Cantronic Systems Inc.
TSX VENTURE : CTS
PINK SHEETS : CRIXF

Cantronic Systems Inc.

July 27, 2011 07:00 ET

Cantronic Reports Results for Q1 Ended April 30, 2011: Revenue from Continuing Operations Increased 198% With Net Income $344,901 or $0.01 Per Share

VANCOUVER, BRITISH COLUMBIA--(Marketwire - July 27, 2011) - Cantronic Systems Inc., ("Cantronic" or the "Company") (TSX VENTURE:CTS)(PINK SHEETS:CRIXF) today announced its financial results for the first quarter of fiscal year 2012 ended April 30, 2011. All amounts are reported in Canadian dollars unless otherwise stated. Cantronic is reporting results from continuing and discontinued operations to allow investors to review Cantronic's China-based video surveillance technology and solutions business separately from the North American thermal imaging business (which was sold during the first quarter of fiscal year 2012).

Selected highlights of the year and subsequent events:

Financial:

  • Revenue of $4.52 million from continuing operations, an increase of 198% compared to $1.51 million for the corresponding quarter of the previous fiscal year.
  • Adjusted EBITDA (a non-GAAP term) from continuing operations was $510K compared to a loss of $1.0 million for the corresponding quarter of the previous fiscal year. The Company uses adjusted EBITDA (a non-GAAP financial measure) internally to make strategic decisions, forecast future results and evaluate its performance, defined as net income before interest, income taxes, depreciation, amortization, stock based compensation expenses, foreign currency loss, and minority interest.
  • Gross margin from continuing operations of $1.44 million (32% of revenue) compared to $528K (35% of revenue) for the corresponding quarter of the previous fiscal year. Management expects gross margin to be between 35% and 45% for the entire FY ending January 31, 2012.
  • Net Income from continuing operations (after minority interest) was $345K or $0.01 per share vs. a net loss of $1.40 million from continuing operations or $0.02 per share in the corresponding quarter of the previous fiscal year.
  • Sales and distribution expenses approximately doubled in the quarter to $463,184 (compared to $231,243 for the previous year's quarter). Management has increased expenditures for sales and marketing (including attendance at trade shows in China and internationally) in order to drive sales, with results already visible in the current quarter. General and administrative expenses increased by 18% over the previous year's quarter to $997,180 (if one excludes one-time transaction costs in last year's Q1 relating to the acquisition of Actiontop) as management continues to build its platform to penetrate the Chinese market and explore business and potential acquisition opportunities.
Operating results
($000's except per share amounts)
Q1 Fiscal 2012 Q1 Fiscal 2011
Quarter Quarter
ended April ended April
30, 2011 30, 2010
Revenue from continuing operations 4,517 1,515
Adjusted EBITDA 510 -1,033
Net income to shareholders 319 -914
Net earnings (loss) per share, basic and diluted 0.01 -0.02
Business:
  • During Q1 FY 2012, Cantronic sold its North American business, comprising the thermal imaging business located in Coquitlam, British Columbia as well as QWIP Technologies, Inc. of Brea, California. The total consideration of this disposition amounted to $5.7 million with a present value of $3.85 million, resulting a pre-tax gain of $378K.
  • In August 2010, Cantronic was awarded a RMB 25 million (approximately $3.9 million) contract to provide to act as the primary contractor for a city-wide networked video surveillance system under China's Safe City program for the city of Haicheng, Liaoning Province. As of July 26, 2011, about 40% of the project has been completed and the rest of the project is expected to be completed within 3 – 6 months.
  • Subsequent to the quarter end, Cantronic announced on June 14, 2011 it had entered into an arrangement as an Original Design Manufacturer ("ODM") with Digital China Holdings Limited of Beijing ("Digital China") to design and manufacture a customized version of Cantronic's most popular digital IP (Internet Protocol) video camera under Digital China's AMPON brand of security products. The product has already been successfully introduced to market, with sales volume expected to reach RMB 12 million (about Canadian $1.8 million) by the end of calendar 2011.
  • Subsequent to the quarter end, on July 18, 2011, Cantronic announced that it was awarded a contract to provide video security and protection systems in China's Jiangsu province totalling RMB 30 million (approximately Canadian $4.5 million). The project will begin in September 2011 with duration of one to two years. Cantronic will supply and install complete solutions that will integrate video surveillance with smart building systems, such as video intercom, access control and alarm monitoring.

"Revenue from continuing operations almost tripled in Q1 FY 2012, with adjusted EBITDA increased significantly and the Company reporting positive net earnings from continuing operations. This was achieved in what is usually the least seasonally strong quarter due to the Chinese New Year holidays. Cantronic has continued to announce integration contracts for the Chinese video security and surveillance market and ODM agreements with major industry players as well as providing its key technologies in video management software, IP video cameras and dome cameras," remarked James Zahn, President and CEO of Cantronic Systems.

Regulatory Filings

The material will be available through SEDAR at www.sedar.com and on the Company's website, www.cantronicsecurity.com.

About Cantronic Systems Inc.

Cantronic Systems Inc. manufactures, distributes, and provides training and services in the fields of IP-based networked video security surveillance technologies, specializing in networked video management software and video analytics, IP cameras, speed dome cameras, high definition video surveillance cameras and night vision surveillance systems for demanding security and surveillance applications.

Cantronic, through its China subsidiaries Cantronic Security Systems (China) Co. Ltd., Beijing Advanced Videoinfo Technology Co. Ltd. ("AVINFO"), Shenzhen Huanghe Digital Technology Co. Ltd. ("Yellow River") and Actiontop Electronics (Shenzhen) Co. Ltd. ("Actiontop") provides high-speed and 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 Cantronic China, please visit our websites at www.cantronicsecurity.com and www.cantronics.com.cn.

Forward-looking statements

This news release contains forward-looking statements, within the meaning of applicable securities legislation, concerning Cantronic Systems Inc. and the markets in which it operates. Forward-looking statements involve 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 said forward-looking statements.

Forward-looking statements include, but are not limited to: the completion of the Proposed Transaction, anticipated share capital following completion of the Proposed Transaction, expectations, opinions, forecasts, projections and other similar statements concerning anticipated future events, conditions or results that are not historical facts. In certain cases, forward-looking statements can be identified by the use of words such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved".

Readers are cautioned not to place undue reliance on such forward-looking statements. Forward-looking information is provided as of the date of this news release, and Cantronic Systems Inc. assumes no obligation to update or revise them to reflect new events or circumstances, except as may be required under applicable securities laws.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

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