388
2011 240,188
------------
1,596,608
------------
------------


Capital Lease Obligations

The following is a schedule of future minimum lease payments under the capital leases expiring July 31 2010 together with the balance of the obligation under capital lease.



Year ending December 31 $
------------
2007 177,293
2008 550,919
2009 461,032
2010 85,416
------------
Total minimum lease payments as at September 30 2007 1,274,650
Amount representing interest at 13.5% (156,423)
------------
Balance of the obligation 1,118,227
Current Portion 476,723
------------
Long term portion 641,504
------------


9. RELATED PARTY TRANSACTIONS

The Company paid or accrued total rent of $60,048 in current quarter ($60,048 September 30, 2006) to companies owned by the President of the Company. Included in lease commitments (Note 8) is $1,200,940 (2006 - $1,206,940) that will be payable to these related companies over the next five years.

The Company purchased raw materials of $416,989 (2006 - $683,222) in the current quarter from a company whose chief executive officer is a director of the Company. Included in accounts payable is $166,356 (2006 - $432,317) payable to the same related company.

10. SEGMENTED INFORMATION



Canada US Other Total
$ $ $ $
--------------------------------------------------
September 30, 2007
Sales 2,809,160 9,617,173 2,235,608 14,661,941
Capital assets 10,682,031 - - 10,682,031

September 30, 2006
Sales 2,317,844 9,876,883 1,608,621 13,803,901
Capital assets 4,775,513 - - 4,775,513

Contact Information